Capital & Class. - 1988. - Issue 34

THE CRASH OF '87 A Symposium

•

19 October 1987 was the first day of the second great crash

of the twentieth century . The events of 19 October 1987 share with the events of 29 October 1929 a number of common factors . First and foremost both were bear market collapses, in which finance capital was centrally involved . Second, both had an international impact . Third, both came after a period of relative stagnation in real capital accumulation . Fourth, both came during periods when the hegemony of the leading capitalist power was in decline . But will 1987 be followed like 1929 by protracted global depression, political upheavals and eventually imperialist world war? The answer will surely be influenced by the longer term impact of the Crash of '87 on real capital accumulation and

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industrial growth, on employment, wages and profits . The issues are so vital to the international working class, that socialists throughout the world must analyse these events with the utmost care and clarity . Capital & Class has therefore invited five socialist economists to contribute to the debate, and we wish to thank them for responding in a short time to our invitation . Each contributor was asked to look at the Crash of '87 from a different point of view . The intention is not to provide a final and definitive answer, but to offer some explanatory perspectives . It is hoped that readers will respond . In particular Capital & Class would welcome accounts of the Crash as seen in countries other than Britain .

The contributions

Trevor Evans sets the scene with a review of the international pressures building up against the dollar since the 1970s, and the various attempts by the dominant industrial nations to contain the problem, ending with the ill-fated Louvre Accord in February 1987 . He considers whether inter-imperialist rivalries made their failure inevitable, and whether the growth of private international money markets has shifted containment beyond the grasp of nation states .

Jerry Coakley takes up the question of the growth of international markets in money and securities . He argues that the world balance of financial power is shifting significantly in favour of Japanese banks, and that the Crash of '87 will accelerate this re-ordering . London, he notes, is the most open of the world's three leading exchanges, and therefore the most vulnerable to shocks . In assessing the causes of the Crash itself, he acknowledges the real and financial explanations on offer, but suggests that an overinvestment thesis can best incorporate their insights .

The crash of '87

Andrew Glyn sets the Crash of '87 against the background of the declining rate of capital accumulation in the OECD countries since the early 1970s . Falling productivity growth, and a rising organic composition of capital, he suggests, account for these falling rates, which in turn undermine the growth of aggregate demand . By contrast, market valuations of real assets have roughly doubled over the past ten years . Market unreality was bound to collapse, but Glyn considers this may not impact greatly on real investment .

John Grahl locates the seeds of the crisis in the rise of finance capital, in the US in particular, from the 1970s . Fuelled by high interest rates and the slump in real investments, its impact was inflationary . He contrasts the deflationary impact of the US Federal Reserve Bank's tight money regime under the stewardship of Paul Volcker, with the profligacy of Reaganomics . Dethroning the dollar as the international reserve currency is thus an essential step towards releasing the world economy from America's increasingly destabilising influence .

Alan Freeman sets the Crash of '87 in a wider historical context . Suggesting that theories of long waves and theories of hegemonic crises both have something to contribute, he reconsiders the Crash of '29 in light of Kindleberger's . thesis that the failure of US capitalism to replace the waning power of British capitalism lay behind the Great Depression . He argues that hegemony requires both national productive capacity and a capability to command world finance and trade to ensure `fair shares' of world surplus value for all leading capitalist economies . The Crash of '87 expresses precisely the incapacity of the US to meet these conditions . Yet the crisis of US hegemony threatens to be a crisis for us all .

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Dollar is likely to rise, fall or stay steady, experts agree'

Trevor Evans

The international stock market crash which began in New York on Monday 19 October, is widely considered to have been triggered by the us Treasury Secretary Baker's threat to cancel the Louvre Accord . This agreement was made in Paris at the end of February at a meeting of the secretive Group of Seven (G7) - the Finance Ministers and Central Bank Governors of the world's seven most powerful capitalist states .2 Crucially, the Accord involved a commitment by Baker to stop `talking down' the value of the dollar . Since before the dollar peaked in March 1985, the financial world had been exorcised by the fear of a so-called `crash landing' - the danger that a decline in the value of the dollar might turn into a free fall if overseas creditors dumped their massive holdings . The us Federal Reserve would then be forced to attract funds back into the dollar by raising interest rates to levels

that would plunge the world into another major recession . Foreign Central Banks poured large sums into buying dollars in order to prop up its value, but the dollar continued to decline . This was partly because official central-bank resources are dwarfed by those of the big private institutions that were selling dollars, but also because the us government was itself encouraging the dollar to fall in an attempt to promote us exports and so cut its economy's mounting trade deficit . This policy is the latest step in a long series of us measures that have used the international position of the dollar to try and boost accumulation in the us at the expense of rival capitalist economies.

The end of the post-war order The background to the present situation lies in the end of the post-war

The crash of '87 boom in 1973 . The end of the boom was characterised by two key.features . Firstly, the dynamic combination of mass production and rising real wages - Fordism - could not be maintained and the rate of profit was falling in the advanced capitalist economies . Secondly, the stable international order based on a hierarchy of capitalist states under the hegemony of the us was undermined, partly by the economic growth of Japan and Western Europe, and partly by the increasingly international nature of industrial and financial capital . A central pillar of the post-war order was the use of the dollar as the main form of international money . Established on the basis of the country's initial industrial and financial supremacy, this placed the us in a very privileged international position . It meant that, unlike any other country, the us could run a balance of payments deficit and finance it by simply issuing more dollars . The Us was restrained by a commitment to convert foreign-held dollars into gold on request but in 1971 the us unilaterally revoked this commitment and the world was left with a system based on an inconvertable us dollar . The lengthy period of crisis since 1973 has moved through several stages, each closely tied to a new turn in us policy. After an initial slump there was an upturn from 1975 until 1979 . This was marked by a big expansion of government expenditure in most advanced capitalist countries - although Britain cut back after a sterling crisis in 1976 . Despite increased demand, accumulation in Europe was weak, although in the us many new, if often low-paid, jobs were created . The strong upturn in the us was made possible by the fact that, although

it resulted in rising imports and a trade deficit, the us could finance the deficit by simply issuing dollars . Then, as overseas creditors piled up more dollars than they wanted, the Carter government just sat back and did nothing to protect the dollar as its value slowly sank on the world's foreign exchanges. This surreptitious devaluation gave us exports a big push at the same time that it cut the value of the dollars held abroad! The devaluation succeeded in stemming the fall in the us share of world trade, although at the same time it raised the price of imported raw materials and led to rising us inflation . However, in late 1978, the strategy had to be abandoned as foreign creditors decided it was time to abandon the failling dollar and its value began to collapse. The us raised interest rates, but perhaps more significantly, the government proposed to issue bonds denominated in yen and Deutschmarks so that it could acquire foreign currency reserves to defend the dollar . The us was accepting that it could not force all the cost of a declining dollar onto foreign creditors, and that it too would have to bear a real part of the cost of adjustment . This co-operative phase was, however, short- lived. Reasserting us supremacy Devaluation had not resolved the underlying stagnation of us industrial capital and the weakened dollar collapsed again at the end of 1979 . us interest rates were once more raised to defend it and the scene was set for a new world slump . Political defeats in Asia, Africa and Central America and additional economic competition from the newly industrialising countries had soured any interest by us capital in

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co-operative solutions . With the election of Reagan, massive rearmament and a strong dollar became the key to reimposing us supremacy on the world. A key part in this shift was played by the us Federal Reserve. With the declared aim of controlling inflation, it adopted strongly monetarist policies which drove up us interest rates to unprecedented levels in the early 1980s . These attracted capital into the country from all over the world and the value of the dollar soared . While the traditional industrial sectors of us capital were ruthlessly squeezed between high interest rates and a collapse of exports, financial capital had a bonanza . At the same time, huge state expenditure on armaments boosted accumulation in electronics and aerospace, thereby actively promoting the most technologically sophisticated sectors of us industry . Reagan rode tall on the super dollar and a heavy line in cold-war rhetoric . After us monetarism has subjected the world economy to two years of bitter recession, massive government spending provided the basis for a new us upturn at the end of 1982 . This boom took off as third world countries, trapped by the debt crisis, were forced to effect a net transfer of capital to the Us . The boom also depended on capital which was attracted from other advanced capitalist countries by the rising value of the dollar . Compared with earlier us upturns, Reagan's boom has been marked by high rates of growth and it has been remarkably prolonged . However, the policies on which it is based have encountered two serious obstacles which lead us to the current malaise of the dollar and its impact on the stock market crash.

The limits of Reagan's boom First, the super dollar meant cheap imports that threatened jobs in many domestic us industries, and an increasingly strong movement in favour of protection looked set to benefit the Democratic Party at the 1986 Congressional elections . Reagan's government apparently decided that the only way to head off this threat was to support moves by other Central Banks to drive down the value of the dollar .3 Foreign Central Bankers were already deeply concerned that after its spectacular rise, the dollar was greatly overvalued, and that unless they intervened in foreign exchange markets to manage a decline, it might tumble and cause chaos in international markets . In February 1985 they sold over $1 lbn in a single week and in March the dollar finally began to fall . The us secured approval for a joint approach to the dollar at an important meeting of the Group of Five, held at the Plaza Hotel, New York, in September 1985 . Finance Ministers agreed to act jointly to drive the dollar down further, but to use their concerted resources to defend it if it fell too quickly. The us needed this agreement because its own reserves were much too small to defend the dollar in the event of a run .4 After the Plaza meeting, Central Banks - including the us Fed - sold $10bn, and the value of the dollar fell . By the end of 1985 it was 25% down on its peak and by the end of the next year it was 40% down - and still falling . Remarkably, because of falling oil and primary commodity prices in the world market, us inflation did not take off as it had after Carter's devaluation . But the falling dollar now posed a different problem .

The crash of '87 Financing the us deficit Reagan's boom sucked imports into the us while the high dollar reduced its exports . This has led to a major imbalance in world trade . Japan, West Germany and the Asian NICs have developed large trade surpluses, while the US has run a growing trade deficit that has turned the country into a net debtor. The second major problem facing the Reagan government has been how to finance this deficit. When the us had run a trade deficit in the 1970s, it had been financed by issuing dollars in the us. But the adoption of monetarist policies ruled this out in the 1980s and the us has therefore had to finance its deficit by attracting dollars that already existed abroad back to the us.s This was successful so long as the dollar was rising, but it became far more difficult once the dollar began to fall . Until 1986, the us deficit was financed by inflows of private capital . In a first phase, from 1983 until mid-1984, there was a net inflow of capital through us banks . They had cut back their lending to the third world after the onset of the debt crisis, at the same time that high us interest rates attracted deposits from all over the world . In a second phase, which began in 1984, the deficit began to be financed by investments in securities. Japanese institutions used the dollars they had accumulated to invest in us Treasury bonds, and us corporations used foreign bond markets to raise capital which they then sent back to the us to finance domestic accumulation . The third phase, which dates from early 1986, has been marked by a diversification by foreign and especially Japanese investors away from Treasuryand Euro-bonds and into shares . In the first half of 1987, foreign institutions'

net purchase of shares exceeded that of bonds, a shift which helped fuel the rise of us share prices. An important feature of this third phase, however, is that private investment has not been sufficient to cover the us deficit ; in 1986 about a quarter of the us deficit was financed by foreign Central Banks who were buying dollars in an attempt to stem its falling value . 6 But to the consternation of these central banks the us continued to encourage the dollar to fall . The aim of the us was to reduce its need for foreign finance, not by curtailing domestic accumulation, but by devaluing so as to make its exports more attractive . This was resented by its capitalist rivals, in particular Japan and West Germany, whose industries are the main competition in the high technology sectors which us capital is striving to dominate. These countries were threatened with slower growth unless government policies shifted from an emphasis on developing high technology exports towards a greater reliance on domestic expansion. The falling dollar was therefore a new source of friction between the major capitalist states . In January 1987, there was a further large flow out of the dollar and into the Deutschmark, and European and Japanese Central Banks spent $30bn trying to stabilise the foreign exchange markets. The White House described the dollar's continued fall as 'orderly and steady', and it denied that it was seeking a further fall in notably ambiguous terms, but the West German Bundesbank President Otto Poehl warned that the us was playing with fire . The Louvre Accord The Louvre Accord in February was

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14 an attempt to reestablish stability in the foreign exchange markets . The Accord stated that the large trade and current account imbalances posed serious economic and political risks and it also claimed that exchange rates were `broadly consistent with. underlying economic fundamentals' . It was agreed that the us would stop encouraging the dollar to fall, and that international imbalances would be redressed by using fiscal policy to restrain growth in the us and to stimulate it in Japan and West Germany. Despite the Accord, private institutions did not accept that the dollar would now be stabilised and, indeed, influential us economists were still calling for it to be devalued by another 20 or 30 per cent in order to balance the trade deficit . Private foreign investment in dollar assets remained insufficient to finance all the us deficit . European and Japanese Central Banks had to intervene repeatedly to defend the dollar and between January and May they acquired a total of some $70bn. This scale of official intervention meant that central banks were financing over a third of the us trade deficit in the first half of 1987. It also had the effect of shifting the immediate tension from the dollar onto interest rates . The rate of return on us bonds increased from 8 per cent in January to just over 10 per cent at the beginning of October . But the stock market boom continued to attract domestic and foreign capital and by the end of August, the price of shares had risen to a level that yielded a return of only 5 per cent . The situation was highly unstable and the speculative rise in stock prices could have collapsed at any moment . Baker's threat to resume pushing

down the dollar is said to have precipitated the big shift of capital from shares into bonds and the collapse of stock market prices . The link to the dollar is that an uncontrolled slide in its value would result in a big increase in interest rates, and since share prices are inversely related to interest rates, share owners wanted to escape before that led to a big fall in prices . 7 But whether or not Baker's statement actually was the trigger, once stock prices were seen to be falling, there was a widespread wave of selling ; and the financial fragility that gave rise to this situation was closely linked to Reagan's policies to benefit us capital, first by pushing the dollar up to extraordinary heights and then by pushing it down again .

The multinational economy Financial manipulation has been central to us government policies to postpone and displace the deep-seated problems of capitalist accumulation . But, since the mid-1970s an international economy outside the control of national governments has been consolidating itself on the basis of multinational corporations. These corporations are financed by multinational banks who run a system of international money that is largely outside the control of national authorities . It is these uncontrolled international markets that are now the principle mechanism for allocating capital on a global scale, but which also threaten the stability of the world economy . The stock market crash briefly challenged the complacency of the us authorities in the face of these huge private markets and there was a relaxation of monetary policy in the advanced capitalist countries in

The crash of '87

order to prevent a serious financial collapse. The relaxation of monetary policy in the wake of the crash led to lower us interest rates . And despite extensive intervention by foreign central banks, this led to further falls of the dollar, which in turn prompted new wave of selling on the stock market . But although there has been an urgent need for co-ordinated policies, the period since October has been marked by sharp disagreements between the main capitalist states . Baker stated that the US was not prepared to risk a us recession in order to defend the dollar, and criticised the West German government for not adopting more expansionary policies. Bundesbank President Poehl criticised the us in unusually outspoken terms ; and even the British Chancellor, Nigel Lawson, called for a US pledge to defend the dollar, by issuing foreign currency bonds if necessary . The Group of Seven issued a statement at the end of December which called for more stable exchange rates, but unlike the Louvre Agreement earlier in the year it involved no commitment to joint action . The value of the dollar had now fallen by half against the Deutschmark since its peak in 1985 . And although the dollar was temporarily stabilised in January 1988 when foreign central bank intervention successfully imposed issues on currency dealers selling dollars, it is not clear that the US will now cease to depress the dollar.

The us government hopes that devaluation will close its trade deficit, but the evidence is clear that this will not be achieved without either a contraction of the us economy or an expansion abroad . If the us did succeed in closing its trade deficit, this would result in a fall in world demand and slower growth for the economies of the advanced capitalist countries and the third world . But to therefore oppose a cut in the us deficit implies supporting the us's ability to appropriate resources from the rest of the world without making any real payment . Socialist policy must address itself to breaking the privileged international position of the dollar, and to creating an international framework that is not dominated by private financial markets . Notes 1 . Title courtesy of Wall Street Journal, 11 January 1988 . 2 . The us, Japan, West Germany, France, Britain, Italy and Canada ; the smaller G5 does not include Italy and Canada . 3 . See Ricardo Parboni, `The Dollar Weapon', New Left Review, no. 158, 1986. 4. Daily foreign exchange trading in London amounted to $90bn in early 1986, a similar sum to the combined reserves of the us, Japan and West Germany. 5 . Alain Lipietz, Mirages and Miracles (Verso, 1997) chapter 6. 6 . Morgan Guaranty, World Financial Marten, November/December 1987 . 7 . Share prices are normally based on the (expected) dividend capitalised at the (expected) interest rate .

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International dimensions of the stock market crash

Jerry Coakley

The October 1987 stock market crash was remarkable on a number of counts, many of which are treated in this issue and elsewhere .' From our viewpoint the most interesting feature of the crash was its international dimensions . The crash was transmitted from Wall Street to other major financial centres both with unprecedented rapidity and with apparent disregard for the underlying state of national economies . Moreover we argue below that the crash had important implications in the struggle for international financial hegemony . Since the crash a bear market has persisted on all the major stock exchanges although the exact nature of price movements has varied as between exchanges . This has been the case even for the Japanese financial markets which are linked to arguably the healthiest real economy among the leading capitalist countries comprising the G7 (Group of Seven) . The other significant post-crash feature has been the shakeout among us and European securities houses. This paper is organised as follows . First we sketch out the international background to the crash by examining developments in international financial markets in the 1970s and 1980s . Of particular interest is the pivotal role London had come to play in these processes . Second we propose an explana-

tion of the crash based on the notion of real and financial overinvestment in the securities industry . This, it is argued, was the underlying basis of the crash and is able to encompass other partial explanations . Finally we look at the aftermath of the crash and draw some tentative conclusions .

Financial markets in the 1970s and 1980s Financial markets and the financial services industry more generally have been fundmentally restructured since the 1970s. This restructuring is most evident in the area of producer financial services which are supplied on the wholesale international financial markets . It has occurred as part of two distinct waves of internationalisation of financial markets . Here we can only sketch out some of the characteristics of this process of restructuring . 2 Very briefly we can characterise the 1970s as the period of the internationalisation of the money markets via the rise of the Eurocurrency markets centred on London . In this period the commercial banks recycled the vast dollar surpluses of the oil exporting countries mainly to Third World countries. London managed to capture in excess of one quarter of this Eurocurrency business and was the leading

The crash of '87 centre by a large margin . On the other hand the 1980s have witnessed a distinct form of internationalisation of financial markets which has marked a sharp break with the 1970s . This involved the internationalisation of securities (bonds and equities) markets by means of the process known as securitisation . This may be broadly defined as that type of financial intermediation which involves the buying and selling of financial instruments. 3 Securitisation received a boost from a number of sources in the 1980s : • the nature of the large international payments imbalances and the related shift in the composition of international lending. Essentially the former have comprised the large us deficit and the surpluses of Japan and West Germany. In contrast with the investment of the 1970s surpluses of the oil exporting countries, those of Japan in particular have tended to be invested in various forms of securities in the 1980s . Moreover the Third World debt crisis had since 1982 led to a sharp decline in syndicated bank loans . This prompted banks to switch the focus of their lending away from the Third World towards the multinationals and governments of the advanced economies . This fostered the boom in the Eurobond markets initially and more recently in the Euronotes and Euroequities markets .' • the regulatory framework for the operation of financial markets has been or is being liberalised or deregulated in many countries . Prominent examples include the abolition of exchange controls on overseas capital movements in the UK and Japan, the establishment of offshore banking facilities in the us and Japan and the Big Bangs in London CSC/34-3

and other centres . The general effect of these changes has been to stimulate international portfolio diversification and to enhance cross-border capital mobility .

• finally the 1980s has been marked by a spate of innovation in financial instruments and markets . A major example of these is the swap market used for hedging purposes which mushroomed from $5 billion in 1982 to some $400 billion in 1986 . 5 Others include Eurocommercial paper, Euroequities and equity-linked bonds and various futures and options instruments .' The combination of these factors favouring securitisation in the international financial markets played a prominent role in the bull market which emerged in 1982 and which continued apparently unabated - a few minor hiccups notwithstanding-until the October crash . One of the major implications of securitisation has been to signal an end to London's hegemonic role among international financial centres and to effect a shift of power toward its principal competitors-New York and Tokyo . The crash has altered this process somewhat by adversely hitting London and New York and so favouring Tokyo by default . In this context it should be stressed that globalisation of financial markets is a misnomer. What we have witnessed instead is the reemergence of interimperialist rivalries' within the framework of financial markets and the financial services industry generally with other financial centres being relegated to playing only minor or specialist roles . Both New York and Tokyo enjoy the advantage of large domestic securities markets and securities houses

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which dwarf those in London . However financial markets remain highly regulated and segmented in both centres despite recent moves towards liberalisation . • In addition both us and Japanese pension funds could be said only to have begun to internationalise their portfolios by comparison with their UK counterparts . As Coakley (1987) has argued elsewhere we are still some distance from global financial markets . Since the 1970s London's preeminence as a Euromarket centre (both for Eurocurrency and Eurobonds) has enabled it to attract the huge influx of overseas banks . Currently some 400 commercial banks and some 110 securities houses or investment banks are directly represented in London .' These include virtually all the leading world financial conglomerates such as Nomura and Citicorp . London has further taken advantage of the trend towards securitisation and has captured the lion's share of trade in purely international securities mainly as a result of Big Bang . The Big Bang has afforded London one major advantage over its two main competitors . London is the only one of these three centres which does not restrict the securities activities of its commercial banks and which grants banking licences to investment banks . That is, London is the only centre which offers free trade in all types of international securities and banking markets to both commercial and investment banks . The corollary of this is that London had become a type of laboratory for financial institutions venturing into new markets. For this reason developments within the City securities markets bore only a very tenuous rela-

tionship to the requirements of the British economy . These developments served to heighten the vulnerability of London to external shocks as has been highlighted in the wake of the crash .

The overinvestment thesis Since the crash a number of theories have been adduced to explain why and when it occurred . These range from theories based on a sharp change in the psychology of traders to those based on the current account deficit and the rate of return discrepancy. The first begs the question of the causes of the change in psychology whilst the others are partial explanations to the extent that one is a real and the other is a financial explanation of the crash . For this reason we shall argue that both can be encompassed within our overinvestment thesis . The overinvestment (in securities) thesis incorporates two distinct concepts of investment which can be viewed as belonging to different circuits of capital . The concepts are real investment or accumulation and financial investment or investment in fictitious capital . The latter we define simply as trading in the securities markets. We shall contend that though the nature of overinvestment differed as between financial centres, in all cages it led to overtrading in securities. In the cases of New York and Tokyo overinvestment was largely of a financial nature though for different reasons . Overinvestment in Tokyo was largely the result of excess domestic savings whilst in the case of New York it was linked to a spate of merger and acquisition activity and a credit boom . By contrast overinvestment in London involved both real and financial ele-

The crash of '87

ments for reasons connected to the Big Bang . Since the Big Bang announcement securities houses and the securities subsidiaries of commercial banks and others have engaged in a process of real investment or accumulation in new trading floors, equipment and facilities . The scale of such investment has been huge by traditional securities industry standards . The FT, for instance, has quoted a figure of some £500m per trading floor in the case of the larger institutions . These large trading floors were required in the wake of the Big Bang due to the switch from a floor-based to a screen-based trading system necessitated by the extent of information technology (IT) flows involved in international trading . In this sense the securities markets were just catching up with existing screen-based trading systems in the Eurobond and the foreign exchange markets . The problem with this scale of investment was that it came to be regarded as a barrier to entry to the securities industry . The large institutions appeared to be faced with the stark choice of joining the first division of diversified market-makers or becoming second division niche players . In the rush not to be excluded most of the larger institutions choose to invest and the result is widespread excess capacity in both the gilts and equities markets in London . The extent of overcapacity can be gleaned by comparing the numbers of market-makers in London and New York. Even though the London government bond (gilt-edged) market is only one tenth the size of that in New York in terms of trading volume, London has some 26 market-makers as

against 40 in New York . One consequence of this overcapacity has been the tendency to overtrade since profits in the securities industry are transactions-based . In other words it has contributed to a rise in trading volume in secondary financial markets . Moreover in the context of a bull market there is a tendency for financial investment to contain a sizeable speculative element which will be inflated by factors causing overinvestment . In this sense the overinvestment thesis can incorporate speculative bubbles but is more general than the latter . 10 In brief what the overinvestment thesis argues is that overtrading emanating from both real and financial investment in the securities markets had inflated equity prices well in excess of their value as determined by expected profitability or market fundamentals . The large institutions had exacerbated this process by switching part of their holdings of liquid assets and government bonds into equities . A financial crisis was required to readjust prices and portfolio shares . The distinguishing characteristic of the overinvestment thesis is the emphasis it places on the speculative element in much financial investment . In that sense it has affinities with Marx's theory of financial crises in the 19th century. Moreover the thesis stresses that the crash had a basis in excessive real investment especially in London's markets. In this respect it is better able to explain the crash in London than its rivals . More generally the thesis would emphasise the continued vulnerability of London to future shocks due to its excess capacity and its reliance on overseas banks and securities houses .

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Capital & Class 20 The aftermath of the crash In the months following the crash we have witnessed a sharp reduction in trading volume in the secondary financial markets or what we have called financial investment. The scale of the reduction has varied as between financial centres but has been of the order of one-quarter to one-third of pre-crash averages in 1987 . This has further squeezed the profitability of securities houses some of whom had already been nursing heavy losses incurred in the course of the crash . The result of all this has been the incidence of a widespread downsizing or shakeout in the ranks of securities houses. It is significant that most of this has occurred in London and New York and has been confined to American and European securities houses . It has taken the form of market exits and the abandonment of trading floors as well as staff redundancies . In the coming months one could witness further centralisation among securities houses and more concentration in the market shares of the larger institutions . The exception in this process has been Tokyo and the Japanese banks and securities houses . Thus far these institutions appear to have emerged relatively unscathed from the crash . How is this explained? The main reason seems to be that these institutions have taken a much more cautious line on internationalisation in the 1980s in contrast with the apparently gung-ho attitude of the others . This caution may be due to a number of factors, prominent among which is state regulation both within Japan and in relation to the international activities of Japanese institutions . One consequence of this is that one could view the crash as marking another

decisive stage in interimperialist financial rivalries. What the crash has done is to confirm the y shift in global financial power in the direction of Japanese securities houses and banks . We say it confirms Japanese power because the large Japanese banks had already established their supremacy in the Euromarkets in the course of the 1980s, albeit from a London base . Finally Japanese institutions (unlike their us and European counterparts) have avoided paying inflated prices for London stock exchange firms . They have preferred to establish de novo securities houses in London although they have bought stakes in three large Wall Street houses.

Conclusions We have argued above that the underlying cause of the crash was overinvestment in the securities industry . This had resulted both in excess capacity and in overtrading in the securities markets . The aftermath of the crash is witnessing a shakeout leading to further concentration and centralisation in the industry . We have also argued that the crash has consolidated Japanese hegemony in international financial makets . The Japanese institutions have displaced us banks from their leading position . Their new-found power is formidable for it extends across the most important international markets from the Eurocurrency to the international securities markets .

Notes 1 . See for example Leadbeater & Rowthorn (1987) and Wells (1987).

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2 . For a further account see Coakley (1987) . 3 . See Cumming (1987) . 4 . These markets are described in greater detail in Coakley (1987) . 5 . See Hammond (1987) . 6 . See for example Topping (1987) . 7 . See Rowthom (1971) . 8 . It will be interesting to see how liberalisation proceeds in the wake of the crash . 9. See The Banker, November 1987 . 10 . For bubbles in stock markets see Diba & Grossman (1987) . Davis et al discuss bubbles in the context of the foreign exchange markets . References Coakley, J . (1987)'The internationalisation of financial markets in the 1980s', paper presented at the Danish Socialist Economists' annual conference.

Cumming, C . (1987) 'The Economics of Securitisation'. FRBNY Quarterly Review 12(3). Davis, C ., Smith, P .M . & Wickens, M.R . (1987) 'Exchange Rate Fundamentals and Tests for Speculative Bubbles' . LBS Discussion Paper No . 20-87 . Diba, B .T. & Grossman, H .I . (1987) 'Rational Bubbles in Stock Prices', Brown University Working Paper No . 85-38 . Hammond, G .M .S . (1987) 'Recent Developments in the Swap Market', BEQB 27(1) . Leadbeater, C . & Rowthorn, B . (1987) 'Legacy of the Crash', Marxism Today, December. Rowthorn, R. (1971) 'Imperialism in the Seventies', New Left Review, September/October . Wells, J . (1987) 'Spend, spend, spend?' Marxism Today, December.

The crash and real capital accumulation

Andrew Glyn

An assessment of the implications of the stock market crash for the development of the world economy should begin with the most important factor in that development - the rate of capital accumulation . Table 1 below shows the growth rate of the (gross) capital stock for business sector of the three major capitalist economies, plus the UK, for selected years since 1973 . In every case

the rate of accumulation in the mid1980s was within the range one-half to two-thirds of the 1973 level . This reflects the fact that the growth of business investment has been running at about 3 per cent per year since 1973, less than-.half the growth rate of the previous period . Since capital accumulation is the most dynamic source of growing demand in the growth process, as well as the fundamental determinant

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Capital & Class 22

of productivity increase through the incorporation of new techniques into production, a major part of the explanation for the slow-down in growth after 1973 must lie in the behaviour of capital investment.' The weakness of capital accumulation cannot be explained in terms of low profits. The latest international data for profit rates shows that in the USA and Europe the profit rate is not far below that at the end of the long boom in 1973 (see table 2) . Even manufacturing profitability, which suffered most in the recessions of 1974/75 and 1981/82, has recovered in West Germany and the UK to near its 1973 level . Profitability in Japan has remained very steady, at around two-thirds its 1973 level, a fall very similar to the decline in the accumulation rate . Of course the rate of profit fell sharply in the three major capitalist blocs before 1973 (see Armstrong, Glyn & Harrison, Capitalism Since World War II, ch . 11) . The combination of pressures which this earlier fall reflected surely contributed to the subsequent weakening of accumulation, even though post-OPEC shock declines in profitability in 1974/75 and 1980/81 have been substantially reversed . It is clear that the stock market boom had a negligible effect in encouraging capital accumulation. Indeed the essentially speculative nature of the boom is underlined by comparing the stock market indices with the value of the underlying capital stock . Such `valuation ratios' - the ratio of the market value of capital to its replacement cost or Tobin's Q - is often taken as an indicator of investment incentive. Recent information on this interesting variable does not seem to be available, but we can crudely update the series in

a recent OECD publication to produce the following results (Table 3) . In the UK, USA and Japan the valuation ratio roughly doubled between 1979 and September 1987 . Despite this the rate of accumulation failed to increase (Japan) or declined . In Germany the valuation ratio actually seems to have fallen a little as did the accumulation rate . In Japan and the UK the valuation ratio was probably higher just before the crash than at any time during the 1960s (in the USA and Germany it was at a similar level) . Given the much slower rates of accumulation, and the smaller productivity increases generated by investment, than in the early 1960s it is impossible to see where the prospective growth of profits, which would justify these high share prices and thus valuation ratios, could have been expected to come from . A further factor depressing share prices should have been the continued high real interest rates . With the probable exception of Germany, therefore, share prices seem to have been grossly overvalued before the crash . Since the rise in share prices appears to have had little or no effect in stimulating investment, the crash may well have little impact in further depressing it. Indeed the OECD still forecasts private investment to grow by around 4% in 1988 and 2% in 1989 - even if they prove too optimistic there is little likelihood of an investment collapse which would trigger off a major recession . The financial crisis would have had to have gone much further, threatening the banking system, before that became likely. As the OECD suggests, the irrelevance of the level of share prices for the determination of investment reflects the fact that the stock market's role in

The crash of '87

financing new investment, as against takeovers and other speculative operations, is very slight. Even its barometric role as a measure of business confidence has diminished, to judge by the failure of real investment to respond to the bull market . But recent experience also shows

Table I

that improved profitability on existing operations is insufficient to generate a prolonged investment upswing, even when accompanied by soaring share prices. What is required in addition is confidence in the sustained growth of the market . Even if the governments of Germany and Japan could be pressur-

% during year business capital stock growth rates

1973 1979 1986

USA

Japan

Germany

UK

4 .5 4 .3 3 .1

11 .2 6.8 7 .2

4 .8 3 .7 2 .8

3 .3 2 .9 1 .5

Source: OECD Stocks and Flows of Fixed Capital 1960-85 and author's estimates from investment data in OECD Economic Outlook, December 1987 . Table 2

% Profit rates 1973-1985

1973 1979 1985

USA

Japan

Germany

14 12 13

22 17 16

15 14 13

UK

8 6 `10

Note: Non-financial corporations except for Germany where the series is for industry plus

transport and the last year is 1984 . Source: British Business, 13 November 1987 . Table 3

Valuation ratios

1973 1979 1987 (September)

USA

Japan

Germany

UK

1 .2 0.7 1 .2

0.7 0.8

1 .1

1 .1 0.8 1 .7

2 .0

1 .1 0 .9

Source : 1973 and 1979 Chan Lee, OECD Economic Studies (Autumn 1986) . 1987 figures are

approximate estimates of the ratio of stock market value to the replacement cost of capital stock from latest data in the above article updated with stock market prices, capital stock and inflation indices from standard OECD sources.

23

Capital & Class

24

ised into implementing a major package of expansionary measures it is most unlikely that business would respond with sufficient investment to sustain an upswing. For this would require confidence that there would be painless absorption of both the tax increases to pay for the extra expenditure in a fiscally orthodox way and the rising inflation which an expansion would generate (if only through rising world commodity prices and falls in the exchange rates of the expanding countries) . Such painless absorption means acceptance by workers in the short run of reduced living standards, at a tine when their bargaining position would be strengthened by rising demand . While May 1%8 has become a sub-

ject for media nostalgia, the subsequent decade of industrial turmoil has not faded from the memories of industrial and financial circles. Such fears would stifle any substantial investment response to expansionary measures, and indeed form the basic explanation of why the governments of Germany and Japan are so stubbornly resisting pressures to expand . Notes 1 . This leaves aside the important issue of the decreasing effectiveness of investment (or additions to the capital stock) in terms of the resulting output - see the interesting data on the falling output capital ratio (or rising organic composition) in OECD conomic Outlook, December 1987.

The stock market crash and the role of the dollar

John Grahl

The stock market crash in October last year calls into question the role of fmance in western economies . What do financial institutions and organised asset markets do? Are financial sectors entitled to the huge amounts of resources they absorb? To what extent do they cause problems for other sectors of the economy? This article first suggests why financial activity has become so profitable

at the same time as other activities stagnated . There follows an account of the boom and bust on world stock markets and a look at some of the implications .

Why the growth of finance? Why have banking and financial sectors expanded so fast? Answers which run in terms of the boundless possibilities

7 he crash of'87

of the service economy, the 'postindustrial' solution to economic problems, are not to be taken seriously . Consumers may need a rather more elaborate range of financial services as their incomes rise, but such an effect is hardly on the scale required to explain the phenomenal financial expansion in question . Resources have flowed into the financial sector in the form of higher interest payments, not as a demand for new services . The immediate cause of financial growth is almost certainly the increase in interest rates, other credit costs and the difficulty of obtaining credit, that is financial tensions in general . Those tensions have made it more and more advantageous to reorganise and rationalise credit activities, to explore every possible alternative source of loanable funds, to direct increasing energies into the management of liabilities . Technical change - computers and telecommunications - has been a permissive factor in the expansion of finance. Far more potential transactions can be explored and funds can be transferred internationally much more easily than in the past . Nevertheless this globalisation of financial systems was driven by persistently high credit costs - otherwise new technology would not have been so rapidly deployed . Explaining financial tensions is more difficult, but the most convincing explanation relates higher credit costs to the end of rapid growth in western economies . The end of the fast, stable economic growth of the 1960s led to a massive increase in system-wide uncertainties . As a result there was a dramatic change in the behaviour of leaders and wealth-owners . The avoidance of risk became paramount: big risk-premiums began to be incorpor-

aced into credit costs and pressure increased for higher interest rates . It follows that the growth of the financial sector is not a solution to but a symptom of persistent difficulties in productive structures. As in the past, such financial tensions, if not kept under effective control, can give rise to deflationary forces and prove highly disruptive of industrial activity.' For the past 15 years such effective control has indeed been lacking, and as a result strong pressures for economic contraction and reduced investment have been generated . Only briefly, in the US itself, was the new power of finance compatible with a general economic boom .

Phase I - Fighting the markets In the first phase - from the oil shock of 1973 to the end of the 1970s- the us monetary authorities struggled to neutralise growing pressures in the financial sector . Their aim was to prevent a dramatic rise in interest rates and thus protect the real economy from a decline in consumption spending or a contraction of investment . The failure of this strategy was largely the result of the atomised nature of us banking and finance. In the US there are over 10,000 commercial banks and even the very largest of them have only a small share of the overall business . And the banks themselves are only one part of the financial system subject to competition from other institutions . Thus relations between industrial borrowers and lenders are determined on a competitive market and there is no particular link between the interests of the two parties . If lenders get nervous they will try to get out of the market without

25

Capital & Class 26

calculating what the overall consequences of their actions might be . The system can only be controlled indirectly, through the terms on which the Federal Reserve System lends money to the banks, and through the general rules imposed on credit institutions . There is no great possibility of a direct influence on the internal policy of individual banks . In consequence, all the Federal Reserve could do was to pump cheap credit into the banks and money markets . It had no real control over how this credit would be used. In fact, very little went into the long-term refinance of industry . Rather, risk-averse wealthowners borrowed cheap in order to buy gold, foreign exchange, energy reserves and real estate . Lending to Latin America seemed more lucrative and more secure in the climate of the times than exercises in industrial restructuring. Faced by this 'revolt of the lenders' even the Federal government found it increasingly difficult to borrow longterm . Official efforts to provide cheap credit actually increased long-term interest rates, since each injection of cash into the system seemed only to produce more inflation and accelerate the flight from dollar-denominated assets . 2 By the late 1970s the easy money policy was no longer feasible as there developed a major flight from the currency and a collapse of the dollar on the foreign exchanges. The attempt to control the financial markets had failed - what followed was an attempt to propitiate them .

Phase II - the Volcker shock The appointment of Paul Volcker as

Chairman of the Federal Reserve Board in 1979 signalled the coming change . Volcker was resolved to stabilise the dollar and control inflation . He was ready to appease the big lenders on the financial markets by allowing interest rates to rise and he was prepared to contemplate recession as -the price of success. Recession duly followed - between 1980 and 1982 two of the deepest recessions in post-war history were precipitated as the Fed cut off supplies of credit and interest rates rocketed . In the summer of 1982, as the policy approached its climax, the us banks' prime rates - that is, the rates at which they lend short-term to the strongest industrial borrowers - went well above 20 per cent . The reverberations of the 'Volcker shock' are still echoing around the world . One, not insignificant, consequence was to eliminate deficit spending as a feasible option for most countries . In the new climate of tight money such strategies were virtually impossible to finance - evenincountries as rich and powerful as France, for example, where financial pressure helped to bring about the turn to austerity by the socialist government in 1983 . In the us itself there - was a vast industrial shakeout ; organised labour suffered terrible blows, unable to defend workers' wages, conditions or jobs in a climate where many employers themselves were unable to finance lossmaking activities . The inflationary strategies of the 1970s had postponed this process of restructuring which was . now brutally accelerated . By late summer of 1982, however, the new strategy itself was no longer viable . Mexico, which had seen its export markets in decline at the same

The crash of '87 time as its debts in the us became impossible to service was on the brink of default . The international debt crisis, lasting legacy of the turn in monetary policy, started to reach alarming dimensions . Inside the us also some big players were in trouble - farming interests, housing finance institutions, energy exploration companies and the banks which had backed them . The dilemma of monetary control, for many years denied by monetarists, clearly emerged - if the central bank cuts off credit in order to fight inflation, it can be forced to restore credit supplies in its capacity as 'lender of last resort', the guarantor of the overall stability of the system. Thus a relaxation of policy and a substantial reduction in interest rates took place in the autumn of 1982, although rates remained at historically high levels . The three dramatic years since 1979 had been massively disruptive but the Volcker experiment did seem to have produced some achievements for the us. Inflation was sharply reduced and for many years afterwards was under much better control . The wage price spiral was broken, along with the power of the unions, inflationary expectations were reduced and the economy has been much less likely to respond to shocks with a sudden increase in the inflation rate . On the international plane there was a related achievement . The Volcker shock completely (although as it turned out temporarily) restored the credibility of the dollar, and of dollar-denominated assets . Interest rates on bank deposits or government securities were easily high enough to compensate for a slight continuing inflation. The whole exercise was an enormous reassertion of us

financial strength. All over the world risk-averse wealth-holders moved into dollars as the most stable and liquid asset in the world economy . Governments were forcibly brought into line with the new policy climate of disinflation . The prestige and power of the us were correspondingly enhanced . This restoration of international confidence in the US currency was the only substantial advantage to the us from the recession years of 1980-82 . Ronald Reagan proceeded to squander it in an adventure of unparalleled irresponsibility . Phase III - The Reagan boom For most of the world's economies the story of the last five years has remained in Phase II - the phase of high interest rates and recession . Growth has in fact resumed but at slow rates with persistent unemployment and inadequate investment. Interest rates at historically high k els for unprecedented periods of time have been a major factor in this performance . But the us itself has been a startling exception to this general rule . Output has grown rapidly since the recession of 1982, unemployment has fallen consistently and is now below 6% . Explanations are often simplistic and doctrinal. For Keynesians, the expansion is simply the outcome of deficit spending on a large scale . For free-marketeers it is the reward for deregulation, tax reductions and the disengagement of the state from economic life . Here it is relevant first to point to the losers - tens of millions of average or low-paid workers whose sacrifices have sustained the prosperity of their more fortunate fellow citizens . In fact the real wages of ordinary workers have

27

Capital & Class 28

fallen in the 1980s, while increasing numbers have faced growing insecurity and deteriorating working conditions. Demographic factors have also been important - a huge immigration of Hispanic workers has given employers the possibility to expand production while cutting wages . Thus, for example, the textile industry in the us has expanded employment on the basis of cheap, often disenfranchised and illegal, labour, a phenomenon not seen in any other advanced country . The much-vaunted `flexibility' of the us labour market, when it is not simply a myth, is largely a consequence of mass immigration - a point worth making to the neo-liberals in contemporary Europe. The boom - which has seen an explosion of 'overconsumption' by the better-paid strata - has involved ar brutal increase of inequality in an already highly unequal society . Rapid 'job-creation' in the us economy must be seen in this light . Between 1978 and 1984 ten million additional jobs were produced at below average rates of pay while the average itself was only kept up by a massive rise in the incomes of a minority of highly-paid employees . Other losers helped to support Reagan's 'magical mystery tour' - in particular the farming regions of the mid-west, struck by failures on a mass scale . Finance itself played a key role in the Reagan boom . In the years after the Volcker shock dollars and dollardenominated assets - above all us government debt - were seen by companies, financial institutions and wealthy individuals around the world as the only safe and stable assets to hold in dangerous times . The dollar soared not because of a demand for American

goods, but simply because of a worldwide scramble for American money . Thus the same crisis and rnala+v which heightened financial tensions around the world actually relaxed financial constraints on the us government and poured capital into the us financial system . This effect, together with a huge redistribution from labour to capital, was at the heart of the boom . It would have been possible for the us to use this financial strength to rebuild and re-equip the American productive structure . This did not happen - what took place instead was a spending spree, on an epic scale . Taxes were cut with no real prospect of meeting the resulting government deficit which was, temporarily, eagerly financed by foreign lenders . Huge defence contracts diverted US enterprises away from genuine wealth creation ; cutbacks in welfare spending went not to close the government deficit but as tax cuts feeding the 'overconsumption' of the richest 25% or 30% of Americans, those who triumphantly reelected Reagan in 1984 . 3 The expansion of Japanese capitalism around the Pacific rim added further fuel to the boom of the American south-west and California . Not everything that happened in the us between 1982 and 1986 can be dismissed as parasitical or speculative expansion . But in general the disequilibrated and unsustainable nature of the boom was clear from an early date: the rising dollar made us products uncompetitive while the government's deficit spending sucked in huge volumes of imports. Not only traditional sectors such as the steel industry suffered ; high-tech enterprises in machine tools or semiconductors were rapidly undermined . By 1985 there was a clear crisis of American competitiveness

The crash of '87

while the us was moving rapidly into a net debtor position - an absurdity for the richest country in the world, especially so as very little of the borrowing went into genuine investment . Early in 1985 the boom on the foreign exchanges broke and the dollar began a descent even more rapid than its rise. Within two years it had lost all the gains painfully produced by the Volcker recessions and was below the levels of 1978 . Growth in the us economy started to slow. Clearly it would soon be difficult to fuel the us boom with further borrowing. By now the balance of financial power tilted right back to the super-productive exporting economies of Japan and West Germany . In the early 1980s these countries battled to adjust to the unilateral moves of the us authorities . Now only continuous recycling of their surpluses kept the Reagan ship afloat . Phase IV-The crash Booms and busts on financial markets are explained in a variety of ways, although the various theories have common elements. The most far-reaching account of the contradictions between private appropriation and social production is certainly that of Marx ; but the most precise analyses of financial instability as a specific phenomenon come from Keynes . Keynes argued that it was impossible for each agent in the market to form an independent assessment of likely future developments . Rather, agents as a group would be governed by collective expectations of a basically conventional nature, with sharp discontinuities if these conventions are shaken . The Keynesian theorist Hyman

Minsky has developed a model of financial fragility : he suggests that any extended period of stability will, by reinforcing existing expectations, progressively reduce the risks to individuals of taking up more speculative positions . 4 There are disagreements about the extent to which individual irrationality is involved in the collective manias so frequently observed . In the bleak post-Marxist vision of Aglietta and Orlean the participants are no more capable of rational judgement than the Gadarene swine. 5 But even if the individual players are acting logically, a cumulative lack of logic in their overall behaviour may be deduced from the nature of the game they are playing . Even among the free-marketeers, similar conclusions tend to force themselves on the more objective economists . Even in the abstruse equation systems of the `new classical' school there are frequently possible divergent `bubbles' in asset prices, providing self-fulfilling prophecies can keep expectations in line with market outcomes . Such unstable time-paths are excluded from the school's results on a priori rather than empirical grounds . There were realities behind the b oom . us output, doped by big tax cuts, grew fast after the recessions of the early 1980s . Massive redistribution from labour to capital meant that profitability grew much faster than output . Large-scale labour shedding, the inrush of migrants available for more intense exploitation, and a supply-side legislative programme geared to the needs of business restored the profitability of nearly all companies except those most vulnerable to competition from imports. The other condition for the boom was the willingness of the rest of the world to hold us paper. In

29

Capital & Class 30

the highly uncertain climate of the 1980s, wealth-holders sought dollar assets as the best refuge in the storm . Fast-moving deregulation, removing local and national barriers between capital markets, and information technology, linking national financial systems into a global network, facilitated the mobility of all financial resources and sustained the buoyancy of the us markets . By nearly all accounts some reaction was inevitable . The conventions on which the bull market rested had to minimise, or assume that favourable solutions could be found for, several growing problems . The overhang of international debt is one example: western central banks operated sophisticated crisis management but came little nearer to a solution, as the big write-offs by us banks reminded the markets earlier in 1987 . Federal borrowing and a growing us trade deficit seem to have been the key factors : the longer they persisted the more likely became drastic and unpleasant corrective action . The stock market did not smoothly adapt to this slowly emerging threat - rather an optimistic convention, or shared set of expectations, suddenly gave way . The absence of any clear view of future developments then fragmented the previous unity into a scramble of individuals for safety . It is a measure of the previous speculative bubble that all the record losses of October only brought stock market prices down to the levels of 12 or 18 months ago . In retrospect there was little to justify the last phases of the bull market except its own momentum with each price advance working to confirm the prevailing sentiment of optimism . The boom then, almost certainly

underestimated economic problems . But the violence of the ensuing reaction is likely to intensify the policy dilemmas which brought about the crash .

The aftermath In practice, and in spite of contemporary free market theory, the ultimate responsibility for major allocative decisions remains with governments and the concept of control by financial markets alone, although it has influenced events, remains an unrealisable utopia . Thus there is a deep irresponsibility in the privatising and deregulating strategies which increase the power and scope of private finance : decision-making is privatised, but acceptable outcomes from these private decisions continue to be a public objective underwritten by the government's legislative and monetary power. The present turmoil on stock exchanges around the world underlines this irresponsibility . Given these levels of volatility, stock exchanges are useless in controlling investment activity. But if deregulated financial sectors cannot usurp the role of government policy, they can certainly make policy formation and implementation much more difficult . In the wake of the Wall Street crash all the dilemmas facing western governments are more acute . Ironically this is most obvious in the case of us monetary policy . A decade ago, highly ambitious monetary policies were the chosen means of limiting political intervention in economic life and restoring the allocative role of markets . It was a key theme of neo-liberal doctrine that monetary policy sufficed to control economic aggregates - active fiscal policy was not needed.

The crash of '87

Today the us monetary authorities have been rendered impotent by the free asset markets they encouraged to grow . Any relaxation of monetary policy could trigger an uncontrollable flight from the dollar, hence resurgent inflation ; but equally, any significant tightening of monetary conditions risks precipitating a new crash on equity markets as the fear of recession provokes a scramble for liquidity. The Federal Reserve System can only try to stay afloat between this Scylla and Carybdis ; any aspiration to control the overall direction of financial developments is abandoned . Paul Volcker did well to resign as chairman of the Fed last year . Events had in any case put an end to his reign. Thus responsibility for us economic policy is now back in the hands of politicians ; the key questions are whether an agreement on stabilisation can be reached between President and Congress and, if so, on what terms . This in itself is a move away from the ultraconservative free-market position of recent years. At an international level governments and central banks in Japan and western Europe are under intense pressure to relieve the stresses produced by uncontrolled finance in the US . Japan and West Germany, which struggled to hold down interest rates when us rates rocketed in the early 1980s, are now accused of violating their international responsibilities by not making further sharp cuts in their already low rates . At the same time they are expected to purchase limitless quantities of dollars at an exchange rate otherwise unsustainable. Governments around the world are expected to widen the budget deficits which they have narrowed so painfully over the past

seven years in response to financial 31 pressure in the us .

Conclusion It would be foolhardy for other governments to deny immediate relief to the hard-pressed us authorities . Nevertheless if European governments simply accommodate their policy stances to the needs of the us they will be perpetuating the financial hegemony of the us which has been so frequently abused and depriving themselves of any influence over future financial developments . If European central banks simply absorb excess dollars they maintain the privileged 'reserve' role of the us currency . However, this role of the dollar as a reserve asset and, hence, as an international investment medium is intimately linked to the 'globalisation' of us financial relations . To preserve the privileged role of the dollar is to sustain the anarchic, atomised assembly of multinational institutions and markets which deal predominantly in dollars . Thus there is a close connection between restoring some social control over financial activity and dethroning the dollar as the central currency in international finance. As is often pointed out, it is futile to propose restoring the financial regulatory structures of twenty years ago . Today, the stabilisation and control of finance necessarily implies control over international financial relations and this cannot happen without replacing the dollar as the medium in which most international financial transactions are effected . The truth is that the organisations - private and public - which issue dollars and dollar-denominated debt are not under any effective social

Capital & Class

32 control and are unlikely to be so in the absence of implausibly drastic political change in the us . In consequence a reduced role for the dollar - reflecting the reduced role of the us in world trade and production-is a precondition for the re-regulation of financial sectors . A key aspect of this is to prevent the us borrowing in its oum currency, that is to say, issuing the medium in which its debts are settled . Nothing in the troubled history of the last twenty years from Nixon's destruction of Bretton Woods to the Volcker shock and Reaganomics, gives any ground to believe that us monetary hegemony will not be again abused at the expense of other countries . If the us needs to borrow, it should do so in Yen and ecus, thus assuming the risks of dollar depreciation while limiting the sphere of dollars as an international store of value. These financial linkages between Europe and the us are far more important than their trading relations which are usually more discussed . The entanglement of European economies in the anarchic and unstable us financial system has been a major contractionary force in Europe - raising the cost of credit and sacrificing long-term economic development to a search for speculative gain . Financial stabilisation, based on a reduced role for the

dollar, is a key condition for European recovery, since it would make possible greatly expanded programmes of investment in human and material resources . In Britain, the policies of the last 10 years have completely subordinated national economic life to globalised us finance and the uncertain course of us monetary policy . This has been, in the short-run, a highly successful gamble ; the British financial sector's explosive growth has induced one of the fastest overall growth rates in Europe . If the dangers of this strategy, in particular its neglect of long-term investment, are now more widely appreciated, the crash will have served one useful purpose .

Notes 1 . For a more detailed account of this argument, see John Grahl, `Productivity Slowdown and Financial Tensions', Thames Papers in Political Economy, 1986. 2 . See Michael Aglietta, 'Etats-Unis', in Robert Boyer (ed .), Capitalismes Fin de Siecle, 1986. 3 . This term and the general remarks on Reaganomics are borrowed from Mike Davis, Prisoners of the American Dream, 1986 . 4 . Hyman Minsky, Stabilizing an Unstable Economy, 1986. 5 . Michael Aglietta and Andre Orlean, La Violence de la Monnaie, 1982 .

The crash of '87 33

The crash Alan Freeman

The Great Crash of 1929 is the only event in living memory which compares in scale with 29 October 1987, and Marxism the only theory which warned it could happen again . We obviously owe our doctrine a small pat on the back . Unfortunately this isn't enough . Why was the particular crisis of 1929 so sharp? And why was the depression which followed so long and so deep? The rediscovery of long waves in capitalism offers part of the answer .' The Keynesian economist Kindleberger 2 offers another, not necessarily contradictory answer . He points to a

structural imbalance in international relations in the inter-war period, marked by Britain's fall from world leadership and the USA's rise to the status of hegemonic leader of world imperialism . As a theory of what caused the crash, abstracted from the contradictions of a system based on private investment for profit - as analysed by classical Marxism - this does not stand up. What caused all the other recessions? But if seen, not as the cause of the crisis but as its highest expression - and the key to its solution - it is consistent both with classical Marxism and with its extension to include long waves . The central idea of Lenin's Imperialism is that under monopoly capital, competition at the highest level is C&C/34-C

between blocs of capital for the division of the world's markets, combined with the struggle for the division and redivision

of the world's territory . Trotsky held that the resolution of global crisis demands a violent reorganisation of relations between national states, serving as instruments for defending national blocs of capital in international competition . These accounts are relevant today . What was World War II if not a convulsive redivision of the world's markets and territories arising from a violent reorganisation of relations between states? What provoked it if not the radical imbalance between the world distribution of productive forces and the world relations between national blocs of capital provoked by Britain's decline and the USA's rise? More chillingly, what do we see now if not a new radical imbalance provoked by the long-term decline in the productive capacities of the USA? This suggests that focussing on relations between the great imperialist powers could shed great light on the 1987 crash .

Economic paralysis, political convulsion 1929 was not a 'normal' cyclic crisis . By 1932, industrial production in the

Capital & Class 34

USA

was barely half its 1929 level. The

us share index fell from a peak of 216

to a trough of 34 - nearly 85% over three years. Trade declined for five successive years and did not regain 1929 levels until after the war . It took five years for the first major country Britain - to reach its 1929 levels of production . 3 The us saw no less than seven years of net negative investment .4 But the political consequences were even more shattering . By the end of the recession Hitler was in power, the Roosevelt administration was in office, the British Labour Party had collapsed into coalition, and France had seen four governments in as many years . Spain was in the throes of civil war. There were an estimated fifty revolutions in Latin America ; Italy had conquered Abyssinia, the Japanese Manchuria, and Germany was well advanced in the conquest of its Eastern neighbours . A chastening point for the view that the economic collapse of capitalism will burst open the door to socialism ; during this entire period, in not one country was capitalism overthrown .

for world trade and payment . As such it was the guarantor of the credit system on a world scale . On this depended not just world trade but imperialist accumulation, which required the large sums of loan capital which only the credit system could mobilise . Britain in effect operated a world counter-cyclical policy . Arthur Henderson, in his proposal to the 1932 Lausanne conference, recalled that Britain used to maintain solvency everywhere in difficult times by shipping gold to . centres of financial crisis and by drawing gold from centres not affected . 'It is of the essence of the present world difficulties that London has failed in the discharge of that vital function, and that no other centre has been willing and able to discharge it', he concluded .' But Britain rose to world banker as its greatest producer, trader and shipper, and bestrode it as a capital exporter. At its zenith in 1913 fully 82 per cent of all capital issues in the UK were for foreign investment.' Magdoff cites the following estimates : Percent of total foreign investment

The character of British world domination These convulsive changes revolved around a central pivot : the erosion of British hegemony . The notion of hegemonic leadership is not a simple one, and does not reduce to being the biggest or most powerful. Britain until 1913, like the us from 1945 until around 1971, combined a number of distinct functions . It was first of all the world's banker. It issued a reserve currency with unlimited convertibility into gold which was the almost universal instrument

UK Germany us

1913

1930

1960

50 .3 17 .3 6 .3

43.8 2.6 35.3

24.5 1.1 59 .1

Capital export has proved the longest surviving component of Britain's imperial role, and the entire 20th century is virtually a history of Britain's obstinate refusal to abandon it . On a superficial comparison the USA overtook the UK as a capital exporter in 1918 . Between 1924 and 1929 Us loans

The crash of '87 abroad totalled $6,429 and those of the UK $3,301 . 8 Gross loans, however, probably do not clearly indicate the size of the disposable surplus for investment abroad mobilised by each country, since part of the loan activity of any country is to recycle funds it has attracted as a borrower . The Economist of 2 June 1928 tried to establish the net export of capital from each country, with the following results : Import (-) or export (+) of capital from us and UK

1922 1923 1924 1925 1926 1927

us

UK

263 -112 306 493 163 671

681 669 390 261 - 34 466 2,463

1,784

It concluded that : `The great fact of recent years is not that American capital, unable to find a use at home, is inundating foreign countries, but that the outflow . . . equals and even appreciably exceeds the inflow of capital from foreign countries which was stopped by the war but has now revived in very considerable volume . The fact is that America's trade balance shows no sign of producing a very large export surplus the proceeds of which she can lend abroad . She can only swell her foreign issues by lending money that is lent to her or by shipping gold .' In a nutshell this explains the third requirement of a hegemonic leadership role. The key to capital export is capital

to export . And once a world market in capital goods emerges, world surplus value can be mobilised only through trade . New York in the early 1920s became the great magnet for investment funds because of the tremendous expansion of its domestic markets . It thus became a great financial centre and combined functions of investing those funds in the us and channelling them elsewhere . But it had not unleashed its full productive might on world markets as the table shows . It could not mobilise and centralise the new value thrown onto world markets as Britain did in the mid-19th century. Britain attained its role as world banker first and foremost as the world's quartermaster . By 1918 it had lost this position ; but no-one else had yet attained it . This is why the crash of 1929 affected the USA worse, and for longer, than anyone else, and yet the recovery found it still forging ahead of its rivals . In the aftermath of a great credit crash it could neither mobilise idle loan capital for expansion, nor supply an export market created by the expansion of others . But the malaise lay not in its productive forces which, as Hoover never ceased explaining, were 'fundamentally healthy', but in its market situation in a world already carved up by the ancient European powers .

Control of markets : the keystone of the arch This brings us to the fourth critical element of imperialist hegemony : the control of markets . Britain's unparalleled access to world markets was the crucial conquered asset with which it marched into the 20th century . It was

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36

Share of exports of manufactured goods

us UK

Germany

1899

1913

1929

1937

1950

1967

11 .7 33 .2 22 .4

13 .0 30.2 26.6

20.4 22 .4 20.5

19.2 20.9 21 .8

26.6 24.6 7.0*

20 .6 11 .9 19 .7*

the cement which bound together its role as producer, exporter and investor. In the heyday of empire them was no contradiction between domestic and foreign expansion . Britain organised the great centres of raw material and food production in the dominions with its railway and mining capital. Its ships carried the booty home where as monopsony purchaser it could dictate a purchase price well below world values, shoring up its exporters against foreign competition long after their time had come . And when challenged, the great Tyneside and Glasgow ships decked out their Woolwich guns and donned their Sheffield armour and steamed off to show the world the value of civilisation. When English gold met German steel and American power plants in the cities of Latin America, this unity began dissolving . As Britain lost its competitive edge in manufactured and capital goods, monopoly control of trade and finance became its decisive weapon in the battle for superprofit . One word expressed this monopoly empire . Two possessions embodied itterritory and ships . Britain dominated trade because it physically controlled both the means of world transport and the places it traded with . Its territorial role is well-known. 9 Readers may be less familiar with its control over trading routes, critical to

its economic competition with the USA in the inter-war years. From 1870 to 1910 the UK Successfully defended a share in world shipping tonnage never less than 34%, massively bolstered when in 1918 it confiscated the entire merchant marine of Germany, its chief rival . In 1928 its gross tonnage was 20 million in a world total of 66 million, of which 16 million was owned by the USA . (Of this 3 million tonnes plied the Great Lakes and by 1930 a further 3 million lay idle .) In 1928 the UK produced 53% of the world's new gross tonnage . t0 On the critical trade routes Britain exercised a virtual total monopoly, including not only the transport of its own goods (and of course, of its colonies) but the international trade of its chief rivals . Again in 1928, the USA carried only 34% of its own trade with its two nearest neighbours, Mexico and Canada!" The significance of these monopolies for the UK as a world power are isolated with stark simplicity by the balance of payment figures for 1928 . In this year a credit balance of $745m in 1928 was produced from a debit of $1,795m on visible trade by two figures : $650m of `net shipping income' and $1,425m of income from overseas investments. In blunt terms, Britain's trading advantage from superior technology had been supplanted by its

The crash of '87 monopoly privileges arising directly from its control of markets and territories. In this lies the root of Britain's displacement as hegemonic power and the key to understanding what a hegemonic power must consist of. The driving force of capitalist expansion is the search for superprofit ; an above average profit which will permit a capital to outgrow and eventually absorb its rivals. With the imperialist epoch two great sources of superprofit became the monopoly of a handful of great powers : monopoly rent arising from control of markets and credit ; and technological superprofit arising from a monopoly control of an entire area of technology. The decisive requirement of a hegemonic power is that it can guarantee the conditions for the general ascendancy of the imperialist powers, providing them with a permanently elevated share of the surplus value produced in the rest of the world . It must also, however, guarantee the distribution of this superprofit among the imperialist states such that all of them enjoy a relative benefit from it, compared to the bourgeoisies of the dependent economies . 12 But to do this it must command both main sources of superprofit . Simple domination of superior forces of production is not sufficient, as the USA found in the 1920s and both Japan and Germany know today . Neither is simple domination of markets sufficient, although Britain still does not seem to understand this and probably never will. From the great crisis of 1873 until the present day Britain has sacrificed its technological lead for its monopoly privileges. us capital was absolutely incapable of translating this productive

advantage into a stable realised surplus until it could supplant Britain as the principal organiser of the sources of monopoly rent - in short until it had become the world's foremost financial power and above all its foremost military power . The great areas of us investment penetration provide a panoramic photograph of the advancing new technologies of the first half of the 20th century, under the control and domination of the USA . In terms of the great capital commodities the battle between the us and the UK saw the triumph of air over sea, road over rail, electricity over steam and oil over coal ." But a superior technology in and of itself was absolutely insufficient . From 1929 the entire pattern of world trade shifted. In the absence of any stable trading medium the major imperialist countries retreated from triangular or multilateral trade and embarked on a series of bilateral or reciprocal arrangements . The decisive point about these is that they depend as much on the political relation of forces between the states concerned as on market relations between the countries . Britain not only ensured that an empire population of over 700 million traded with it to the exclusion of its rivals, but maintained a steady improvement of the terms of trade in its own favour . As it retreated into the laager of empire, its monopoly position became ever more an obstacle which the US could not surmount . At the lowest point of the depression, when us production stood at 53 relative to 1929, British production had fallen to a mere 84. After Japan its recovery was the earliest, and its depression the shallowest, of the capitalist world .

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38

The following table shows how decisive Britain's military and political domination proved in the battle for markets. This is in sharp contrast with the situation of the us, which not only saw its access to world markets severely curtailed but also had to swallow the cancellation of most of the war debt . This determined the USA's foreign policy course : to break up the ancient empires under the banners of Free Trade and Liberal Values . The opening shots of this policy were announced by Woodrow Wilson with the famous 'eight points' around which the League of Nations was constituted . The cornerstone of Wilson's policy was the right of self-determination of all nations. To some this appeared an unnecessary concession to Bolshevism but in fact it corresponded directly to the interests of us capital, which owned hardly any colonies and stood to gain everything from detaching everyone else's . Wilson, before his time, fell at the altar of isolationism. It was left to Roosevelt, together with Stalin and Churchill, to redivide the world in 1944 in a manner which exactly corresponded to the relation of productive, military and financial forces . To

the USSR, a buffer zone. To Britain, a junior partnership in us Limited, sanctified by a place in the sun and a share in atomic technology . To Germany and Japan, us management. To France, whatever it could get . The arrangement precisely satisfies the conditions for hegemony which we established for Britain before wwt. The dollar replaced the pound as principal reserve currency and as the world's gold token, and the USA replaced Britain as the principal banker and policeman . The point which is often missed it that all imperialist powers could share in the exploitation of the newly redivided colonial world because of the mechanisms for redistributing this surplus in the multilateral trade of the metropolis . This includes powers such as Japan and Germany who were totally shorn of their empires . The USA's pent-up capital surplus poured into Europe and South East Asia to combine with the, burgeoning productive forces of the vanquished nations . 'Freed' of imperial obligations and expenditures, they acquired the specialised role of advanced producers, securing technological superprofit where monopoly rent was denied them .

Percentage of UK trade with the empire"

Total (m) 1913 1924 1931 1933 1935 1937

769 1,277 861 675 756 1,028

Imports %from Empire 25 .0 26 .4 24 .4 34 .2 35 .2 37.4

Total (m) 209 305 148 150 190 238

Exports % to Empire 32 .9 32 .4 32 .6 35 .9 39 .5 39 .9

The crash of '87

1987 revisited It is now necessary to review the crash of 1987, and indeed economic developments since the break-up of Bretton Woods in 1971, in the light of this analysis . Initially the USA very rapidly expanded to become the world's leading military and territorial power . By 1960 it had troops in 66 countries in the world- 15 But in 1945 the basis of its position was without question its decisive superiority in productive techniques . It had 21 .9% of all world exports of manufactures - but 56 .7% of all value was added in the us. 16 Since value added necessarily measures not just fresh labour but profit and surplus profit, this is a staggering ascendancy . In 1950 each us factory worker produced 3V2 times as much as her or his German counterpart and each miner four times as much ." Nevertheless the two central facts which emerge from any long-term study of trends in the post-war years are the exhaustion of the post-war wave of investment-led expansion and the decisive relative decline of the usA as producer and exporterfrom the early 1960s onwards.

The roots of this relative decline lay in the very role acquired by Japan and Germany as the leading appropriators of technological rents . The USA steadily lost its productive advantage . Armstrong, Glyn and Harrison estimate that between 1955 and 1970 capital stock per head grew by 38% in the us, 87% in Europe and 203% in Japan . Productivity in that period grew 6-7% faster in Japan than in the us and in Europe 4-5% faster . In the 1980s so far productivity has grown 4 .2% per year in Europe, 5 .6% in Japan and 1 .6% in the us.

This decline had to manifest itself in trade, and under Reagan it began to do so explosively . The gigantic us trade deficit is not the consequence of bad economic management, Reaganomics or any such superficial factors . It is the product of an inexorable, long-term and - if the inter-war years offer a basis for comparison - irreversible historical process, of the utmost importance to Marxists and socialists and, indeed, all humanity . This has expressed itself in virtually all sectors and all goods and was doing so long before the present crisis . To take just three representative sectors : Agriculture : In 1981, us farm exports at $44bn were 19% of all its exports . 30% of its farm produce was exported . The us agricultural surplus was so huge it used it as a major instrument of political blackmail . In May, June and July of 1986 the us imported more agricultural goods than it exported . Its 1986 output at $26.5bn has fallen 40% in five years and its share of the world market from 59% to 41%. Capital Goods : By 1986 no less than half the USA's spending on capital equipment was imported . 18 A surplus of $45bn on capital equipment has vanished in five years . Imports of machine tools rose from 25% of the US market to 43% . 1 e Between 1980 and 1985 a quarter of all us machine-tool companies went out of business . Electronics: The 'hi-tech' trade gap with Japan reached $2bn in 1986 and has been the principal object of us restrictive trade legislation . An estimated 70% of every computer shipped even by IBM is now manufactured in South East Asia . The consequences of this are, in a nutshell, precisely the same imbalance between the distribution of the forces of

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Capital & Class 40

production and the distribution of control over markets which dominated the inter war and depression years and led directly to World War 11 .

There is, however, a major difference . In 1929 a clear alternative to British leadership existed . Now there is no such alternative. This impasse lies deep at the root of the 1987 crash, which arrived 7 years after the last slump with impeccable timing but was exacerbated by a combination of two intractable circumstances : first, the rise of the us trade debt to the point where it could only be financed by completely reversing the post-war direction of capital flow so that the us began financing its deficit at the expense of its rivals ; second, when it became clear that this apparently limitless process amounted to a straight robbery of its financiers, who have now seen their dollar holdings fall to around half the value they held a year ago, and the said financiers denied they had had enough . The us has moved to exactly the same position that Britain occupied in 1918 . It no longer guarantees the general conditions for imperialist accumulation but on the contrary destabilises them . It uses its accumulated financial and military weight to rob its rivals of the plunder of `honest' trade. Is there a resolution to this process? The answer, of course, is that there is always a resolution under capitalism but at what price? A capitalist resolution, one can now insist not just with the benefit of theory but of terrible experience, necessarily involves a convulsive, violent and destructive reorganisation of the world's territories and markets . The imperialist world is becoming increasingly riven by its division into rival trade blocs, with no

power in position to unseat the USA, but all deriving increasing benefit from its leadership . It is only a question of time before Japan and Europe begin to seek, with increasing aggression and audacity, the military and territorial clout needed to stabilise their industrial weight . Already, Franco-German military collaboration and the growing nuclear arsenal of the European powers - untouched by the Gorbachev-Reagan accords - bear witness to the imperatives driving Western capital . If socialists owe themselves a pat on the back for predicting another 1929, they owe the entire world deliverance from another 1939 . Santyana21 said that those who do not learn from history are doomed to repeat it . This time round, his last three words are probably superfluous .

Notes 1 . See E Mandel, Late Capitalism, London, 1975, for the most authoritative Marxist account . 2 . Kindleberger, C .P. (1986) The World in Depression . London. 3 . Kindleberger, p . 240 . 4 . Lewis, W.A . (1970) Economic Survey. London. p . 54. 5 . Kindleberger, p. 210 . 6. Commerce Reports, us Department of Commerce, 18 February 1929, p . 394. 7 . Madgoff, H . (1969) The Age of Imperialism. New York. p. 55 . 8 . Kindleberger, p. 41 . 9 . See, for example, Barratt Brown, M . (1974) The Economics of Imperialism . London . 10 . Denny, L. (1930) America Conquers Britain . London and New York . p . 352 . 11 . Denny, p . 355 . 12 . This is one of our principal differences with Kindleberger, who presents the idea of hegemonic power simply as the organiser of benefits for all capitalists of the world .

The crash of '87 Neither the us nor the UK brought much joy to the bourgeoisies of the colonial and semicolonial world. They enjoyed supremacy as organisers of the conditions for imperialist superexploitation and any unity of interest between them and their rivals arose out of that function and vanished the instant they ceased to play that role . 13 . Public utilities - read 'electrical power installation' - were to us capital abroad what the railways were to the UK of 1850s . Of $4,500m in us foreign securities issued between 1914 and 1928, $1,000bn were in public utilities . By 1927 the largest electrical power goods monopoly, the Electric Bond and Share Company, held through its subsidiary American and Foreign Power a controlling interest in the public utilities of 29 us states and l 1 foreign countries with strong interest in another 6 . Its sphere of influence clearly indicates the regional character of us market penetration with major interests in Cuba, Argentina, Mexico, Brazil, Chile, Colombia, Venezuela, Ecuador, Panama, Costa Rica, Guatemala and China . Electrical

power was the spearhead of the us advance into Europe. American GE by 1930 had acquired a third interest in German AEG, a major interest in Italian Super-Power, helped create the largest French combine and even established a $26m contract with the Russian government . The directors of GE Britain created a furore when in 1928 they decided to disenfranchise all nonBritish stockholders specifically to ward off American GE. This was denounced as 'financial Bolshevism' . 14. Jones, G .P . & Pool, A .G . (1959) A Hundred Years of Economic Development in Great Britain . London. p. 322 . 15 . Magdoff, H . (1%9) The Age of Imperialism . New York . 16 . Times, 26 September 1984 . 17 . Armonstrong, P., Glyn, A . & Harrison, J . (1984) Capitalism Since World War Il . Fontana. 18 . International Business Week, 8 April 1985 . 19 . International Business Week, 9 June 1986 .

41

Anna Pollert Dismantling flexibility

Two distinct ideas that the labour force is becoming more flexible and that flexible specialisation offers a new means for capital to exert control - are critically evaluated . The evidence for both fashionable theses is found to be wanting ; their increasing 42 acceptability is linked to a retreat from class politics and from a confrontation of inequalities of race and sex . Indeed they herald a new form of imperialism .

• `Greater flexibility in the labour market is no panacea, but it is nevertheless a means for quite a substantial amelioration in current problems' (DECD, 1986 : 6) . • 'It was noticeable during 1985 that many managements were seeking greater flexibility in the use of labour' (ACAS, 1985 : 9) . • 'The practices of Japanese companies . . . are understood in the managerial community in terms of a notion of flexibility very different from that which provokes the employment debate . Managers attribute the success of these firms to an unusual degree of responsiveness to market conditions' (Piore, 1986a : 158) . 'Flexibility' has engulfed conceptions of employment structure and restructuring since the early 1980s . To call it 'the flexibility debate' is over-complimentary . For most of the flexibility literature tends to be either prescriptive, or assumes there is a 'new' trend, which it then proceeds to describe and generalise . There has been no discussion on the origins of the term, to unravel its many connotations, to question what is indeed 'new', and to set this against the ideological processes which have unleashed it . Such a situation has political dangers : it defines the agenda of debate, assumes a radical break with the past, conflates and obscures complex and contradictory processes within the

Flexibility organisation of work, and by asserting a sea-change of management strategy and employment structure, fuses description, prediction and prescription towards a self-fulfilling prophecy . A deconstruction of 'flexibility' as an extremely powerful term which legitimises an array of policy practices is long overdue . Within management literature, 'flexibility' has been a handy legitimatry tool precisely because of its all-purpose resistance to precise definition . Production flexibility, technical flexibility, organisational flexibility, labour process flexibility, time, wage, financial, marketing flexibility - all these issues are presumed to have a connection, and this connection is implicitly understood to reside in the behaviour of labour . Such a slippage has allowed the discussion of restructuring to veer away from the global issues of capital structure, investment, exchange rates, trade relations, to the homely, and apparently more manageable 'problem' of labour . The argument runs that the changeability of markets is the supreme challenge facing management, and its solution lies in the flexibility of adaptability of labour, both in the workplace, and in the labour market . Other dimensions of production, such as organisation and design, in which labour costs are not a prime issue, and other managerial driving forces, such as marketing, are swept off the table (Rubery et al, 1987) . Such an ideological assumption is far from new ; it accompanied the concern with the British worker's 'productivity' some twenty-odd years ago : . . . it had always been there, a sort of background music full of familiar melodies . . . it had always been accompanied by a more or less constant refrain - something about British workers and productivity . (Nichols, 1986 : xi) On a wider level, the whole 'flexibility' ethos is notable for its futurological discourse . With the growth of insecure, or irregular forms of work, and unemployment, social scientists have 'discovered' what casual wage labourers and those outside paid employment - very largely women and youth - already knew, that not all 'work' is stable and secure. Libertarian futurologists have heralded work in the small business, self-employed, informal and domestic economy as a 'new' form of work, not only more competitive (because more 'flexible' in adjusting to markets), but offering autonomy, 'flexible' hours, and in general 'flexible working lives' . A body of futurological writing based on a postindustrial conception of a 'radical break' in 'industrial society' and a largely technically determinist prophecy of the 'collapse of work' and 'discovery of leisure' (Jenkins & Sherman, 1979) has meshed with a dualist construction of the economy . In essence, a demise of regular wage labour, indeed, of wage labour itself, is given a libertarian legitimation, because it is both inevitable and

43

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44

progressive. The left-reformist writing on 'flexibility', most notably articulated by Piore and Sabel (1984), explicitly distances itself from the concern with labour market flexibility (Piore, 1986a). It is also on quite a different intellectual level of theorisation from the management and 'manpower studies' literature (e .g. Handy, 1984 ; Atkinson, 1984). Nevertheless, the panacea of 'flexible specialisation' (FS) indicates an overwhelming consensus between left and right on the sovereignty of markets as the defining principle of restructuring . For the neo-classical revivalists and their management practitioners, this is obviously the strategy for capital . For the FS school, the restructuring of capital by the restructuring of production and labour, is once again the route forward, only this time, as a reform for capital and labour . The convergence between the right and Fs dissemination of 'flexibility' is a central theme of deconstruction in the following analysis . There are further conceptual affinities between the reformist FS perspective and the managerial literature, stemming from the prime place given to markets . This is the elevation of the fragmentation and decentralisation of production, and of the small firms sector, as the economic saviours of an ailing system . Behind this resurrection of economic dualism in both approaches, is the 'post-industrial' vision of a radical historical cleavage and branching point in social development, the projection of trends and a 'grand theory' futurology of technical and productive paths, from'Fordism' to'neo-Fordism' . Before a detailed examination of these two 'flexibility' literatures and their relationship, two areas of mystification implicit in both need clarifying . First are the dimensions of labour flexibility under discussion, and second, the assumption that these are new concerns . Flexibility in employment and in work - what's new?

The 'flexibility' debate has concentrated on two aspects of labour flexibility : flexibility in employment and flexibility in work . The neo-classical revival has provided the cue for the international concern with 'Eurosclerosis', the solutions for recession and unemployment sought in wages and labour market flexibility . Labour market deregulation in the form of the legislative offensive on labour organisation and employment rights and protection (Lewis, 1987 ; Hepple, 1987), the ideological and practical sponsorship of private enterprise and the small business sector, in the form of privatisation and competitive tendering, and the maintenance of a vast reserve army of the unemployed set the material agenda for using the competitive labour market as the solution to

Flexibility

economic regeneration . Of state employment deregulation policies, the clearest statement of the virtues of labour market flexibility is the 1985 White Paper, Employment, the challenge for the Nation, a document which was deliberately modelled as the antithesis of the 1944 White Paper on employment, which embodied the post-war consensual commitment to full employment (Standing, 1986 : 45) . Linked to the concern with labour market flexibility, the implicit focus on the flexibility or rigidity of labour within work, perpetuates the concern with flexibility manifest in British productivity dealing in the 1960s and 1970s, albeit with a crucial shift in bargaining power away from labour . A typical productivity deal in the 1960s concerned `Increased flexibility in the use of manpower . . . [and] changes in working practices, e .g . tighter scheduling of transport operations, shift work changes and flexibility over numbers and types of machines supervised' (NBPt, 123, 1%9 :4) . , Concern with both forms of flexibility is not new . It is the flexibility of human labour which creates the elastic commodity of labour power and allows its extension and intensification in the extraction of surplus value . Capital has always required flexibility of labour ; the struggle over its control has structured management development, the capitalist tabour process, and forms of labour organisation . In the early days of industrial capitalism, the emphasis was on defining rules and demarcations, both in time and task . The tension between the discipline of wage tabour and the rhythms of life outside this social relation has been a source of conflict throughout the development of capitalism . E P Thompson charts the harnessing to time discipline through the 18th and 19th centuries, when the employers, far from wanting flexibility, imposed rigidity on the `irregularity of the working day and week . . . framed until the first decades of the 19th century, within the larger irregularity of the working year, punctuated by traditional holidays and fairs. Eventually, the rigid wall between work and non-work was built' : The first generation of factory workers were taught by their masters the importance of time;. the second . . . formed their short time committees . . . the third struck for overtime or time-and-a-half. They had accepted the categories of their employers and learned to fight back within them . They had learned their lesson, that time is money, only too well . (Thompson,1%3 : 76, 86) . The debate from this period about the benefits and costs of regular employment, organised or `flexible' labour markets, was

45

Capital & Class 46

a perennial issue . Thompson (1963: 78) notes `the debate between advocates of regularly-employed wage-labour and advocates of 'taken-work' (contract labour, AP) . Casual work has always contributed to the process of capital accumulation, alongside the creation of a more organised proletariat . Berg (1985) emphasises the continuation of domestic and other forms of non-wage labour, particularly among women workers in the mass-consumption industries, until well into the 19th century . Littler's (1982) discussion of the decline of internal sub-contracting also points out its uneven continuation, which was seen until comparatively recently in the docks, and characterises (perhaps increasingly) the British construction industry . And the use of cheap outworkers, both in traditional industries and expanding new firms is not new (Hakim, 1985), nor is the deliberate use of married women as a low-paid, stable, yet unprotected laboui force, in the small firms sector, or the `toleration' of high turnover in sectors with unstable product markets (Craig et al, 1984) . Casual labour may or may not have increased, but more important, it has become ideologically visible . Only when 'rigidity' of time and task become the basis of skill, or of occupational ownership and bargaining strength did management unequivocally stress 'flexibility' . In engineering, for example, this became the centre of the 'craft question' . During the 1890s, the recently-founded engineering employers' association came in direct conflict with the Amalgamated Society of Engineers over the demarcation of work and the right to control the entry of skilled labour, and the use of new machines (Clegg, 1983 : 20) . The lockout of 1897 was precisely about wresting flexibility from craft workers, and gave 'freedom to employers in the management of their works, and set forth such conditions as to employment . . . the rating of workmen, the training of operatives . . . as the Trade Unions would not have accepted had they not been beaten' (Cassier's Magazine, 1902, quoted in McGuffie, 1986 : 39). The struggle over the 'right to a trade' is a basic organising principle of trade unionism on the one hand, and of managerial prerogative on the other . To isolate it as a contemporary, or 'new' phenomenon, obscures this historical continuity and serves as a mystifying veil cutting off collective memory of past experience . Having said this, however, there is something new about the current articulation of an imperative towards labour flexibility . This is its construction within a dualist employment and industrial perspective. It is to this question that we now turn .

Flexibility Flexibility and dualism : the 'flexible firm' and 'flexible specialisation'

The distinctive way in which the new emphasis on labour flexibility has been mediated within a dualist perspective lies in the relationship between two apparently unconnected literatures : an elegant management policy model and a scholarly historical `grand theory' developed as a strategy for economic restructuring . Two highly influential uses of 'flexibility' as a basis for labour and production reform, the British 'flexible firm' model (Atkinson, 1984, 1985a), and left reformist perspective of 'flexible specialisation' (Piore & Sabel, 1984 ; Sabel & Zeitlin, 1985), have both to be addressed, to gain leverage over the meaning of the term . Both these restructuring expositions are grounded in dualist and segmentation perspectives ; the first treats the simple dual labour market as a deliberate, conscious policy goal, and the second is a reversed application of dual labour market analysis by at least one originator of the dualist segmentation model . However, what is common to both is the legitimation of dualism as a dynamic and progressive force for the current period . The 'flexible firm' model: an outline

The 'flexible firm' model asserts there is an 'emerging manpower system within the large primary sector firm ; a 'new' polarisation between a 'core' and a 'periphery' workforce, the one with functional and the other with numerical flexibility, to provide adaptability to changing product markets (Atkinson, 1984, 1985a, 1985b). The multi-skilled 'core' group offers'functional' flexibility in the labour process, by crossing occupational boundaries. It also offers flexibility by time, in terms of adjusting more closely to production demands . The 'periphery' provides 'numerical flexibility' ; workers may be insecurely or irregularly employed, or not have a direct relationship with the firm at all, being, for example, sub-contracted or self-employed . Here, it is the precariousness of the employment relationship and competitiveness of the labour market which provides the employer with a numerically variable workforce . The economic and social basis of the privileged sector is allegedly its importance to the 'organisation's key, f irm-specific activities' (Atkinson, 1984a) ; thus, the model rests on the assumption of a direct relationship between primary employment conditions and the business concept of managerial 'strategic choice' of an organisation's 'core activity' . The 'peripheral' workers, by contrast, are less central (i.e. they are important, but not part of the 'core business'), making them more easily recruitable from

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the open labour market, and therefore less protected from its competitive pressure. It is their disposability which matters : `numerical flexibility is sought so that headcount can be quickly and easily increased or decreased in line with even short-term changes in the level of demand for labour' (Atkinson,1984). The appeal, but also the weakness, of this model is both its comprehensiveness, in covering a wide Slumber of employment situations in one model, and its simplicity . In a later reference to the model, Atkinson and Meager (NEDO, 1986) describe it as a tool with which to analyse a wide variety of changes in employment practice, rather than as a description of any real firm . There are others who share the view that the model is a rough and ready guide to understanding key changes in employment (e.g . Hakim, 1987 : 93), and this is reflected in the wide currency of common usage of the terms 'core' and `periphery', and of the two kinds of flexibility . Although Atkinson registers the insecurity of the secondary sector labour force, its deliberate expansion is nevertheless seen as either inevitable, or desirable from capital's point of view, and it is up to labour to make the best of this . The `flexible firm' was widely reported in the press (e .g . Guardian, 18 April 1984; Industrial Relations Review and Report, 7 August 1984; Personnel Management, August 1984 ; New Society, 30 August 1985), and 'core' and 'periphery' are common parlance in management conferences (e .g. IRS, 1985, 1986) and academic language. It has also entered trade union debate ; its incursion into bargaining language has made 'functional' and 'numerical' flexibility common currency, and has forced a critical response from the labour movement (Tuc, 1985 ; LRD, 1986). But besides evoking some critical commentary on the left, it has also frequently been incorporated as evidence of a 'new' management strategy in radical texts (cArrs, 1986 ; Mitter, 1986; Nichols, 1986 ; Potter, 1987) . To the extent that it is fact or has become a material force as practice, this inclusion is justified . Yet this is far from proven, and its reportage as a 'fait-accompli' hardly clarifies the matter . It is therefore long overdue that the model, its factual evidence, its conceptual base, its policy implications are put to rigorous scrutiny . Flexible specialisation: an outline

The strategy of 'flexible specialisation' is accomplished by a new form of artisan production made easily adaptable with the aid of programmable technology . It supplies customised goods to satisfy a plethora of individual tastes and needs and revitalises markets in a way similar to Atkinson's 'flexible firm', the labour process resembling that of the 'functionally flexible' 'core'

Flexibility

workers . However, Piore and Sabel's scenario is not simply a resurrection of a legitimised dual labour market, but of a benign one. The case for flexible specialisation as a strategy' of production restructuring is based on the concept of technological paradigms, and an explanation of 'industrial' development based on competing systems of industrial technology : craft production and mass production. The dominant productive paradigm had been craft production, but became mass production as a result of historical contingencies - a 'chain of accidents compounded by mistakes' (Piore & Sabel, 1984 : 193) . The dominant 'system of industrial technology' (ibid : 5) is now the special purpose machine organised on an assembly line, operated by a semi-skilled labour force, mass producing standardised products for a mass market . But the current economic crisis is a crisis of the dominant technological paradigm, mass production . It has reached the limits of expansion ; mass markets for standardised goods are saturated, and have given way to a more fragmented and discerning pattern of demand, in which quality competition is more important than the price advantage of mass production . In such a crisis of production and markets, an alternative technological paradigm can break the deadlock, and offer the chance for a 'second industrial divide' . The signs are provided by the resiliance of industrial regions based on specialist artisan production which have successfully exploited microtechnology for new opportunities of more flexible production and the opening of new, specialised and variable market niches . Simultaneously, a managerial shift in larger firms to smaller units of more flexible production, including technical changes to flexible specialisation and organisational changes to just-in-time inventories, suggests a shift away from mass production and the sclerosis of saturated mass markets . Basically, it is both technology and the mass market which previously determined the dynamism of the 'primary' sector, with its capital-intensive advantage, and held back the 'secondary' sector, with its low capital investment and inability to use economies of scale . And it is new technology and the fragmentation of market demand which reverses this relationship, making available to the small firm sophisticated, small-scale, technical flexibility . With the alleged change in the consumer market, this gives small-scale production the competitive edge over the vertically integrated 'primary' sector firm, where labour and technical stability are now rigidities, and where economies of scale are no longer cost effective . This reversal of dualist analysis can be seen at two levels : as a logical continuation of a technological and market demand about sectoral relations, and as a political shift from a major concern with the experience of underprivilege, to a comC&C/34-D

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mitment to the health of markets . Flexibility as description, prescription and prediction

One of the distinctive traits of both the model of the `flexible firm' and the FS thesis, is that the writing on flexibility is couched in a complex form of `post-industrial' discourse . This asserts that the current period is a radical break from the past ; the `flexibility' managerial imperative is 'new', as is its accompanying segmentation . 'Flexible specialisation' brings the possibility of a 'new industrial divide', because the crisis of mass production brings a crucial branching point in history (Piore & Sabel, 1984) . Yet the evidence for both these sweeping assertions is thin. To the extent that the empirical basis can be challenged, there is justification in arguing that both approaches are refractions through an ideological lens, which embraces a 'radical break', a new role for dualism, and a particular context for the emphasis on labour flexibility as progressive . To analyse this question, we have to examine both the concrete evidence for change, the ideological implications of this re-cast dualism, and conceptual underpinning which gives such force to the complex fusion of description, prescription and prediction characteristic of the revivalism of 'flexibility' . Why is this so important politically? The empirical evaluation of the 'core-periphery' model is essential in the British context, since it has gained extremely wide currency and is accepted by many as an accurate description of new division in the working class . The empirical validity of flexible specialisation is no less important, both in relation to its basic premise that mass markets are indeed breaking up (an assumption also underlying the need for 'flexibility' of the 'flexible firm'), and in relation to the actual impact of programmable technology on the organisation of work . Such analysis cannot be divorced from the political implications of this preoccupation with labour flexibility and dualism . The novelty of the polarisation between a privileged core and a marginalised periphery is one of the elements of the view that the working class as an active force is dead . It is irretrievably divided, and the 'core' can only consolidate itself by working with capital . This is the case for the new realism, the case for the broad alliance of the soft left with any 'progressive' group, and the relegation of a large part of the working class - the periphery - to an unorganisable underclass. It is a conception built on a new accommodation with 'flexible patterns of work' legitimising pliability, insecurity, unemployment, and 'getting by' with self-employment . Here 'flexible specialisation' appears to square the circle for labour, since the artisan worker can now recreate the strengths of the craft tradition in the secondary sector with the invigorating

Flexibility breath of new technology and new markets . Both positions depend ultimately on a market perspective, and so, not surprisingly, converge with the neo-classical revival which sets the political agenda of the day . We begin, then, with an empirical evaluation both of the `flexible firm' model and the FS analysis, as the precursor to unravelling the common threads running through both literatures .

If the `flexible firm' is indeed the 'new' trend in employment The `flexible firm' structure, it should be possible to show evidence both for an expanding 'periphery', and for a consolidating 'core' (Pollert, 1987) . On existing evidence, there is little support for either . The evidence for a growing 'periphery' The 'core'-'periphery' dichotomy has been picked up and broadcast by some observers as a way to emphasise the importance of casual employment in the economy . Hakim has argued that, 'By the mid-1980s the labour force divided neatly into two-thirds "permanent" and one-third "flexible" . . . the importance of the "flexible" sector has clearly been underestimated ; it is hardly a narrow and insignificant fringe on the edge of the labour market' (Hakim, 1987 : 93) . Unfortunately, this conceptualisation has always been a muddy conflation of legally disadvantaged, but long-term work, such as part-time work, and temporary work, so that, from the start, 'numerical flexibility' has added to a confused understanding of employment . This has been further complicated by the ahistorical 'discovery' of insecurity, as though it were radically new, and the calling of this a 'flexibility' trend . The influential NEDO report, 'Changing Working Patterns', . for example, claims that 'nine out of every 10 respondents had introduced changes to manning practices since 1980 designed to increase numerical flexibility' (NEDO, 1986 : 6). However, the conclusion of 'radical change' is undermined by the conflation of standard practices to vary production with changes in employment . Besides part-time work, the inclusion of overtime working in 'numerical flexibility' confuses a traditional practice for permanent employees with varying the numbers of workers . But if 'peripheral' work is taken to mean 'non-standard' contractual status, deviating from a full-time 'norm', there is little evidence that there has been a recent increase . Temporary work. Hakim (1987) originally claimed, on the basis of the 1985 Labour Force Survey, that 'the most dramatic

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52

increase' in employment was in temporary work ; this enthusiasm was dampened when the figure of a 700,000 growth between 1981 and 1985 had to be revised downward to 70,000 (Employment Gazette, April 1987: 218). Seen as a cyclical phenomenon, the `increase' recedes even further: the proportion of temporary workers in the workforce peaked in 1979, before declining rapidly in the recession and resuming an upward trend in 1982-1983, such that by 1985 it has regained the level of the mid-1970s . (Meager, 1985 : 4) Surveying the private sector in general, the impression is that the greatest use of temporary workers occurs where this is already a well-established practice . The Warwick IRxu Company Level Survey (Marginson et al, 1988) found that the majority of enterprises, and just over half establishments, reported no change in policy towards the use of temporary contracts . The most recent study of temporary work (Casey, 1987) provides further evidence of the absence of significant change in the use of temporary work . Excluding the 12 .5 per cent on special employment measures (1984 Labour Force Survey), there was 'no real growth in the period 1983 to 1985 . In 1983 temporary workers not in special schemes made up 5 .5 percent of the labour force ; in 1985 they made up 5 .5 per cent' . Ironically, the private sector focus of the `flexible firm' model excludes the one area where the use of temporary work may be most significant - the public sector. In 1984, fixed-term contracts were more common in the public sector services than elsewhere and the education sector was responsible for half of these (Millward & Stevens, 1986: 210). The Civil Service, particularly the DHSS, and the Water Authorities, are two other services found to be introducing `new' temporary workers (Potter, 1986,1987) . There is thus little evidence that there has been an overall increase in temporary work, and its appearance may well be the cyclical response witnessed in previous periods . Sectoral variation gives little support to a view of overall restructuring, and also highlights what the generalisation obscures : the importance of changes in the public service sector .

Part-time work. Between 1981 and 1986 the proportion of part-timers in the workforce grew from 21 to 23 per cent . From 1983, the only employment growth was an increase in female employment in the service sector, which was almost all part-time work. Between 1979 and 1986, 62 per cent of the rise in women's service sector jobs was in part-time work . At the same time, the aggregate increase in part-time em-

Flexibility

ployment obscures the fact that it declined from 7 .6 to 6.7 per cent of the manufacturing workforce. For women, this was a 40 per cent loss in manufacturing part-time jobs between 1979 and 1986 (Lewis, 1987). The 1984 Census of Employment and 1985 Labour Force Survey cast further doubt on a simplistic view of increasing part-time work . At an aggregate level, the proportion of the total workforce who worked part-time (defined here as working fewer than 30 hours per week) increased only from 14 per cent to 16 per cent between 1980 and 1984 . As previously, it remains concentrated in the non-manufacturing sector, where it has increased from 18 per cent to 22 per cent of the workforce between 1980 and 1984 (Millward & Stevens, 1986 : 205). For women, parttime work rose only from 40 per cent to 42 per cent of all women workers in the service sector between 1979 and 1984, and somewhat surprisingly, in retail it increased only from 34 per cent to 36 per cent of female employees . This could mask huge differences, by firm size, for example . It could also miss increases in the number of women earning below the National Insurance threshold . But it may well be that there are contradictory processes of growth and decline, as well as, what may be more qualitatively significant, changes in the type of part-time work (hours, length and regularity of shifts), rather than a dramatic increase . Finally, turning to the public sector, we find once more that it is highly relevant : 'Two fifths of the manual workforce in the public services sector consisted of part-time workers in 1984, compared with just over a quarter in the private services sector' (Millward & Stevens, 1986 : 207) . And its main growth between 1980 and 1984 appears to be 'amongst the largest workplaces in the public services sector' (ibid : 209) . These findings demonstrate that the 'flexible firm' conflates changes in the public sector, and the services in general, with management strategy in the private sector . Outworking, freelancing and homeworking . This is a notoriously difficult area to research . Homeworkers, particularly ethnic minority women, are vulnerable to state or employer harassment and more likely to remain invisible in surveys, while the small firm sector, perhaps the most important for these forms of employment, is one of the most difficult areas to study . But in large firms (the subject of the 'flexible firm' model), Millward and Stevens (1986) found a decline in all these forms of employment between 1980 and 1984. This is explained mainly by the contraction in manufacturing. There is thus little evidence of the growth of a 'periphery' composed of these workers . Subcontracting . The alleged increase in subcontracting is perhaps one of the most topical areas of the 'flexible firm', since it relates most directly to the interest in Japanisation, in the fragmentation of production and in the growth of small firms . But

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there is little evidence at an aggregate level of a dramatic increase in subcontracting in the private sector . The Warwick IRRU Company Level Survey found that 61 per cent of establishment respondents reported no change in the level of subcontracting over the previous five years (Marginson et al, 1988). Rather, subcontracting of services was already extremely widespread ; 83 per cent of establishment managers reported that they subcontracted out at least one service, and 39 per cent of this group contracted out three or more services . The NEDO report similarly found the long-standing nature of subcontracting of ancillary or service activities in the private sector (NEDO, 1986: 56), with many of the companies surveyed reporting that `they started down this road in the early 1970s' . There appears to be a move towards more outside purchasing of parts in engineering ; on the other hand, in food and drink, both the NEDO and Marginson et al, found a decline in subcontracting . Rubery. et al's study of consumer goods industries (1987 : 140) points to differing rationales in the use of subcontracting . While some firms bought in and subcontracted components to reduce costs and increase flexibility of production, 'there was no evidence of a widespread increase in subcontracting' . Some subcontracted as an industrial relations tactic to avoid workplace conflict. Others had 'bought-in' production previously subcontracted, in response to 'major problems of co-ordination, design and quality control, particularly because of the growth of subcontracting on an international scale' (ibid). The blinkered concern with increases in subcontracting masks crucial changes at the qualitative level . The EM-funded Steel Project, which investigated the experience of redundant British Steel Corporation workers in Port Talbot between 1980 and 1985, found that while BSC expanded the range of work put out to subcontract, what was new was newcomer subcontractors' undercutting of established subcontract firms . This was achieved through breaking union membership, lowering wage rates, ignoring health and safety precautions, and organising work 'off the cards' (Fevre, 1986 : 23) . An explanation of these varied and often contradictory trends would provide a more penetrating analysis than the imposition of a managerial imperative to 'peripheralise' . Self-employment. Estimates of the increase in selfemployment since 1979 also vary enormously, from between 30 per cent and 45 per cent since 1979 . Overlooking this problem, it appears that 62 per cent of this increase was in the service sector, 20 per cent in construction, 10 per cent in agriculture and 8 per cent in manufacturing (TUC, 1986c) . Most of this appears to be due to an increase in single-person businesses : between 1981 and

Flexibility

1984 the number of people who were self-employed in their main job grew by 442,000 to 2 .6 million, or from 9 .2 to 11 .2 per cent of total employment (Creigh et al, 1986) . While this may be associated with redundancy, it does not seem to be associated with flexibility strategies in large companies . Atkinson and Meager (NEDO, 1986 : 58) found the growth in self-employment 'negligible', except in financial services and the food and drink sector, and here the rationale did not appear to be to increase 'flexibility' . The evidence for a 'core' The `core' defined by recruitment criteria. To start with the problem of defining a 'core', the labelling of all permanent employees as the 'core' workforce is either tautologous or highly debatable if it overlooks segmentation in status, terms and conditions within the permanently employed . Marginson et al (1988) therefore suggest special recruitment procedures as one criterion of 'core' work . They start 'from the straightforward postulate that if any group of employees constitutes a "core" workforce then that must include managers.' Recruitment of such a core would normally involve higher-level management . The general conclusions of their survey are that the majority of firms do not involve higher-level management in the recruitment of non-manual and manual employees . In the main, recruitment of non-managerial employees remains a local, establishment matter . There are also marked sectoral patterns, with enterprises in finance most likely to recruit employees at a central level, and those in mechanical engineering, textiles, clothing and footwear and distribution (for, manuals) recruiting at local level only . Using the recruitment criterion, it would appear that the deliberate fostering of a 'core' workforce is at best patchy, and sectorbased rather than generalised. Functional flexibility as the basis for a 'core' . Other research has looked in detail at the developments in 'functional flexibility' as chief ingredient of the 'core' . But the extent of multiskilling appears limited. Cross's (1987) research indicated that most occupational flexibility was confined to the production/ maintenance boundary, with little change to multiskilling in engineering and craft areas . IDS Study 360 of capital-intensive manufacturing industry, questions whether, in fact, multiskilling is as widely desired as a 'flexibility' trend suggests : Companies have widely different aims . Competitive pressures vary between sectors . Skill requirements are dependent on widely different technologies . More skill, different skill, less skill, can all be legitimate objectives .

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56 Generalisations about moving towards a small, highly skilled and highly flexible workforce may fit one company and be contradicted by the pressure towards a quite different workforce in another . (IDS, 1986 : 1) Similarly, a trade union based study of `flexibility' concludes that, 'in spite of the impression created by a small number of widely publicised case studies . . . a full range of flexible working practices are not frequently implemented' (LRD,1986a : 5) . Many `flexibility' agreements were only 'enabling' not faits-accomplis . Nor was there, apart from rare exceptions, evidence of a 'core' in terms of improved job security . Even the NEDO (1986) study, which used the 'flexible firm' as an analytical model, found extremely limited evidence for 'functional flexibility' . In manufacturing there was little 'radical job enlargement' (NEDo, 1986 : 45) which crossed 'core trade' boundaries; while three-quarters of respondents had achieved a limited overlap between maintenance craftsmen, only a third had achieved dual skiling even within electrical and mechanical trade groups and only 15 per cent had achieved it across the electrical/ mechanical divide (ibid : 46) . Significantly, since the introduction of technical change 'appeared to have the effect in most manufacturing companies of reducing the number, and skill level, of tasks required by process operatives, the tendency was to reduce the numbers of operatives and/or spread them more thinly across the plant, adding a number of deskilled tasks to their job' (ibid : 50). Further, the greatest obstacle to increasing 'functional flexibility' was the cost of re-training, and shortage of training resources (ibid : 50) . And since a short-cut to skill shortage was often the buying in of specialist labour, the development of flexibility in the 'core' workforce was actually hindered . In Britain 'core' status thus has a hollow ring, especially when 'employment security boiled down in practice to a reduction in the threat of job loss rather than anything more positive' (ibid : 79) . This is hardly a convincing case for a consolidating 'core' workforce . The flexible firm: conclusions on the evidence

From this review of the changes in the workforce and in employment practices, the 'flexible firm' model is left standing with few clothes . Where there has been most major restructuring, this has been led by the state as employer . But in the private sector, sectoral continuity is far more in evidence than change, with little evidence of polarisation beween an (ill-defined) 'periphery' and a privileged 'core' . Despite this, the 'core'-'periphery'

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model has become a conventional wisdom of today's alleged 'flexibility' trend . Before trying to explain this at a political and ideological level, the radical restructuring programme of flexible specialisation should be similarly exposed to empirical analysis . Flexible specialisation is part of a much wider debate on early industrialisation which cannot be addressed here . As a method of analysis and strategy, it has been criticised on a number of different levels (e.g . Hyman, 1986 ; Smith, 1987 ; Williams et al, 1987) . For the present purposes, the assessment of the Fs thesis will be judged on the validity of its key premises : 1) the concept of the 'technological paradigm' based on the equation of a 'system of industrial technology' and a dominant system of production . 2) the alleged decline of mass production . 3) the alleged decline of mass markets . 4) the alleged new opportunities of new technology for small firms . 5) the actual spread of skill-upgrading FS as the prevalent use of programmable technology in large . firms Much of the evaluation of Fs, particularly the assertion of the fragmentation of markets and the 'new' importance of the multiskilled worker and new technology also applies to the 'coreperiphery' employment restructuring model . 1) Mass production as a technological paradigm

The concept of Fordist mass production as a dominant system of 'industrial' technology' is a crude and inaccurate delineation of the main developments of production systems in 20th-century capitalism . Types of technology, their organisation into different systems of production, and types of labour processes cannot be conflated into a single paradigm ; the empirical evidence is far more complex. Within the large, technologically advanced firm associated with primary sector production and which Piore and Sabel identify with mass production, a variety of technologies and production systems exist, depending on the nature of the product market . Thirty years ago, Joan Woodward's research on firms employing over 100 employees found differences in productive systems 'could not be related to the size of firm', or to technology, but : on their detailed objectives which depended on the nature of the product and the type of customer . Thus some firms were in more competitive industries than others, some were making perishable goods that could not be stored, some

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produced for stock and others to orders ; in fact, marketing conditions were different in every firm . (Woodward, 1958) These different production systems have long been recognised to fall into three standard categories : 1) small batch and unit production, 2) large batch and mass production, and 3) process production. Woodward also identified a lack of neat fit between type of technology and a single productive system : `Automatic control can be applied most readily to mass production and continuous flow-process production, but even in unit and small-batch production devices for the control of the individual machine can be used' (ibid). Some firms also remained outside the threefold classification, simply because they were 'too mixed or changing' . To set up a false dichotomy between 'mass production' on the one hand, and 'craft production' on the other, and discover product diversity as proof of an alternative 'paradigm', is thus a distortion of a much more complex reality . 2) The decline of mass production

To demonstrate a basic opposition between two types of production - mass production relying on mass markets, dedicated equipment and semi-skilled workers making standardised goods, versus flexible equipment and skilled workers producing specialist goods - poses a false problem . No such clear opposition exists . But even if we confine the argument to developments in assembly-line production, there is substantial evidence that even within flow-line technology, product diversification takes place without prolonged delays or increased skills . Multi-model and mixed-model lines can be used either to change the products or vary a basic model (Bennett, 1986 : 89). The resilience of mass production to greater product diversity and responsiveness to markets has been discussed elsewhere . Murray (1983) points to improvements in stock control . Gough (1986 : 64) observes that even the much quoted example of Benetton,'produces most of its clothes bleached, the colour variation being added as the final stage' . The crude distinction between 'dominant' production trajectories also obscures the complexity and contrary directions of production organisation : there are trends away from customised towards mass production in the production of machinery (Piore & Sabel, 1984: Ch . 4); and decentralisation of production through subcontracting cannot be conflated with a return to artisan production . It can simply be another mode of division of labour and standardised production .

Flexibility

But a major, and much neglected, problem with the theory of'Fordism' and the decline of mass production is the omission of 'Fordism before Ford' - the female gendering of most semiskilled assembly workers . The focus has either been on the car industry - which perhaps stands out because the Fordist assembly line is the exception, rather than the rule, for male production jobs - and engineering occupations, which are rarely part of mass assembly production anyway . As Glucksman (1986) has demonstrated, the new mass production industries of the inter-war years producing the consumer goods for the new mass markets were constructed as women's work . The assembly line, the moving conveyor belt and flow processes created a new division of labour in which women performed the semi-skilled work of repetitive standardised production. Taking electrical engineering as typical of the new industries, women were concentrated in the assembly of electric lamps, batteries, telephone and wireless apparatus, valves, electric light accessories, heating, cooking and other apparatus . Jobs became sex-typed, for women were `unquestionably' more patient, dexterous and reliable but 'wherever new methods of production were introduced, men acquired, or retained, control over the technical process' (Glucksman, 1986 : 29). The sexual division of labour in manufacturing is no different today . Where semi-skilled women workers have not been rationalised away and remain a cheaper, or more reliable option than machinery, they remain in the labour-intensive production, assembly and packing jobs of the mass production industries (Herzog, 1980; Pollen, 1981 ; Cavendish, 1981 ; Armstrong, 1982 ; Westwood, 1984). Yet consumer durable industries, and the assembly lines in them, are absent from the Fs discussion . Existing work on the social construction of skills and occupations, and the gendering of technology, conforms women's isolation from machinery, and the likely displacing and deskilling impact of new technology (Cockburn, 1983, 1985) . Since social differentiation, by sex, race or age, is a key process in the formation of occupational and skill identity, where restructuring does take the form of upgrading to flexible specialisation, the gains in control are likely to be gendered. Without conscious feminist struggle, this would reinforce existing segregation . The alleged trajectory of a decline in mass production and rise of Fs is thus a complacently male sex-blind view as well as empirically inaccurate . The decline of mass markets?

If there is no dear opposition between mass production and

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batch production, and if product markets have always been a mixture of standardised and differentiated goods, then what is the evidence for the break up of mass markets? With the concept of `mass markets', we enter the same problems of definition as with mass production. As Williams et al (1987) ask : at what point do we cross the rubicon of diversified mass markets and enter the fragmented market for the specialised goods of flexible specialisation? The much discussed fragmentation of the market in the clothing industry is a further case in point . For example, the proliferating variety of `Next' retail outlets, including the takeover of Grattan mail-order (Observer Magazine, 10 January 1988), is a planned strategy of carving the consumer market into predictable chunks . The capturing of markets by the deliberate cultivation of finely-tuned consumer tastes naturally becomes more urgent as competition intensifies, but this is not evidence of a decline, but of a more sophisticated manipulation of the mass market . Indeed, one can look at a whole range of industries which are based on mass and large batch production and continue to sell well to large markets : food, drinks, flat-pack furniture, DIY goods, toiletries, records, toys - the list covers most consumer goods . The Japanese consumer durable industry has been quoted in support of the rationale for FS : Managers attribute the success of these firms to an unusual degree of responsiveness to market conditions, responsiveness which eludes the traditional, tightly integrated, hierarchical corporations . (Piore, 1986a : 156) But the Japanese success can hardly be described as a shift away from mass markets ; televisions sell not because new models keep appearing, but because they are welt designed, reliable and cheap . New products also create markets, while the need for replacements likewise means that the market for domestic equipment has no more reached saturation today than before (Willi et al, 1987 :425) . As Gough has argued (1986), the focus on a fragmentation of demand as a root of crisis, mistakes cause for effect . Fragmentation is part of marketing strategy, which is one way (along with price competition, which cannot be said to be obsolete for all the claims of the Fs school) to deal with the problem of overaccumulation . This leads to the other major misconception in the analysis of a decline in mass markets : the substitution of a totally arbitrary conception of saturation in use values, for a crisis in the realisation ofexchange values. The crisis of overaccumulation is reduced to a crisis in mass markets . Markets, and the tastes of the `sovereign

Flexibility

consumer' (Hyman,1986) are as crucial to the FS analysis as they are to the neo-classical world view. Production flexibility : new opportunities for small firms?

One of the lynchpins of FS as both the explanation of the persistence of artisan production and facilitator of decentralised restructuring is the suitability of the new, flexible technology for small firms (Zeidin, 1985 : 13, 21) . The evidence does not support this case . In the British clothing industry, as supporters of decentralisation have conceded, the major items of equipment for more flexible production, such as computer-aided design (CAD) and computer-controlled cutting systems, are very expensive, and available only to the large clothing manufacturers (Zeitlin, 1985 : 14) . Any future reduction in cost is speculative (Zeidin, 1985 : 13) . In the meantime, it is the large producers who are best able to implement flexible production of relatively short runs, threatening of London's small, specialist garment manufacturers (GLC, 1985 : 13) . Thus, the reality is that large firms can invest, where smaller ones cannot - hardly a revelation . The `solutions' for the small firms, such as developing a federated structure for sharing equipment and management advice, would face the formidable competitive advantage of the larger (75-250 worker) firms . Paradoxically for the advocates of decentralisation, quality competition (the driving force for more flexible production) leads retailers to rely more heavily on larger manufacturers ; far from decentralising, there has been growing pressure on suppliers to move production 'in-house' (Zeitlin, 1985 : 19). This has added further advantage to the larger firms (GLC, 1985 : 3). The agument thus returns to the basic point of analysis, that flexible production does not necessarily mean small production units (GLC, 1985 : 4) . One cannot conflate technology, productive system and organisational form into a technologically determinist form of macro-restructuring . Similarly, one cannot assume a technologically driven restructuring of semi-skilled work to craft revival - the final point of our critique of Fs . Production flexibility and the rise

offlexible specialisation?

The continuation of debate over the skill upgrading or deskilling utilisation of microprocessor technology, challenges any assertion of a dominant trajectory towards the revitalisation of craft skills in FS . The 'post-Taylorist' view of More and Sabel can be contrasted with the evidence of Shaiken et al (1986) . This demonstrates the use of new technology to wrest control from

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production workers and further centralise management control . Elger's (1987) review of recent British studies of restructuring using new technology for more flexible production, reinforces a growing body of evidence that both management and labour can wrest gains and suffer costs in the negotiation of change . Uneven development also emerges as the most marked result of recent research on consumer goods industries (Rubery et al, 1987) . This shows that while more flexible production and ease of product differentiation is increasingly important with heightened competition, this is not necessarily achieved by new technology, and where it is, does not necessarily lead to the creation of a polyvalent craft workforce (Rubery et al, 1987: 145) . Indeed, the outcomes for labour of shifts to more flexible production vary between continuing dependence on traditional skills, deskilling, skill increases and skill polarisation - a conclusion similar to Kelley's review of the debate (1987). What does seem to emerge repeatedly is that there is no clear development towards an upgraded craft revival . The critiques of both the managerial and the 'radical' applications of both labour and labour market flexibility highlights one common characteristic : both cases are based on 'ideal type' models of reality, which do not bear up well to empirical scrutiny . This leaves us with a fundamental question : is there a deeper conceptual and ideological affinity between these apparently distinct constructions, which serves to explain why, in spite of their shaky factual foundations, they are pursued so intently? We must turn then to a conceptual and ideological analysis . Dualism, the 'informal sector' and 'postindustrialism'

In discussing the `flexible firm' and 'flexible specialisation', we are juxtaposing very different literatures, but they have a distinctive conceptual alliance . One is a rooting in, and re-application of dual labour market analysis . The other is in a post-industrial conception of a radical social break, forecasting new trajectories into the future . Both employ a method of argument, fitting complex facts into 'ideal type' models, and basing global sweeps on selective evidence . With the 'flexible firm', this is a future trend in management strategy. In 'The Second Industrial Divide', there are a number of possible futures . In both literatures, economic dualism is in different ways the basis of a new set of policies and new social structure . The dual labour market resurrection of the 'flexible firm' as a 'new' segmentation is a crudely ahistorical transformation of an academic analysis into a practical policy . The very basis of dual labour markets were not homogeneous, but segmented between an internal labour market and an external one (Doeringer & Piore, 1971) . The 'flexible firm' model ignores this long-standing

Flexibility

segmentation, and starts from a false premise of initial homogeneity. It also reproduces the lack of clarity of dual labour market analysis in providing no clear criteria for its dichotomisation (Pollen, 1987) . It is an irony that Piore, who in the early 1970s pioneered dual labour market analysis as an explanation of the underprivilege of black workers (Doeringer & Piore, 1971), should recast his perspective in a reversed form, the `secondary' industrial sector becoming the beacon of progress, the ills of `secondary' labour market conditions finding a cure . Looking back to this early period, Piore recalls : For us at the time the different fates of black and white workers in the economy were the critical factors . 'Dualism' captured the perceptions of black workers and of many white workers and employers as well as the structure of differences between black and white employment opportunities . (Berger & Piore, 1980 : 16) One can begin to detect a shift of interest in the 1980s, with the theorisation for what was largely a descriptive account of dualism (Berger & Piore, 1980) . This looked towards the technological and political basis of economic uncertainty as the source of dualism . Returning to Adam Smith's analysis of the relationship between the division of labour and the size of the market, Piore lays the foundations for the later elaboration of Fs, in a model of industrial structure driven by the relationship between the structure of market demand and technological development and organisation (Berger & Piore, 1980 : 24) . The growing interest in flexibility and uncertainty was already apparent in Berger's account of the resilience of the traditional sector in France and Italy (Berger & Piore, 1980) echoing the enthusiasm of Italian segmentation theorists for the small firms sector (e.g . Brusco, 1982; Solinas, 1982) . Ultimately, this shift in priorities can be seen in political terms . The segmentation tradition was not alone in turning its attention to the secondary sector in this period . Recession, growing unemployment and deepening crisis at the end of the 1970s meant that the small firm sector became both ideologically and politically more significant, as a sector which might potentially shoulder the risks and costs of 'economic recovery', and generate some national employment growth (Gerry, 1985 : 300) . Although the small business sector has 'proliferated' by high turnover, rather than growth -'the birth and death rates of small enterprises appear to have more or less matched one another in recent years' (Gerry, 1985 : 308)-the ideological impact of the small-business/ self-employment focus is vital . It has fostered competitive indi-

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vidualism, and obscured the extent of exploitation in this sector with the illusion that the self-employed are all independent, profit-making entrepreneurs. There is a heritage to the dualist focus on the small business sector in the discussion of the 'informal' sector in the Third World. The 'informal' or 'marginal' sector constructs were inspired by 'the need to explain the impoverishment of increasing numbers of people, simultaneous with economic growth' (Connolly, 1985 : 60) . Dualism served to mystify the connections between unemployment, poverty and the integration of smallscale production into capital accumulation, by presenting two 'economies' as separate . It became the corner-stone for separate 'solutions' for both 'economies', either as a celebration of the informal sector as a vanguard of enterprise, or as a social problem for philanthropic concern . Either way, the linkage of poverty to the underlying processes which make it a necessary part of the global system of production, appears broken . Connolly argues that in the case of Mexico in the early 1980s, the informal sector served to legitimise policies which reinforced the extreme inequality of wealth . Massive state subsidies to the most profitable capital-intensive industries were justified on the grounds that 'modem development' was the panacea to unproductive backwardness . Complementing this, welfare expenditure and 'selective aids' to labour-intensive activities using 'adequate' technologies could be justified, if only theoretically, to encourage an autonomous informal sector, without threatening the underlying concentration of capital (Connolly, 1985 : 67) . Similar policies underpinned the use of the 'formal', 'informal' nomenclature elsewhere ; in the ILO missions to Colombia in 1970, to Sri Lanka in 1971 and Kenya in 1972 (Gerry, 1985 : 2%) . As crisis deepened, and it became clear that the alleged 'trickle down' effect from the formal to the informal sector was not to be, the more the informal sector became ideologically transformed from a social blight, to the vanguard of enterprise (Pearson, 1987) . This ideological celebration of the 'informal' economy can also be seen in the recessionary phase of 'post-industrial' theory, a perspective which has found strong expression in the current obsession with 'flexibility' as a return to small business . The post-war boom inspired a number of 'post-industrial' perspectives of a radical break from 'industrial society', rooted in assumptions of guaranteed growth, general affluence and satisfaction of material needs . Bell (1974), the most influential exponent of this optimistic projection, held that the break consisted in a fundamental employment shift from manufacturing, to the provision

Flexibility

of services, and a new 'service society', with a 'knowledge elite' as its basis of power. As the end of the post-war boom forced close questioning of these full-employment projections, Bell's benignly voluntarist 'service society' came under scrutiny . Gershuny (1978) pointed out that service occupations were not the same as services for people, since most were integral parts of manufacturing organisation . This successfully undermined the basis of a'post-industrial' break. Yet Gershuny continued the 'qualitative break' tradition, but now in the context of recession and unemployment . His analysis pursued the problem of how services were actually provided, and focussed on the household economy and, increasingly, on work in the 'informal' sector . Kumar (1978) sought an ideological break with the 'growth' ethic of 'industrial' society, towards a libertarian, 'small is beautiful', world . Veering away from concern with large-scale employment and wage labour, a new literature of 'recessionary' post-industrialism emerged, predicting the demise of wage labour in the formal economy. Emphasising the economic viability of production in the informal sector, it has been influential in the broadcasting of a polarisation between formal and informal economies, core and peripheral employment . The 'post-industrial' emphasis on the informal sector as a radical break has a parallel in Piore and Sabel's recasting of the secondary sector as not only economically dynamic, but beneficial for labour . The argument behind Gershuny's vision of the selfservice economy comes dose to Piore and Sabel's analysis of the demise of mass production, and vision of alternative trends. Both advocate a 'third way' out of crisis, which is neither a Keynesian bolstering of demand, nor a monetarist solution, but a furtherance of a dual economy. Both also invest prime importance in consumer demand, and the transformative powers of new technology to supply this in new ways. For Gershuny, The third strategy, instead of working against the trends, works with them . . . [it] is to start to consider the redesign of the household, or rather to consider the social basis of final consumption . . . The 'dual economy' strategy would not seek to discourage the continuing drive for efficiency, with accompanying unemployment, in the formal sector . Instead, it would seek to improve both work and leisure in the informal sector ; indeed, since in this sector production and consumption activities are based on the same social unit, the distinction between work and leisure might itself become less clear-cut . As a result of this strategy, the informal sector might become a viable alternative to

C&C/34-E

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employment in the formal sector. (1978 : 160-1) Piore and Sabel's arguments for the resurgence of craft production is based on a historical analysis of competing productive paradigms, not on complementary systems (except at the international level). But the resonance between their own celebration of the craft tradition, and the `post-industrial' economy of self-employment is unmistakable . The political implications of the `post-industrial' embrace of the small business sector reveal themselves in their convergence with enterprise capitalism's enthusiasm for deregulation . Piore remarks `there is considerable truth in at least Reagan's vision of American prosperity . . . we are more dependent on entrepreneurial activity than we were in the past' (1986b : 211). It is no coincidence that the `post-industrial' vision embellishes the management literature on 'flexible' work. `New' types of working offered by new technology and non-standard forms of work offer possibilities of flexible working time, and the much sought blurring between work and leisure . The 'radical break' brings a new quality of inevitability and liberal appeal to the 'postindustrial' economy of the demise of collective wage labour . Clutterbuck and Hill (1981 : 4) assert that,' . . . many forecasters believe we are on the edge of a shift in attitudes and behavioural patterns comparable to that involved in the transition from the Middle Ages to the Renaissance' . This, together with the decline in manufacturing, new technology, unemployment, and the growth of the informal economy, is all moulded to the need for 'flexibility' : 'As will emerge time and again throughout the following pages, the key to meeting the challenge of tomorrow's workplace is flexibility of response. . . . In theory at least, those companies that develop the flexibility of response . . . Will be the ones to prosper' (ibid : 22) . Handy (1984: 8) predicts : ' . . . Jobs will be shorter . . . jobs will be difficult, more dispersed, and, in many cases, more precarious .' As a consequence, he forecasts the growth of the 'dispersed' or 'contractual' organisation (ibid : 74, 79) : 'Whether we like it or not (and there are many who don't), the contractual organisation is with us, is growing and is likely to grow faster' (ibid : 81) . The 'flexible firm', with its emphasis on decentralisation and 'new' management strategy, is part of this 'radical break' management literature with a similar fusing of assertion, prescription and prediction (Pollen, 1987) . The strain between the model's assertions and unsupportive empirical facts expresses itself in a duality between sweeping generalisation on the one hand, and immediate qualification or retraction, on the other. In

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Report No . 89, a radical change is first announced, then negated : IMS

In the UK we are beginning to witness important changes to orthodox ideas about work organisation and the deployment of labour. As yet such changes cannot be said to add up to new and coherent employment strategies on the part of employers . (Atkinson, 1985a : 1) The report contains this tension throughout (Pollen, 1987) . Eleswhere we are told, `flexibility has become an important theme in emerging corporate thinking', yet, `research suggests in practice, relatively few UK firms have explicitly and comprehensively reorganised their labour force on this basis' (Atkinson, 1985b) . Trends are both asserted and denied, contradictions obscured by the interpretation of numerous practices as 'radical breaks', even if the 'small print' shows they are not . This prophetic style has unleashed a method of policy dissemination, where the prescriptive message is carried in the assertion of a trend . A distinctive language has been created, based on the compelling force of asserting trends which will leave you behind if you do not join in . But the arguments of FS are similar, except here the projection of trends is built on an elaborate historical edifice. In both, the edifice is less secure than the confident style admits . The common ground between the radical restructuring programme of reviving artisan production, and of management strategies promoting greater labour market flexibility leads to further questions about the relationship between both 'flexibility' literatures at the policy level . Some argue that the Atkinson model is quite different from the FS scenario (Williams et al, 1987 : 434) . While there are obviously differences, there are more similarities than meet the eye . Labourflexibility and'coreperiphery' as a new state integration

ofcapitalist

The policy implications of the 'flexible firm' model and of Fs are neither identical n scope nor content . The first is a managerial strategy for controlling labour, the second, a strategy for restructuring both the labour process and capital as a whole . In the first, the concept of 'functional flexibility' at the 'core' allows for the multiskilled craft worker, but also the more pliable employee and the removal of demarcations . But in both models, centrality in the labour process strengthens labour not against capital as the most advanced, organised section of the working class, but to work with capital in a new partnership . Japanese lifetime employ-

The 'flexible firm' and flexible specialisation : Political convergences

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68

ment is implicitly - (or with Fs explicitly) - the reference point . But there is also a much wider ideological message of social integration . The 'core' and 'periphery' model is one of organisational balance, labour process flexibility in the one supplemented by labour market flexibility in the other . The Fs analysis is likewise based on dual labour market analysis as a model of dynamic equilibrium . It rejects an analysis of capitalism as a system based on contradictory class interests, and wholeheartedly supports market regeneration . It poses a new equation of sectoral and productive balance, which is healthier for markets . In both projections, dualism suggests a functionalist balance, whereby economic and social equilibrium is maintained by labour market division . The trade unionism of FS (and 'core') workers co-operates with capital, apparently as the realistic 'Challenge for Union Survival' (Piore, 1986b) . In new-realism-speakThe hope for unions lies in articulating an alternative vision, one which is both more realistic and effective in providing an operational understanding of the socio-economic system and which, at the same time, provides an organic and central place for worker organisation . (Piore,1986b) For the car industry, Katz and Sabel argue : Unions will have to exchange the rights to impose uniform conditions for rights in decision making . . . the unions will have to find ways of tying the interests of particular companies to the interests of their industry and even of the economy as a whole. (1985 : 314) Such a scenario resonates with the New Realism of certain union leaderships in Britain (the AEU and the EMW for example), eager to secure their 'core' status in the 'flexible firm' . Core-periphery and flexible specialisation as social division

In FS, the benign version of economic dualism, the question of underprivilege fades into silence . The 'flexible firm's' explicit divisiveness is paradoxically a more candid admission of the concrete applications of fragmentation strategies, than all the sophisticated caveats of welfare protection in the Fs case. But the stubborn persistence of inequality in the Fs utopia will not go away (GLC, 1985 ; Gough, 1986 ; Murray, 1983, 1987 ; Jenson, 1988) . The craft ideal is worrying in itself: Hints that women may not do very well under flexible specialisation begin to niggle at feminists while reading

Flexibility Piore and Sabel's fond references to Proudhon . . . embedded at the heart of his understanding of the independent, craft based working class - which he celebrated - was the belief that women should only work in the home and that any self-respecting working man ought to be able to support his non-waged wife and children . (Jenson, 1988 : 4) Murray (1983, 1987) has shown the seamier side of decentralised production in the Third Italy : racial, gender, skill and age divisions are essential to its success . Competition between firms results in a survival of the fittest which appears in no way ameliorated by local state intervention . Geographical fragmentation between firms and phases of production creates 'maximum wage differentials between different groups of workers', undermining solidarity, and making union organisation 'an uphill task' . Meanwhile 'much work can in no way be described as prized and non-alienating craft labour' (Murray, 1987) . Sharp differences between workforces and firms extends to geographical fragmentation, so that privileged and successful industrial regions, in the Third Italy, for example, can export the insecurity, poor pay and working conditions needed to provide 'flexibility' with fluctuations in demand, to surrounding areas (Solinas, 1982 : 334, 350 ; Brusco, 1982 : 177) . Piore and Sabel rightly feel the need to defend FS from being compared to 'the old Bourbon kingdom of Naples, where an island of craftsmen, producing luxury goods for the court, was surrounded by a subproletarian sea of misery' (1984 : 279) . Their answer rests on a voluntarist vision of co-ordination of market relations by local community structures and by national socialwelfare regulation . But the international perspectives are not quite so rosy, or if so, only on the basis of harmonious inequality . While it may be possible 'to modernise the burgeoning craft sector of third world countries along the lines of flexible specialisation - rather than urging these countries to imitate the massproduction history of the advanced countries - (who does the urging? - AP) - Piore and Sabel continue, It is conceivable that flexible specialisation and mass production could be combined in a unified international economy . In this sytem, the old mass-production industries might migrate to the underdeveloped world, leaving behind in the industrialised world the high-tech industries and the traditional dispersed conglomerates in machine tools, garments, footwear, textiles, and the like-all revitalised through the fusion of traditional skills and high technology

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. . . To the underdeveloped world, this hybrid system would provide industrialisation . To the developed world, it would provide a chance to moderate the decline of mass production and its de-facto emigration from its homelands . (1984 : 279) This blithely imperialist perspective is a further dimension of the unconsciously divisive and elitist complacency implicit in the FS school, for all its utopian collectivist aspirations . It further confirms the compatability between this programme of restructuring for labour, with the advocacy of labour flexibility as a panacea for capital alone, in the 'core-periphery' model as a managerial strategy .

Conclusions

From this analysis of 'flexibility' presented as a 'radical break', spearheading something 'new', it is worth reiterating that flexibility is far from new . It was argued earlier that capital's harnessing of the inherent flexibility of human labour is the defining characteristic of labour power. It is, and always has been, essential to capital accumulation . How this flexibility was organised has been, and is, part of class conflict . In the early days of the factory system, division and rigidification of time and task were the central management priorities, while flexibility on the workpeople's terms was attenuated . Today, flexibility on labour's terms remains an area of struggle as it was before; in spite of unemployment and the appropriation of 'flexibility' as a managerial and market concept, the organisation of work and employment continues to be socially negotiated (whether through formal industrial relations or informal means), and labour can, as in previous periods, recoup and transform managerial initiatives to its own ends . However, such outcomes depend, as'participation' exercises, productivity deals and other managerial initiatives to gain worker co-operation show, on the groundwork of worker organisation and self-confidence . Whether the libertarian legitimations of casualisation and 'flexible' working lives can thus become re-appropriated by labour as positive improvements in terms of working hours and arrangements, paid for by capital, not labour, is an open question . But it is not a new terrain of struggle, just as the 'flexible workforce' is not the radically new phenomenon which it has been perceived to be . The deconstruction of 'flexibility' as a celebration of labour market dualism in fact reveals a strong convergence in practice between FS, management policies for labour fragmentation, and neo-classical policies of labour market deregulation . All these approaches place the major responsibility for economic recovery

Flexibility on changes in labour, with `new technology' as companion to a select few . The focus on labour is itself ideological, foreclosing perspectives on international movements of capital, capital concentration, money markets, or the social distribution of wealth . `New technology' too is conceived ideologically, as progressive, neutral and inevitable . The use of labour and new technology as part of the 'flexibility' restructuring programme has allowed a benign recasting of dual labour market theory . The 'flexible' workforce, and economy, is to be composed of a technically advanced, but pliable, 'core', and a disposable, elastic periphery . With the 'flexible firm', labour market segmentation is resurrected as though it were new, with no allusions to existing divisions by race, sex and age . With Piore and Sabel, the secondary, small firms sector is re-interpreted as the dynamic part of the economy, becoming, in this sense, the 'core' and ousting the ailing 'primary' sector firms based on declining mass production. New, flexible technology thus becomes the saviour and economic transformer of what had been the subordinate sector . In each approach, all labour flexibility is celebrated as work enhancing, while decentralising and fragmentation are embraced . As such, the informal and secondary economies are legitimised, and the significance of the disjuncture between organised, collective and directly employed labour, and isolated, atomised production is masked . The convergence between these perspectives, and the neoclassical revival of the enterprise economy, individualised competition and policies of employment deregulation and attacks on trade unionism lead one to question why such a broad ideological consensus should have developed . Capitalist crisis, and the lack of control by nation states over the system may predispose the relinquishing of policies of control, towards an emphasis on the primacy of 'markets', raising economic flexibility to be the panacea . At the same time, the concern of governments with small businesses may itself be the product of the 'contradiction between increasing involvement in the international economy and political dependence upon a nationally/territorially defined social and political structure' (Gerry, 1985 : 303) . That this perspective should find its way into managemenr writing is not surprising . Nor is it new for academic discourses to reinforce, reproduce and legitimise a political consensus . For 'radical' restructuring strategies to turn to what are fundamentally market-dominated solutions of working with, not against capital, suggests an abandonment of class analysis and class action as the basis for change . This is one reflection of the more general disorientation and demoralisation of the left . Fortunately there is now a growing swell of opposition to such

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fatalistic defeatism, accompanied by the theoretical critique of its policies . The effect of `flexibility' as both material strategy and ideology is complex. There can be no doubt that workplace and trade union organisation are both under attack . And yet, as the survey of the empirical evidence shows, the extent of change in the direction of casualisation is more uneven and complex than the 'radical break' perspective implies. In this sense, the 'discovery' of the fflexible workforce' is part of an ideological offensive which celebrates pliability and casualisation, and makes them seem inevitable.

This paper has therefore attempted to analyse the interweaving of 'flexibility' both in its concrete applications, and as ideology. Seen in this way, the language of 'flexibility' reveals itself as the language of social integration of the 1980s : how to live with insecurity and unemployment, and learn to love it . Acknowledgements Thanks to the following people for their helpful comments and suggestions on earlier drafts of this paper : Peter Armstrong, Irene Bruegel, Fergus Murray, Peter Nolan, Ruth Pearson, Chris Smith and John Ure .

References

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75

Rod Steven The high yen crisis in Japan

im

This paper argues that the poor organisation of the working class in Japan has contributed to an accumulation model characterised by high growth and profit, and which relies on an expanding set of overseas markets to compensate for the relatively poverished domestic market. The rise in the value of the yen has precipitated a crisis in this accumulation 76 model . The strategies for recreating the conditions for accumulation are discussed and related to the balance of class forces in Japan.

• Since 1985, when Japan's total net foreign assets reached $130 billion and Japan became the largest creditor `nation' in the world by a long stretch (FEER, 9 April 1987 : 51), the internationalisation of Japanese capital has skyrocketed to unimagined levels . By the end of 1986 total net foreign assets exceeded $180 billion and they are now expected to double that by 1990 . Direct foreign investment, whose accumulated total was a mere $31 billion as late as March 1980, soared by $12 .2 billion in fiscal 1985 alone and then by $22 .3 billion in fiscal 1986, bringing the total to over $100 billion (Okurasho, 1987) . The reasons for this sudden acceleration in the internationalisation of Japanese capital are not widely understood outside Japan . Since such a process always has its origin in some or other crisis in the capital exporting country, I want to focus in this article entirely on that crisis in Japan and the struggle, or absence of effective struggle, associated with it . Unfortunately, I do not have the space to elaborate on developments outside Japan . My argument is that the growing weakness of organised labour in Japan left the way open for the development in the mid-1970s, and then the consolidation in the mid-1980s of a relatively unique accumulation model . Because of capital's increasingly strict wage control and authority in the workplace, growing labour productivity in the consumer goods branches of the machinery industries (e.g . motor cars and audio-visual equipment) had to find outlets in export markets if the Japanese

High yen crisis working class's limited buying power was not to interrupt accumulation . However, the resulting expansion of exports in other advanced capitalist countries caused increasing conflicts with other advanced capitalist powers, conflicts which were temporarily resolved by means of currency adjustments and a rise of the yen from 240 to the dollar in September 1985 to 132 in early December 1987, with the prospect of further rises in the months to come. The result has been the entaka fukyu (high yen recession), in response to which Japanese capital adopted a three-pronged strategy : industrial restructuring, an onslaught on the domestic working class, and a massive programme of foreign investment . What has become unique to Japan is the combination of two features of Japanese wages which are further consolidating exportoriented accumulation . First, at current exchange rates, Japanese money wages are higher than American wages, bringing to an end the era of Japan as a cheap production place and spurring capital abroad in search of lower wages, even to such places as the Us . Second, real wages in Japan are still at most only about 60% of real wages in the us, and Japanese workers have to save massively to cope with the huge proportion of their lifetime earnings which is absorbed by such things as housing, education, old age and health care . The result is that the higher money wages of Japanese than American workers translate into neither higher living standards nor into greater purchasing power for consumer goods . This is why capital also continues to look to high wages countries in North America and Europe to market consumer goods, since in spite of the higher yen, the disposable income of Japanese workers remains too low to sustain accumulation based on the domestic consumer market . Japanese workers thus face the prospect of growing unemployment and even further pressure on their living standards, since their wages are both too high and too low. Capital has less and less interest in them as either producers or consumers . Capital accumulation in post-war Japan has been accompanied 1973 oil shock : by a continuous process of industrial restructuring, what has a crisis of social been called `scrap and build' . Until the first oil shock in October relations 1973 this took the form of running down light industry (which throughout the pre-war and early post-war periods had generated the surplus for the state to build infrastructure and subsidise heavy industry) and building heavy industry into the dominant pillar of Japanese capitalism. Until 1973, the so-called `miracle' was based on the heavy chemical and basic metals industries, processing imported raw materials and exporting iron and steel, ships, chemicals and petroleum products . Its counterpart was the scrapping of coal, textiles and much of agriculture (in spite of

77

Capital & Class

78

the latter's subsidisation), a strategy which meshed well with the political alliance which had been sealed between the ruling classes of Japan and the United States in the Security Treaty of 1952 . The United States would find in Japan a market for its agricultural surplus and other raw materials, and simultaneously gain an extra lever with which to keep the Japanese ruling class in line with its military strategy in the Far East . Scrap and build is a normal part of capital accumulation, demanding a social structure and form of ruling-class organisation which ensures working-class compliance . I have elsewhere tried to analyse this social structure and only briefly mention some of its main features (Steven, 1983). There are two axes where bourgeois and patriarchal social relations overlap and reinforce social control in Japan . The first divides what are called regular workers, the bulk of whom even today receive from their employers `lifelong' (until about 55) job security, annual pay increments and comprehensive social security, from the many types of non-regulars, who receive none of these benefits and who are not generally granted union membership . Part-time workers are the worst off of this group, who comprise day labourers, contract workers, retired workers on short-term hire and so on, and their wages are typically only a third of regular workers' wages. All large Japanese companies have substantial contingents of low-paid non-regular workers, so that their unit wage costs have been kept extremely low even though their unionised, particularly their older male, workers could be very well paid . Whatever else may be said about rapid accumulation in the post-war period - for example, that it resulted from continual technical change through high levels of debt-financed investment in up-to-date equipment - it remains true that the miserable wages and conditions of the bulk of the working class allowed for the accumulation of the maximum amount of surplus from the rising labour productivity . The division within the working class along the permanenttemporary axis is reinforced by the degree to which it coincides with patriarchal social relations . To an extent unknown outside Japan, regular workers have been male and irregular workers female. Even the overwhelming majority of formally regular women workers, many of whom are members of trade unions, are in reality also merely low-paid temporaries . This is because although both men and women are paid dismal starting wages in large as well as in small firms, these wages, which are withheld from them when young, are returned to those who toil loyally in the same firms until retirement age. But since women are effectively retired at around thirty when they marry or have children,

High yen crisis

they never receive the wages which were withheld, and the patriarchal requirement on them to parent their children converts them from nominally regular into effectively temporary workers . The second axis which divides the Japanese working class and secures a high rate of exploitation covers the vast network of subcontracting relations that exist between large and small firms . Particularly in manufacturing, the technical division of labour involved in the production process tends to coincide with an institutional division, so that different parts of a product are made by different firms, the largest of which assemble components made by myriads of scattered subcontractors . The smallest of these undertake the most labour-intensive tasks, sometimes receiving their orders from firms which are only marginally bigger than themselves and which are in turn working under contract from still larger firms . Often even the employers in the smaller `child' companies are powerless in the face of the 'parent' companies' capacity to dictate contract prices, quality standards, and delivery dates . Wages and conditions deteriorate to the levels of temporary workers as one moves down the hierarchy of subcontracting and re-subcontracting . Also, the smaller the firms, the harder it has been for workers to organise, and very few even in medium-sized companies are unionised . However, the subcontracting system does not function in as closely parallel a fashion with patriarchal social relations as does the temporary labour system . While women are more concentrated in small firms than men, at least 20% of economically active males in Japan have toiled away as employees in such establishments . The first oil shock in late 1973 triggered a crisis which marked a turning point in post-war accumulation . The overlapping networks of social relations which had ensured capital's profitability were no longer able to do so to the previous degree, and widespread bankruptcies, layoffs and losses of livelihood among the ordinary people occurred. But because in the preceding decades capital had concentrated on building up the heavy and basic-materials processing industries, whose social counterparts were a deepening of the subcontracting system and new forms of temporary labour, what was in reality a profoundly political domestic problem presented itself as an externally-induced ecological one, a constraint of nature. Ever since the Meiji Restoration, competition from foreign capital has been a greater threat to the Japanese ruling class than have the ordinary people . Although the latter have been heavily exploited, powerful mechanisms of social control have reduced domestic class struggle to a less dynamic force shaping the course of history than imperialist rivalry. While the stereotype of a passive working class ignores the many forms of struggle which

79

Capital & Class 80

characterise day-to-day life in Japan, it does contain an element of truth: the success that these struggles have had in influencing the course of capital accumulation has not been very great . Because local class relations have always been less explosive than international conflicts, the main forms of bourgeois organisation, such as the state, have been shaped by the need to be strong in the face of foreign rather than domestic threats. But this same state would use its power with vigour against the masses if the occasion arose. Capital's response : export-led growth

The Japanese state was thus very successful in presenting the `oil crisis' as a threat to the nation, and it facilitated capital's threepronged strategy, just as it would in the next period of crisis a decade later . First, scrap and build was applied respectively to the basic materials industries and to the machine industries . The latter comprised three broad types of machinery and equipment - general, transport and electrical-and the signal of their potential profitability was their growing international competitiveness from the mid-1970s . Second, the run-down industries were increasingly located abroad, in the hope that this would somehow prevent future crises, and finally, there was a general attack on the working class, the overall aim of which was to revive profitability through raising the rate of exploitation . However, because the up-and-coming industries concentrated on mass consumer goods, wage restraint in Japan required a restructuring of the market from domestic- to export-orientation .

Increasing rate of exploitation In comparison with the attacks on the working class which occurred in the next period, the social costs of the restructuring in 1974-80 were unspectacular . But there were major job losses and cuts in living standards, as well as extensions of the systems of temporary labour and of subcontracting . In 1974-78 a full 170,000 jobs were destroyed in the rationalisation programmes of the top 100 firms alone, while in large firms (over 500 operatives) in a slightly longer period (1974-79) the number was close to a million (Steven, 1983 : 249, 258-59) . And although real wages did rise a small amount in 1974-78, they fell after that . But more important, the meagre earnings of the growing numbers of parttimers and temporaries who employers used to cut costs concentrated the falling standards around the irregulars, thus increasing the uneven exploitation of the working class . The introduction of new technologies and other rationalisations of production, which were linked to and which exploited the temporary labour and subcontracting systems, created a

High yen crisis competitive power for Japanese capital in the machine industries which surpassed that of us and European capital . Table I shows that by 1985 labour productivity in Japan was higher than in America in most machinery-related industries and that wage costs at the pre-September exchange rate were considerably lower, even in some industries where labour productivity in the us was much higher, such as chemicals and pulp and paper . It also shows how at Y 140 to the dollar Japanese capital's advantage was eroded, in some cases totally . The years of the most rapid industrial restructuring and rise in labour productivity in the machine industries was 1975-80, but although after that labour productivity grew less rapidly in Japan than in Europe and America, Japanese capital remained much more successful in keeping the lid on wages . Table 2 shows that apart from West Germany, where wages were restrained with almost equal success, capital in all other countries faced larger increases in wage costs than Japanese capital, even after 1980. However, rising productivity and wage restraint did not simply raise the rate of exploitation in Japan more rapidly than in Europe and America. It also preserved considerable differences in real wages and intensified the tendency towards underconsumptionism which has always threatened accumulation in Japan's wage goods industries. Both effects require brief explanation, even though their relevance belongs as much to the period after September 1985 as to the one before it . The Ministry of Labour recently estimated that even after the yen had risen to 156, real wages (excluding the cost of land, houses, borrowing and social security) in the us were 63% higher and in West Germany 20% higher than in Japan (Rodosho, 1986) . However, this probably exaggerates the current level of real wages in Japan, since the upward effect which normally accompanies a currency revaluation has actually been minimal, because one of the most amazing features of the yen's rise is that the prices of imported consumer goods have not fallen widely . One reason for this is that Japan's distribution system is a real 'non-tariff barrier' which has simply absorbed the gains in higher profits . Another is that many imported consumer goods are on the list of restricted agricultural items, and their lower import costs simply swell price support funds . Thirdly, Japanese people have long been made to believe that imported goods are more expensive because they are better, and price cuts often do reduce sales . However, this will change as more manufactured goods from low-wage countries complement the luxury imports from Europe and America . Finally, capital has poured most of the gains from the revaluation into speculative activities, including

81



Table l

Productivity and wage costs in Japan,1985 (us= 100)

Labour

Manufacturing average General machinery Ceramics Transport machinery Rubber Electrical machinery Textiles Metallic products Leather products Iron and steel Petroleum products Chemicals Pulp & paper Non-ferrous metals Foodstuffs Clothing

Wage costs

Productivity

$1 = Y 238 .54

$1 = Y 140

104 290 202 178 153 144 135 118 105 103 97 80 69 53 46 18

68 28 32 43 47 47 60 47 82 72 74 80 81 125 166 327

116 48 54 74 79 79 102 81 140 123 126 136 139 212 284 558

Source : Rodosho (Ministry of Labour) 1987, reference materials : 124 .

Table 2 Comparative hourly manufacturing wages and wage costs, 1975-85

Japan Nominal wages Real wages Productivity Wage costs United States Nominal wages Real wages Productivity Wage costs Britain Nominal wages Real wages Productivity Wage costs West Germany Nominal wages Real wages Productivity Wage costs France Nominal wages Real wages Productivity Wage costs

1975

1978

1980

1982

1984

1985

Annual rise (1975-85)

72 .5

90 .0 100 .7 90 .3 99 .7

100.0 100.0 100.0 100.0

111 .0 103 .1 100 .7 110 .2

118 .0 105 .3 112 .4 105 .0

120.6 105 .4 116.1 103 .9

5 .2%

84 .9 107 .2 95 .7 88 .7

100.0 100.0 100.0 100.0

116 .8 99.7 104 .0 112 .3

126 .3 100 .2 115 .9 109 .0

131 .0 100.4 120.4 108.8

7.1%

72 .3 96 .8 102 .1 70 .8

100.0 100.0 100 .0 100 .0

120 .7 99 .3 109 .9 109 .8

138 .6 103 .9 123 .9 111 .9

141 .4 99.9 127.9 110.6

10.6%

89 .0 97 .7 %.6 92 .1

100 .0 100 .0 100 .0 100 .0

111 .1 99 .3 104 .3 106 .5

117 .5 99.2 113.1 103 .9

121 .9 100 .7 120 .3 101 .3

5 .2%

77.0 %.9 92 .1 83 .6

100 .0 100 .0 100.0 100.0

130.9 103.2 106.4 123 .0

157 .0 105 .2 116 .5 134 .8

n/a

12 .9%

n/a n/a

4 .7% 7 .8%

72 .8 99 .6 66 .1 85 .1 77 .7 51 .6 96 .4 53.5 73.5 89.0 82 .6 52 .8 76 .9 68 .7

4.8% 0.4%

3.5% 3 .4%

2 .9% 7.5%

3 .1% 2 .1%

Source : Nihon ginko (Bank of Japan), 1986: 23-24, 146 . E4



Capital & Class

84

land, whose skyrocketing prices have put home ownership beyond the reach of working-class people. If one were to include the cost of land and houses, the real wage differentials would be even greater, since in Osaka and Tokyo more than six times a worker's annual income is needed to buy a house, while in New York it is just over three times. I would estimate that before the rise of the yen, even excluding social security, real wages in Japan were about half those of the us and that the currency adjustment has not affected them greatly. While including social security would not have as dramatic an effect as does land, it is very relevant to the problem of underconsumptionism . From underconsumptionism to export-led growth

Since state welfare in Japan is notoriously underdeveloped, workers must themselves save for such things as their old age, health care and children's education . In fact very high levels of savings for such purposes have been available to capital to finance Table 3

Rising export ratios* of major machinery products, 1974-84

Automobiles Colour TVs Stereos Watches Cameras

1974

1984

43 .9 31 .3 42 .9 57 .9 54 .3

56 .3 62 .2 75 .3 84.1 78 .9

*% of total volume exported Source: Industria, July 1987 : 12 .

Table 4

Composition ofJapan's commodity exports, 1960-8S (%)

Textiles Chemicals Metals and metal products Machinery and equipment Others Source : mm, 1987: 148-49 .

1960

1970

1975

1980

1985

30 .2 4 .5 14 .0 22 .8 28 .5

12 .5 6 .4 19 .7 46 .3 15 .1

6.7 7.0 22 .4 53 .8 10.1

4.9 5 .2 16.4 62 .8 10.7

3 .6 4 .4 10 .5 71 .8 9 .7

High yen crisis

investment, increasingly abroad, and their continual growth is often cited as a major reason for Japan's chronic underconsumptionism and the need to sell and invest overseas (Nxs, 29 September 1987). Their importance in this context is that even after the higher yen had raised money wages in Japan and should correspondingly have raised consumer purchasing power, the effect was rather to increase savings . In the absence of a viable welfare state, the cultural pressure to save and pass on one's security to one's heirs perpetuates the underconsumptionism inherent in Japan's traditional low-wage system. The minimal spending power of Japanese workers in the 1970s was thus bound to set limits to the growth of the consumer goods branches of the booming machinery industries, and capital naturally turned to export-led growth . From the mid-1970s, therefore, the share of machinery production which was exported increased sharply, as did the share of exports which came from these industries. Table 3 shows the rising export ratios in 1974-84 of products with the highest external dependencies, all of them mass consumer durables . Table 4 summarises the restructuring of commodity exports in 1960-85. Table 5

Real GNP growth and current account balances, 1970-86

GNP growth

%

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

85

9 .5 4.3 8 .5 7.9 -1 .4 2 .7 4 .8 5 .3 5 .2 5 .3 4 .3 3 .7 3 .1 3 .2 5 .1 4.7 2 .5

Current account ($ million) (Y billion)

437 4,307 5,120 - 1,384 - 6,574 - 2,110 2,426 9,686 18,200 - 7,640 -10,721 8,740 6,900 20,534 33,611 46,099 82,743

157 1,483 1,577 - 373 - 1,869 - 625 705 2,516 3,828 - 1,714 - 2,613 2,005 1,776 4,894 8,004 10,871 13,739

Source : Ibid: 14, 161 ; Tsusho sangyosho (mm), 1987b: 798-99 .

Exchange rate Y per,

360 .00 347 .83 303 .8 272 .21 292 .06 2%.85 296.49 268 .32 210.11 219 .47 226 .74 220 .54 249 .07 237 .61 237 .52 238 .53 168.03

Table 6

Japan's exports,

1985-86

1985

Textiles Chemicals Metals Iron and steel Metallic products Machinery General Electrical Transport Motor vehicles Precision Other Total

1985

1986

Y billion

%

Y billion

%

$ million

$ million

1,496 1,843 4,430 3,253 827 30,120 7,040 9,306 11,732 8,195 2,043 4,067 41,956

3 .6 4 .4 10 .6 7 .8 2 .0 71 .8 16 .8 22 .2 28 .0 19 .5 4 .9 9 .7 100 .0

1,161 1,603 3,073 2,150 660 26,146 6,465 5,982 10,416 7,216 1,768 3,307 35,290

3 .3 4 .5 8 .7 6.1 1 .9 74.1 18 .4 17.0 28 .4 20.4 5 .0 9.4 100.0

6,263 7,698 18,491 13,556 3,458 126,179 29,537 38,931 49,149 34,377 8,561 17,007 175,638

6,874 9,484 18,182 12,706 3,913 155,027 38,381 35,519 59,426 42,676 10,472 19,584 209,151

Source : Tsusho sangyosho (MIT!), 1987a : 310-11

1986

High yen crisis 87

The most rapid restructuring of exports took place in 197580 : machinery considerably raised its share, metals lost half its share, while the downward trend of chemicals and textiles continued . The extent of capital's reliance on the machine industry massively exceeded its previous reliance either on textiles or on the basic materials industries . The solution to one crisis thus bore the seeds of the next . If the first oil shock was the catalyst which triggered the restructuring of 1974-78, then the second in late 1978 confirmed that the basic materials industries had to be scrapped in favour of the booming machine industries . The effect on profits and on the balance of payments of high-priced raw materials was drummed home a second time, and soon the new export-led growth strategy began to pay huge dividends . From a $10.7 billion current account deficit in 1980, Japan scored an $8 .7 billion surplus in 1981, which increased by leaps and bounds each year until it reached $46 billion in 1985 and $82 billion in 1986 . Table 5 shows that the emerging structure did not simply produce favourable external balances : it revived capital accumulation and relatively high rates of GNP growth . A lot of money could be made producing machines cheaply in Japan and selling them in the lucrative markets of the advanced capitalist countries in Europe and North America . Effective social control enabled employers to introduce new technologies which affected mainly the jobs and conditions of non-regular workers: unions in large private companies often helped employers single out old, infirm, or rebellious workers for redundancy when this was required, and the low wages of most manufacturing workers guaranteed that rising labour productivity would translate into a continual fall in unit costs . This `second Japanese miracle' was as firmly based on the unique power capital possesses over labour in Japan as was the first .

Since capital always moves to where money is made, it was inevitable that the restructuring would receive a bandwagon effect and create new problems : by 1985 three-quarters of Japan's exports were from the machine industries (see Table 6) and the overall dependence on exports of the system increased from 9 .5% of GDP in 1970 to 13 .3% in 1985 (Keizai kikakucho [Economic Planning Agency], 1987 : 88) . Apart from ships and certain categories of electrical machinery, the shares of the machine industries in total exports continued to increase even in 1985-86 in spite of the higher yen (from 71 .8% to 74.1%). These are the very industries which are most dependent on exports and therefore most vulnerable to fluctuations in overseas demand . They are also the

ti

Origins of the high yen: pressure from the us

Capital & Class 88

ones whose major corporations are leading the current flight of capital abroad. The industrial restructuring of the production process into machinery was thus accompanied by a locational restructuring of the circulation process into world markets, particularly in the advanced capitalist countries where demand seemed limitless . This enabled Japanese capital to take full advantage of the productive power which its hold over the working class provided . By 1985 41 .6% of the entire machine industry's overseas sales were in the United States and a further 18 .5% in Western Europe and Canada. Table 7 shows that a year later the proportions had risen to 43 .3% and 22 .1%, suggesting that it would take much more than a currency readjustment to reverse the forces which had been building up in Japan from the mid-1970s . Table 7

Advanced country markets for nackinery exports, 1985-86 (%)

Total General Electrical Transport Precision

United States 1985 1986

Europe and Canada 1985 1986

41 .6 34.5 38.5 48 .9 38.1

18.5 17.3 18 .5 16 .0 29 .7

43 .3 35 .5 37.4 53 .7 38 .7

22 .1 21 .2 21 .3 20 .2 32 .6

Source: Tsusho sangyosho, 1987b : 117-48 . It was one thing to rely heavily on the us for food and raw materials after the war, since this did not threaten the interests of American capital, but quite another to gobble up the latter's diminishing market, particularly when this threat to the already crisis-ridden American system had as its counterpart in Japan an unprecedented industrial specialisation, an unprecedented dependence on export markets, and an unprecedented dependence on the us market . There was also a qualitative difference in the continual bickering of the late 1960s and the 1970s over the `excessive' exports of textiles and TV sets, where Japan's competitive advantage posed no overall threat to American capital, and the trade friction which began in the early 1980s , over semiconductors and motor vehicles on which the us clam to world technical superiority rested heavily . Moreover, by the 1980s American labour had more fully felt the effect on jobs of Japan's export success and had become an added source of demand for protectionism .

High yen crisis

By 1985 the situation had deteriorated to a point of inevitable conflict, expressing itself in the soaring value of the yen from September that year, the punitive tariff on Japanese semiconductors in early 1987, the hysteria in June over Toshiba's sale of silent motor technology to the Soviet Union, and the 'Japan bashing' revealed in the Omnibus Trade Bill which Congress passed "at time with almost unprecedented majorities . By 1986 Japan's share of the American trade deficit had reached 30%. Because of its leading position among the capitalist powers, the us could get support for a strategy which would eventually reduce its deficit with Japan, but one which would shift much of the burden from its own to the Japanese working class . The main weapon was the spectacular rise of the yen, following the `G5' agreement (of the finance ministers of the five major powers in September 1985) that adjustment of the exchange rate should receive the highest priority . Before the us suspended the convertibility of the dollar into gold, when exchange rates were relatively fixed (e .g. Y 360 to $1 from 1953 to 1970), the superior productive power of the leading capitalist powers resulted in trading surpluses which created vicious circles : the deficit countries eventually had to pay in gold or some other commodity, which further weakened their productive power and strengthened that of the advanced countries . Under the gold standard, which the dominant powers normally have an interest in maintaining, trading surpluses siphon resources from defaulting countries, allow further accumulation in the advanced countries and further consolidate their dominance . By around 1970 us military expenditure abroad had required such a level of borrowing that the holders of that debt could no longer be allowed freely to withdraw gold from the country . Henceforth, the us would cover its debt with paper dollars, and allow these to devalue if need be . Although devaluations do result in more commodities than before leaving the country for any given quantity entering it, when this result is achieved via exchange rate adjustment rather than the movement of gold, both the dynamic effects and the costs borne by the various classes are different . The movement of gold does not affect the competitiveness of capital in the dominant countries and there is no threat to the jobs or living standards of their working classes . But in the deficit countries capital must force on their working classes the most miserable of conditions, otherwise their technical backwardness will perpetuate their uncompetitiveness . However, a currency revaluation momentarily blocks the superior productive power of capital in the advanced country, even though trade does result in a greater net transfer of resources

89

Capital & Class 90

to it than before . Because the volume of its sales in the country which devalued can fall, the jobs and living standards of its working class might be threatened, since it must now further raise productivity if it is to cut prices sufficiently to recover the lost sales . Exchange rate adjustment therefore gives the ruling class in the deficit country a chance to break out of the vicious circle: to initiate or revive capital accumulation . However, a strict system of wage control and exploitation of the labour class is required so that inflation does not undermine the advantage received from the devaluation . Although currency adjustment might cause only a temporary reduction in the competitive power of advanced capital, the breathing space can be sufficient to revive accumulation in the deficit country. It has been a facilitating factor in the massive upsurge in capital's (including us capital's) movement from advanced to underdeveloped countries since 1970 . However, as the productive power of American capital came to express itself more in exports to the us from countries where this capital had located itself, such as Taiwan and South Korea, or from rival powers, such as Japan, so the American state came to champion a system of flexible exchange rates . In all of these countries, the living standards of workers are much lower (in different degrees of course) than those in America . The us state hopes that an exchange rate adjustment can sufficiently lower the dollar price of American labour to revive accumulation and us technical superiority in enough industries to forestall the need to slash real wages even to the levels which exist in Japan . By the end of 1986 in most industries money wages in America were indeed lower than money wages in Japan . It might, however, take a long time for exchange rate adjustment alone to rectify the Japan-us trade imbalance, which has causes other than relative prices . For example, Japan's import bill dropped almost 30% in the fast half of 1986, partly because oil prices crashed . Moreover, as we saw in Table 6, in spite of the fall in yen-dominated exports to the us in the same period, the higher yen caused the dollar denominated figure to rise by over 20%. The reason is that the us has become dependent on a large number of Japanese (and other) imports, which do not respond much even to radical price changes . Some products, such as CD players and VTR equipment, are not even made by us companies, while others, like motor cars and steel, are already subject to export quotas and devaluations do not have much additional effect on their importation . By June 1987, the rise of the yen had begun to affect Japan's trade surplus, as imports picked up dramatically and exports slowed, but the us deficit was as chronic as ever and Japan's share of it had increased . The structural

High yen crisis

dependence of the us on Japanese imports has so far been unaffected by the currency adjustment . To revive us capital accumulation to the degree that can reverse the deficit will take a rate of exploitation of the American working class which is much closer to that of the working classes in the countries from which the exports are coming, such as Japan (not to mention South Korea and Taiwan), either by slashing wages or by the monumental introduction of new technology . Whether that can be achieved depends on the course of the class struggles in the countries concerned . Devaluations are really no more than moves by the ruling class in these struggles . The high yen did not affect the profitability of capital in all industries to the same degree . The loss of export revenues in fiscal 1986 was about Y 7 trillion, which increased to about Y 9 trillion after the effects of the resulting industrial slowdown had worked themselves out . On the other hand, capital's import bill fell from Y 31 trillion to Y 21 trillion, so that the end result was probably a small overall gain of about Y I trillion (Takeuchi, 1987 : 7-8 ; Tsusho sangyosho (burl], 1987a : 310-13) . However, the effects of the yen's rise were unevenly distributed between the two main groups of industries. Where some 20-30% of output was exported, that is, among the machinery industries, the losses were the greatest, whereas the primary material importing industries gained most through a 20-30% fall in their costs : of crude petroleum, metals, natural gas, hides, fertilisers and agricultural products . Apart from agriculture, the domestic production of these materials is trifling, and their importation exerted very little influence on domestic activity . An early survey carried out by Nikon Keizai Shinbun in March 1987 of 980 quoted companies (excluding finance) showed how the profitability of the two groups of industries had moved in opposite directions .' From 38-48% declines in consolidated profits were the norm in the machinery industries, while, apart from iron and steel, the basic materials industries all registered increases . A few examples are worth elaborating . Import-using industries: profit rise Electric power's 30% profit increase resulted from both the rise of the yen as well as the fall in oil prices, but with the recent firming of the latter and the expected fall in demand from the manufacturing sector, profits were expected to fall again in 1987 . While the profits of pulp and paper companies rose by up to 50%, those in the chemical industry increased by more than 10% and the outlook for 1987 was optimistic, mainly because of increased

91

Effect on Japanese capital : uneven profitability

Capital & Class 92

demand from the Asian Ntcs and a series of plant accidents in the United States . There is even talk of reviving ethylene plants which had been idled as a result of the overall decline since 1973 . But a great deal of unevenness and uncertainty remains within the industry, the main tendency being diversification into products of higher value added such as pharmaceuticals, biotechnology and communications equipment . Unproductive industries : windfall prfis Because capitalists put their surplus money into unproductive investments rather than into plant and machinery, skyrocketing land prices in 1986 brought a 30% increase in consolidated profits to real estate companies . In fiscal 1986 bank loans for land ballooned by 36.2%, and land prices in central Tokyo rose by 76 .8% for residential areas and 76.2% for commercial areas, compared to a nationwide rise of 7 .7% (yF7, l August 1987 :1, 5) . The big three fuzes in the industry, Mitsubishi Estate, Misui Real Estate Development and Sumitomo Realty and Development, achieved record profits with 18-47% increases . The declared income of one small company with only 17 employees, Mogami Kosan, rose by 3,750% to put it just behind the giant Fujitsu with its 51,350 employees (TBT, July 1987 : 23) . Profits from land speculation are not the preserve of real estate companies in Japan . Five of the top ten real estate holders are life assurance companies, with Nippon Life occupying second position behind Mitsubishi Estate (FEER, 9 July 1987 : 58). Since land prices seemed to have peaked in central Tokyo for a while, speculators are shifting their attention to the suburbs, other large cities and overseas . The biggest gains in 1986 were made in the financial sector : by banks, trust banks, insurance companies, life assurance firms and above all share brokers . The top fifty consolidated profit earners in 1986 saw the four major sharebrokers in prominent positions: Nomura Securities in third place behind Toyota Motor Co . (number one in spite of its 25% profit decline) and Tokyo Electric Power ; Daiwa Securities in seventh place behind N rr and Chubu and Kansai Electric Power; Nikko Securities in tenth place behind Fuji and Dai-Ichi-Kangyo banks ; and Yamaichi Securities in fourteenth place just behind Mitsubishi, Sumitomo, and Sanwa banks . Fourteen of the next 35 ranked firms were in finance and insurance, of which the big four trust banks Mitsubishi, Sumitomo, Mitsui and Yasuda - had made their killings on the foreign exchange market . Only twelve manufacturing firms were in the top fifty (NKS, 31 May 1987 : 1) . The importance of zaiteku (fund management) in total

High yen crisis

corporate profits is considerably understated by what is formally declared by companies in the unproductive sector . Quite a few transnational manufacturing firms are big zaueku players, and for some these non-operating profits concealed large deficits in 1986 . For example, Nissan's Y 84 billion operating loss was only transformed into a consolidated profit which kept it in the top 50 because of its second position in the zaiteku stakes with a close to $1 billion non-operating profit (BT, August 1987 : 23) . Japanese corporations have also started tapping overseas capital markets as a means of hedging exchange risks, and the yen's appreciation enabled them to cut their debt burden by Y 3 .1 trillion in fiscal 1986 . Among the major companies for which zaiteku is the essence of day-to-day money making are the life insurance companies . There has been a marked trend in recent years for individuals to put their money into insurance policies and investment trusts, rather than bank deposits and bonds, and insurance companies invest this money in real estate, the stock market and yen loans . The big five figure as prominently among Japan's top ten shareholders as they do among the top ten landowners (FEER, 9 July 1987 : 59) . If insurance companies have been the main new outlet for the surplus funds of individuals, then the counterparts for corporations have been trust banks and investment trusts . In 198586, the latter's assets grew by 43 .3% and 152 .5% respectively (Indusnia, July 1987 : 36), and like the insurance companies, the trust banks invest money mainly on the stock exchange . Together with the major city banks they comprise the biggest source of funds for the securities market - and for investment abroad . By 1985, Japan's top five city banks (Dai-Ichi-Kangyo, Fuji, Sumitomo, Mitsubishi and Sanwa) were among the world's top six banking institutions, while the five leading trust banks were in the top 50 (FEER, 9 April 1987 : 85) . In 1985-86 the surplus funds flowed into every possible channel in Japan, bidding up not simply land prices, but also causing a rise in the value of shares which bore little relation to their real value. Sooner or later the stock market was likely to tumble badly, the only odd thing about the crash of October 1987 being that it followed rather than preceded Wall Street . Stucturally-depressed industries : continued decline

Almost as spectacular as the gains of some industries in 1986 were the losses of others . Most prominent was iron and steel, with the rise of the yen accelerating its long-term downward trend . Nippon Steel's loss in 1986 comprised Y 112 billion out

93

Capital & Class 94

of the big five steelmakers' plunge in consolidated profits of Y 399 billion. With world production and demand continuing to decline, Japanese steel makers have been cutting production and anticipating annual outputs of around 90 million tons a year, well below their pre-1973 levels . Imports from South Korea in particular are expected to grow and to hasten the decline of the domestic industry, which will find it difficult to retain the tide of the world's largest steel exporter . The stagnation of shipbuilding took a similar leap downwards in 1986, with the combined fortunes of the seven majors soaring -183 billion into the red. Export orders fell 32 .6% in 1986 to reach only 8% of their 1973 peak, and South Korean shipbuilders outperformed their Japanese counterparts to become the world's leaders . The government has recommended the scrapping of a further 20% of capacity and a regrouping of companies : IHHI (Ishikawajima Harima Heavy Industries) plans to scrap 60% of its production facilities (7t~7, 2 May 1987: 14 ; Industria, May 1987 :28) . Export industries : sharp falls The greatest profit turnarounds were recorded in the exportoriented machinery industries, where the problems from the high yen were compounded by a decline in equipment investment by exporting companies . Among the car makers, dramatic falls in income were recorded almost across the board in fiscal 1986 : Toyota by 31%, Nissan by 45%, Honda by 1 .4%, Mazda by 80 .1% and Mitsubishi by 7.6%, although Suzuki and Fuji recorded increases of 17 .5% and 13 .8% respectively . Exports to the US and Europe actually increased by 4 .0% and 13 .1% in 1986, but they declined drastically to the Middle East (51 .3%), South East Asia (31 .2%) and Oceania (40 .3%) . However, in the first half of 1987 the sales in the us of exported vehicles fell by an average of 10 .9% (over the same period the year before) . Yet this only reduced the share of Japanese cars from 19 .6% to 19 .3%. Since the total us market declined by 9.5%, Japanese cars actually held their own, with the shares of GM and Chrysler falling by 22% and 15% respectively . Automakers' equipment investment was expected to fall by up to 4% in fiscal 1987 (TBT, July 1987 : 18-31 ; Industria, July 1987 : 24; AS, 31 July 1987 : 13). The fundamental problem therefore remains unsolved, and the crisis in the industry will continue . Since the special thrust into export production a decade ago was mainly because the domestic market was shrinking, the current growth in domestic sales is not likely to persist . For example, Toyota is increasing its domestic sales as a result of the T50 (to get 50% of the market)

High yen crisis 95

campaign, but this is mainly at Nissan's expense . In desperation, car makers are urging the 70% of householders who already have a car in this massively overcongested country to buy a second one. Exports of electrical machinery fell by 11% in 1986, while among the majors, Hitachi Mfg Co . and Mitsubishi Electric recorded 15% declines . The `double punch' of the high yen and the `voluntary' restriction of semi-conductor exports slashed the former's profitability by 44% . The company counter-attacked with a 1,160 cut in its workforce and a 40% cut in equipment investment. Mitsubishi Electric's profits dropped 34 .4%, while Toshiba's plunged 48 .7%, even though the latter retained its previous level of exports . The operating profits of a large number

Table 8

Ordinary profit rates of quoted companies, 1985 and 1986 (%)

Total Manufacturing Food Textiles Pulp and paper Chemicals Pharmaceuticals Petroleum Ceramics Iron and steel Non-ferrous metals General machinery Electrical machinery Motor vehicles Shipbuilding Precision machinery Non-manufacturing Construction Trading companies Retail Railway Marine transport Electric power Real estate Source : NKS, 14 July 1987 : 16 .

No. of companies

1985

1986

1,579 1,075 87 79 31 130 33 11 58 58 89 164 159 53 10 33 504 133 110 42 27 26 9 23

3 .75 4 .47 3 .63 4.86 5 .78 5 .93 9.44 0.25 6.60 4 .90 3 .78 4 .97 4 .92 4 .26 1 .32 5 .79 3 .20 2 .98 0 .53 3 .08 14 .87 1 .18 19.91 16 .01

3 .40 3 .39 3 .95 4 .08 7 .00 6 .10 10 .91 2 .41 5 .98 0 .76 3 .81 2 .37 2 .81 2 .62 - 1 .% 2 .51 3 .41 2 .98 0 .45 3 .09 13 .87 - 2 .43 24.00 16.35

Capital & Class 96

of majors went into the red : Sony, Sansui, Akai, Japan Victor, Canon and Sanyo (7Ey, 30 May 1987 : 24; NKS, 22 May 1987 : 15 ; 9 July 1987 : 16 ; 2 June 1987 : 1). However, largely because of the temporary stabilisation of the yen around 150 as well as rationalisation programmes at home and abroad, the situation improved somewhat, with profits expected to rise in 1987 in all branches of machinery apart from shipbuilding . From being Y 8.4 billion in the red, for example, Nissan expects a turnaround in 1988 even on the assumption of an exchange rate of Y 140 to the dollar . Overall, the profits of the 980 surveyed companies fell by 5 .3% in fiscal 1986. But if one includes the banking sector, whose profits surged by 40%, the overall result was an 8 .8% increase in 1986 (NKS, 30 May 1987: 1). Table 8 shows the ordinary profits for fiscal 1985 and 1986 actually declared by the 1,579 (non-financial) companies quoted on the stock exchange, confirming that the recession was mainly confined to the machinery industries . According to most government and business sources, the trough of the high yen recession was around November 1986 and the reversal of fortunes between the machinery and basic materials industries was not expected to continue in 1987 . The latter's long-term downward trend would reassert itself, with falling profits even in electric power . But the revival of the machinery industries would depend heavily on foreign investment and domestic restructuring . Construction: emerging boom

Among the profit leaders in 1987-88 will be the companies associated with a mounting boom in housing investment. Real private housing investment grew by 13 .1% in 1986, and it was forecast to grow by 14 .5% in 1987 (NKs, 30 June 1987 : 23) . The building boom is particularly vigorous in the construction df apartment buildings, since the high cost of housing is causing a trend back into rental as opposed to ownership units . The socalled `one room mansion', a contradiction in terms, is in fact becoming all that many people can afford nowadays. The profits real estate companies amassed during the land boom are now being shared with the construction and building materials companies, notably aluminium. Ordinary people must fork out the bill for dearer housing . While the fortunes of capital will continue for a while to reveal the discriminating effects of the high yen, there was by mid-1987 a widespread optimism among the capitalist class, or at least among its heavyweights . Small and petty capitalists, particularly those for whom there is no escape overseas, are on the contrary extremely worried .

High yen crisis

Small firm sector: on the brink

In more extreme cases the recession has manifested itself in actual bankruptcies, but these seem to have peaked in early 1987 . Of the total of 963 bankruptcies resulting specifically from the high yen in October 1985 to May 1987, 50 .4% were small firms with less than Y 10 million capital and only 1 .9% were large ones with over Y 100 million capital . Twenty-one per cent were in electrical machinery, 25 .6% were in general machinery, and 22 .4% were in industries more dependent on domestic demand . The most spectacular case was that of Tanaka Sangyo, a shipbuilder in southern Japan that went under in January 1987 with a debt of Y 45 billion . A more typical case was that of Shoko Sangyo, a small company which had made moulding materials for Nissan cars and Canon cameras . Having prospered for some 20 years, it borrowed heavily a few years ago to finance a modern factory in Tokyo . But then, under pressure from the high yen, the parent companies squeezed it for price cuts, and its debt proved too crushing . In one sense Shoko Sangyo was not typical, because a remarkable feature of the current recession is the strangely low level of bankruptcies which have been occurring (Awsy, 31 March 1987 : 1) . Total bankruptcies began to decline almost as the yen started to rise, by 9 .7% in 1985, 7 .1% in 1986, and then close to 20% in early 1987 (73TT, July/August 1987 : 62). Neither is this relationship coincidental . The easy credit and surplus funds that have characterised the recession have been lent to companies on the brink of bankruptcy and prevented its actual occurrence . With large corporate clients raising their capital ratios and relying increasingly on the Eurobond market for their loans, the banks lowered their criteria for domestic lending . As a banking analyst put it, `They've had to go to these effectively bankrupt companies because they're the only ones who are going to pay the premiums on the loans' (Awsy, 31 March 1987: 7) . Teikoku Data Bank, which has been recording the bankruptcies, expects a major reckoning to come towards the end of 1987 and the wave of failures to spread deep into the economy, although one limiting factor is likely to continue . Many small export-dependent companies see the writing on the wall and disband before their debts become intolerable. Particularly when they own some valuable real estate, it pays to withdraw voluntarily (Nxs, 24 July 1987: 29) .

C&C/34-G

97



Capital & Class

98

Capital's response : three-pronged strategy

The immediate response of Japanese exporters to the rise of the yen was to cut costs rather than raise overseas prices . In fiscal 1986, declining raw material prices enabled them to recover about 50% of similar revenue in 1987. Using a variety of other cost cutting measures, most of which were at their workers' expense, they managed to limit the fall in the volume of their exports in 1986 to a mere 3 .2% and the expected fall in 1987 to 3 .0% . Although this did have an impact on real mining and manufacturing production, which declined by 0 .5% in 1986, as far as the capitalist class was concerned the recession bottomed in the last quarter of fiscal 1986, and production was expected to rise by 2 .9% in 1987 (7E.7,15 August 1987 : 11) . As far as the working class is concerned, however, the real depression is only beginning, because capital's strategy for solving the trade imbalance is clearly not to shift into industries which would require Japanese workers to consume a larger share of what they produce, but to persist in the production of machinery for export to the us, but doing so from countries other than Japan . This means that the high yen recession, brief as it was for capital, signals an historic turning point for labour . The accelerated outflow of capital into overseas ventures is causing the kudoka (hollowing out) of Japanese industry . At least one third of the Japanese people can expect to be acutely threatened by this process of deindustrialization, which has caused mounting unemployment and deepening poverty in Europe and America . Of the three prongs of capital's strategy - industrial restructuring of sorts, increasing the exploitation of Japanese workers, and foreign investment - I discuss only the first two . Industrial restructuring : more of the same

Industrial restructuring currently means hastening the destruction of the `structurally depressed' (mainly basic materials) industries, on which the sun had begun to set following the oil crises of the 1970s, and eliminating those export-dependent branches of the machine industry for which the high yen is insuperable. The latter scrapping is likely to involve much more new foreign investment than the former, much of which Japanese capital has already located overseas . Although government thinking on the subject is not entirely consistent, the most comprehensive statement of official policy is the so-called New Maekawa Report (English summary in yE7, 23 May 1987 : 7, 21) . Among other things, it strongly recommends the expansion of domestic demand in Japan as part of the solution to the current overproduction, but this is something the Japanese ruling class is reluctant to do, other than as a desperate once-and-

High yen crisis

for-all measure to satisfy overseas criticism . The Nakasone government's `Emergency Economic Measures', including the plan to spend some Y 6 trillion on such things as public works, are not intended to redistribute to the Japanese working class the purchasing power for a more domestic-demand based system . Such a structural change could really only occur as a result of struggles by organised labour for a larger share of the national product, since the resulting redistribution of income, even though it would mean a lower overall rate of exploitation and rate of profit, would nonetheless encourage capital to move into industries for which this expanded purchasing power provided a market . In other words, the price of shifting from an overseas to a domestic market would be a lower rate of profit, and capital would only concede that if forced to do so by the people whose exploitation would be lessened . The Japanese working class has been too weak to win such a restructuring of the system, and capital has planned a course through the recession which will give it the best of all worlds . It will try to retain the benefits of its competitive advantage in the machine industries, it will continue to rely on markets outside Japan for the sale of these products, just as it determined to do in the late 1970s, and it will take steps to meet the demands of its American and European rivals . The dens ex machina would be to expand foreign investment, which would provide cheaper labour and locate outside the country the point from which the final export of the products is to occur. It seems, therefore, that this time not much new industry will be built, only a continuation of the scrapping of raw material processing . Machinery will not be scrapped, `only' hollowed out, with growing proportions of production and employment being located overseas . Such a course will generate great profits for Japanese capital, quickly ending the recession as far as it is concerned, but it will cast labour into the vicious circle which has accompanied deindustrialisation elsewhere : unemployment and falling wages . Although this restructuring essentially continues the process that began in 1974, there were towards the . end of 1987 strong signs that it would be accompanied by a shift back towards one feature of the previous industrial structure : increasing the production of investment goods for the domestic market . If the distribution of wealth is to continue to shift from labour to capital, as has been the tendency during the high yen recession, then domestic production should shift towards industries for which capital rather than labour provides the demand : investment goods and luxury consumer goods . It is not accidental that the bulk of the surge in imports in 1987 fell into these categories . On 5 December 1987 the headline that dominated the entire

99

Capital & Class

100

Japanese press was that a rate of GNP growth of 2% (8 .4% on an annual basis) had been achieved in the third quarter of that year (compared to zero growth the previous quarter), with 1 .8% contributed by an increase in domestic demand and only 0 .2% by an increase in exports. However, the 1 .8% broke down into 0 .6% from increased housing investment, 0 .4% and 0 .2% from increased private and public investment respectively and only 0 .5% from increased consumer spending . Moreover, the rise in consumer spending of 0.9% compared with a 10 .3% growth in housing investment, a 2 .2% growth in private equipment investment, a 3 .3% increase in public capital formation and a 6 .7% increase in exports (5 .9% increase in imports) (NKs, 5 December 1987: 1). Equally significant is that the increase in industrial production of 4 .6% in this period fell almost entirely into the categories of capital goods, producer goods and construction goods . The growth in consumer goods production was minimal (.7E.7,5 December 1987 :5). A few months before, the Japan Economic journal had wondered why personal consumption and imports were growing briskly when the rise in individual income was so modest . However, it explained that the : swelling value of financial and other assets [had created a] new rich [who) buy luxury cars and clothes and take expensive overseas trips . This class of people is behind the recent upturn in personal consumption . . . [A] class division seems to be forming between those who have assets on which they can reap capital gains and those who do not. (7E3, 15 August 1987 : 6) The estimate that this class comprises some 34-40% of the population is not too far off my own earlier estimate of property ownership among the bourgeoisie, petty bourgeoisie and middle class (Steven, 1983) . The apparent contradiction between the belt-tightening being forced on workers and the widespread prosperity suggested by statistics on consumer spending disappears when we remember that a large upper class can, after receiving windfall profits, go on a spending spree. And there is no reason, other than its capacity to get away with it politically, why this class should not continue to spend liberally . Wherever wealth is unevenly distributed, the upper class contributes the most to `domestic demand' . The sudden upsurge in the production of investment goods is not just a way to steer production towards areas of greatest demand . A shift out of consumer goods reflects the strategy of relocating these industries abroad and concentrating in Japan on the most technically advanced industries . Japanese capital will

Table 9 Methods of adjusting manufacturing employment (% of firm using them in 1986)

Layoff non-regulars Hue fewer young workers Hire fewer other workers Temporary layoffs Redeployment/secondment Retirement/dismissal

Iron & steel

Electrical

Motor vehicle

Shipbuilding

20 .7 51 .7 6.9 31 .0 65 .5 13 .8

46 .5 42 .3 33 .8 1 .4 39.4 8.4

55 .9 38 .2 23 .5 2 .9 32 .4 2 .9

25 .0 87 .5 50 .0 25 .0 87 .5 62 .5

Source : Rodosho (Ministry of Labour), 1987, reference materials : 129 .

Table 10 Employment in shipbuilding, September 1985 to December 1986

1985 September 1986 March 1986 December change Source : Ibid: 132 .

Total

Employees

White-collar

Blue-collar

Contract

137,543 126,279 98,349 -39 .9

94,274 87,864 68,789 -37 .0

33,874 31,161 25,966 -30 .5

60,400 56,703 42,823 -41 .0

43,269 48,415 29,560 -46 .4

Capital & Class

102

'

retain its dominant position in the international division of labour it envisages in the Pacific region by focussing more on the production of capital and luxury goods, leaving mass consumer production increasingly to its subsidiaries in Asia . Widespread loss ofjobs is newer

Wherever capacity is scrapped, workers' jobs and livelihoods are the first to go . In many cases management get workers to retire `voluntarily', threatening them with shimei kaiko (designated dismissal) if they do not . The latter is usually the last resort, since workers are normally either pressured in interviews to `request retirement' or they are seconded to subcontractors, who then lay them off . Alternatively, `temporary layoffs' are used to induce workers to look for new jobs, new hiring is suspended and normal retirement is used to ensure cutbacks, or workers are transferred to separate companies . Table 9 shows the results of a survey by the Economic Planning Agency in October to December 1986 on the methods used in various manufacturing industries . At IHHI the plans to cut 30% of the 7,000 workers have centred on the 35-54 year-olds and the infirm, while the pressures to retire have included threats of violence and even its actual use (Sasaki, 1987 : 8-12) . Table 10 shows the loss of jobs in the industry as a whole since late 1985 : the numbers of contract workers, who are not employees of shipbuilding companies, fell by a massive 46 .4% . Similar tactics are being used to achieve the mammoth new cutbacks planned for the iron and steel industry . On 13 February 1987, Nippon Steel suddenly announced a plan to dose five blast furnaces (at Yawata, Sakai, Muroran, Kamaishi, and Hirota) in 1988-89 involving 7,000 jobs, bringing the total intended cut by 1990 to 19,000. If one adds the effect on small subcontractors, the total number of jobs lost will be well over 30,000, the biggest ever rationalisation in Japanese history . Including planned reductions by the other steel majors (5,600 by Kawasaki Steel ; 6,000 by Sumitomo Metals, 6,000 by Kobe Steel, and 8,000 by Nippon Kokan) as well as the repercussions on their subcontractors, the total expected loss of jobs in the industry by 1990 will be over 100,000 (Ibid, 14-15) . Typical of the iron and steel and shipbuilding majors is how the economies of whole towns have become dependent on them, for example, the five towns where Nippon Steel plans to close blast furnaces, Innoshima where Hitachi Shipbuilding has a major works, and Aioi which is a stronghold of mm. In Kamaishi, the tax paid by Nippon Steel in 1985 comprised 34% of the town's company-tax income, while the total number of persons

High yen crisis

directly linked to Nippon Steel was about 20,000 (2,400 employees plus subcontractors and family members) out of a population of 60,000 . Over the past 25 years, the town has lost 33,000 people, mainly because Nippon Steel has been transferring employees to Nagoya and Chiba, and the loss of each such employee causes a drop of ten in population . In September 1985, Nippon Steel closed one of its furnaces and began instructing workers to stay at home . Then on 14 February 1987 it announced that its second furnace would be closed by March 1989 . This is a total disaster for the population of this company 'castle town' (Ibid : 17-18). Innoshima is a Hitachi Shipbuilding 'castle town', with 3,300 employees in 1985, but in 1986 these were cut to 1,800 and then a further 1,300 were laid off . Of the rest, about 300 are being moved to a new company, leaving only 200 who will repair ships for the navy . Hitherto 70-80% of the population have been linked to shipbuilding, as has 80% of the town's production . It is difficult to find jobs outside shipbuilding, and the town's jobs-toapplications ratio is 0 .06 : that is, only 6 jobs for every 100 job-seekers (elsewhere it is 70 jobs per 100 seekers) . With layoffs concentrated among the over 45 year-olds, the situation is particularly desperate because getting second jobs has become almost impossible . Of the 739 people who left the factory in 1985, only 64 had found jobs by February 1987 . The company has been ruthless : having urged people to buy their own homes (from a Hitachi real estate company) and lent them money for the purpose, it is now pressing them to pay back the loans . Houses which cost Y 16 million to build cannot be sold for Y 8 million, and the redundancy payment of Y 2 million covers only half the Y 4 million loans (Ibid: 18-21) . In the 10 years 1976-86, 340,000 jobs have been lost in companies quoted on the first board of the stock exchange, mainly in 'structurally depressed' industries : 84,000 in shipbuilding and vehicles, 83,000 in textiles, 62,000 in iron and steel, and 39,000 in chemicals . As the process of running down these industries continues, the number of jobs lost will multiply to inestimable levels, particularly when large numbers of subcontractors are involved (Ibid: 26) . In the export-dependent industries, although the loss of jobs is only beginning, the main cutbacks so far affecting non-regulars and overtime, there are many signs of what is likely to become a continuous process of attrition . For example, in April 1986 Matsushita Electric, which is regarded as the most competitive firm in the country, announced plans to cut its workforce by 1,000, while Sanyo planned to lay off 1,200 temporary and part-time workers . Early that year there were also about 16,000 such workers in motor vehicles, but by October they had been

103

Capital & Class 104

reduced to 7,000 (Ibid. 28-30). In mid-1987 it was hard to pick up a Japanese newspaper without finding either an announcement by some company to cut its workforce or some estimate by a research body of impending cuts . For example, in July the Japan Industrial Bank published the results of research it did on the job losses which would result in other industries following an anticipated fall in car production of Y 450 billion in 1985-1990 : in all (including the car industry) 31,195 jobs (xxs,10 July 1987 : 9). Ruling-class circles estimated that in 1986 there were between 6 .4% and 13 .8% surplus workers in manufacturing : between 778,000 and 1,686,000 . The lower estimate is based on `appropriate' levels of labour productivity, the latter on `appropriate' personnel expenses in relation to turnover. By the end of 1987, Nomura Research estimated (productivity basis) that in manufacturing firms with over 30 regular workers alone, there would be 1,250,000 (16%) surplus workers (Rodosho [Ministry of Labour], 1987, reference materials : 31). An overall picture of the coming effect on jobs in various industries of the two broad strategies (cut exports or expand imports) for correcting the external balance is presented in Table 11 . In practice both strategies will be used, and the Industrial Structure Advisory Council estimated a loss of about 2 million jobs in 1980-2000 : 550,000 resulting from a doubling of imported intermediary goods, 500,000 from a doubling of imported final goods, and between 560,000-970,000 from cutting exports and expanding foreign investment (Kudo, 1987: 50). A large question mark hangs over the degree to which food imports will be liberalised, since the political implications are in balance with a large number of contradictory but equally powerful forces at work . On one side is the us with its massive external deficit and its agricultural surplus, dying to make a killing on the Japanese market . Supporting it are the financial and industrial fractions of the Japanese bourgeoisie, who have long found the subsidies to agriculture wasteful and who have an interest in making peace with the Americans . Finally, there are the metropolitan members of the working class and petty bourgeoisie, who would love to buy rice for a fifth and meat for a half of their current prices . On the other side is a coalition which does not appear to be a match for the liberalisation lobby but which has so far won the day . It is brought together by Nokyo (The Federation of Agricultural Cooperative Associations), which coordinates farmers' agricultural and political activities. The ruling party, which is heavily dependent on the agricultural vote, is also committed to stabilising Japan's food supply, which already comprises more net imports than that of any other country .

Table 11

Estimated loss ofjobs from cutting 1986 external surplus

Cut exports Agriculture, forestry, fisheries Mining Construction Manufacturing Consumer group (food, etc .) Basic materials (non-metallic) Basic materials (metals) Machinery Transport, communications Wholesale, retail Finance, insurance, real estate Services Total Source : Ibid: 133 .

55,000 5,000 7,000 850,000 44,000 129,000 63,000 505,000 163,000 299,000 62,000 148,000 1,589,000

Expand imports

962,000 36,000 7,000 575,000 134,000 184,000 35,000 143,000 142,000 216,000 70,000 186,000 2,194,000

Capital & Class 106

In 1987 there were two major signs of a change in the balance of influence between the two camps: for the first time in 31 years the producer price of rice was cut, by almost 6%, with not as much political backlash from farmers as was expected . One reason could be that almost 60% of farming households no longer sell much rice (12% of the total) and are in fact mainly engaged in non-agricultural work. Nokyo increasingly represents no one but its 300,000-member bureaucracy, which uses farmers' money for mainly non-farming business operations . It is said to do little besides repeat stereotyped slogans for the maintenance of the food control system, and in the words of an agricultural journalist `is becoming an agricultural organisation with no interest in agriculture' (BT, August 1987 : 5). The real interests of the bulk of the Japanese peasantry are not furthered by either camp : the existing policy has gradually impoverished them, while import liberalisation will drive them totally off the land (Steven, 1983) . Following the GATT ruling against Japan's import quotas, the government indicated a new willingness to move further towards liberalisation . Estimates of actual unemployment in Japan are hopeless, capturing at most only one-half to one-third of the persons who would be classified as jobless in Britain or America . The investigation is carried out the last week each month, and even if one did part-time work for only two hours on the last day, one cannot be regarded as unemployed . Furthermore, it is necessary to be actively looking for work and to have registered at an employment stabilisation office . Anyone doing however small an amount of unpaid assistance in a family enterprise can also not qualify as unemployed . Moreover, the size of the workforce is overestimated in comparison to other countries, so that the percentage unemployed is minimised . For example, members of the armed forces are classified as in the workforce in Japan, whereas they are not in America . Even min recently admitted that if it used the American system, it would have to almost double the official estimate of Japan's jobless . Nonetheless, this official figure has been climbing sharply in recent months, and is beginning to cause considerable alarm : from 1 .55 million (2 .62%) in 1985 to 1 .86 million (3 .1 %) in the first half of 1987 (Rodosho [Ministry of Labour], 1987, reference materials : 97 ; yEy, 8 August 1987 : 3) . There is no question that joblessness will rise steadily in Japan as a result of the structural changes towards which the rise of the yen became the catalytic turning point, even though the process will not be even . For example, towards the end of 1987, there was a slight reduction in the numbers of officially unemployed, partly reflecting the increase in part-time jobs . However, the level of future unemployment is generally minimised by

Table 12

Industrial distribution ofemnployment,1970-2000 (1,000 persons)

1970

1980

1985

1993

2000

Material production sector Agriculture, forestry, etc . Manufacturing Basic materials processing Machinery and metallic production Other Construction Network sector Electricity, gas, water Transport, communications Commerce Finance, insurance, real estate Knowledge service production Management services Medical and health services Education services Leisure related services Housework substitute services Public administration, and others

26,770 9,060 13,770 3,970 5,230 4,570 3,940 13,380 290 3,240 8,530 1,320 10,790

Total

50,940

25,020 5,880 13,660 3,390 5,380 4,890 5,480 15,970 300 3,500 10,260 1,910 14,370 2,940 1,800 1,840 3,320 1,630 2,840 55,360

25,010 5,180 14,530 3,200 6,190 5,140 5,300 16,710 330 3,430 10,780 2,170 16,350 3,660 2,110 1,980 3,810 1,800 2,990 58,070

24,090 4,440 13,950 2,860 6,110 4,980 5,700 16,560 350 3,540 10,410 2,260 20,690 5,380 2,840 2,280 4,850 2,160 3,180 61,340

22,990 3,500 13,335 2,280 6,470 4,600 6,140 17,020 340 3,290 10,790 2,600 23,100 6,630 3,190 2,320 5,410 2,270 3,280 63,110

Source : Keizai kikakucho (Economic Planning Agency), 1987 : 77 .

Capital & Class

108

over-optimistic expectations of the industries which are now to be 'built'. What will be built: pie in the sky

Discussion of where displaced workers are meant to go has been very abstract and is difficult to describe . It has centred on two main areas of hoped-for growth : services and industries of high value added . Sometimes these are combined into what are called the high-technology information-centred services, particularly for businesses . In its Basic Strategy Towards the 21st Century, the Economic Planning Agency tried to concretise this conception by relating it to existing industrial classifications . Table 12 shows how it expects the distribution of employment to change. As far as scrapping is concerned, the 'Basic Strategy' is to preside over the hollowing out of Japanese industry right until the end of the century . Both in terms of employment and shares of GDP, the manufacturing and primary industries will be allowed to decline considerably, with the biggest falls occurring in agriculture and raw material processing . Although the document admits that the machine industries have a great potential for further growth in Japan, it notes that this will not be realisd because capital will to an increasing degree be moving these industries abroad . In contrast to its hard-headedness towards capital's interests in scrapping uncompetitive operations, the 'Basic Strategy' reveals totally unreal expectations regarding what capital might wish to build . Knowledge-service industries are supposed to generate jobs for 33 .7% of the workforce by 1993 and then 36 .6% by 2000, as opposed to 28 .1% in 1985, an increase of 4 .34 million jobs in 1985-93 and another 2 .41 million by 2000 . The largest growth is expected to occur in management and leisure related services, but medical and health services are also supposed to provide many more jobs . This sort of pie-in-the-sky optimism is common in government propaganda which is directed towards workers, but it is unusual in documents which set out capital's mediumand long-term strategies . In the midst of a campaign to press to the full every possible way of raising the exploitation of workers, conceptions like the following sound utopian : 'expand free time and give weight to individual worth', 'create free time for foreign and domestic travel', 'shorten working hours', 'increase leisure', 'lifetime health care', 'expand domestic-labour-saving goods and services', 'expand social capital and social security', and 'improve housing' (Keizai kikakucho [Economic Planning Agency], 1987: 31).

High yen crisis

If the service sector is to be significantly expanded, then ordinary people will need to be paid more money if they are to afford the improved services . However, one of the main reasons for the current skyrocketing foreign investment is the excessively high level of Japanese wages following the rise of the yen, and the deindustrialisation process is no more likely to lead to higher wages in Japan than it has in Britain or America . Simply to list all the things that Japanese workers have long needed but been consistently denied sweeps aside the two major political conditions on which the projected restructuring depends : redistributing buying power from capital to labour, and expanding the unproductive sectors of the economy . Japanese workers are simply not organised to win the first, while the second would be limited by the pace of deindustrialisation, since the wealth used by a growing unproductive sector must come from the productive sector . The new three-fold classification used by the Economic Planning Agency seems to accept the distinction between productive and unproductive industries, as well as the latter's dependence, even parasitism, on the former . Its network sector, which resembles the circulation process, is apparently unproductive, but it wrongly includes transport, electricity, gas and water, which are productive . The difficulty of limitlessly expanding unproductive industries is recognised in appending the term 'production' to `knowledge services' . However, most of these are actually either unproductive or at best only indirectly productive : they are simultaneously things which workers require, such as health and education, which normally come in for the chop rather than for expansion in times like these . Ever since the need for comprehensive social security became glaringly obvious after the first oil crisis, there has been a lot of official talk about expanding the virtually non-existent welfare state in Japan . Yet even in 1986, as in the two years before, the proportion of national income devoted to social security remained a meagre 14 .0%, in comparison to 17.9% in the us, 25 .8% in Britain and 31 .0% in West Germany . Moreover, almost all of the increase in Japan since 1974 has been in pensions, which gobbled up 47 .7% of the total in 1986, and medical-insurance and related expenses, which accounted for another 39 .7% (NKs, 10 August 1987:1) . The ideology of 'post industrialism', which grew up in America and Britain to rationalise the deindustrialisation of those countries, might explain the lack of consistency in the picture of a rising service economy as the solution to unemployment. The notion of knowledge-intensive is less appropriate to services than it is to manufacturing, while adding the word production only

109



Capital & Class

110

further confuses the issue . And the issue is whether industries which normally grow alongside and depend on the material production sector can survive, let alone expand without apparent limit, when the material production sector is being massively run down . Japanese capital has its eye on two ways in which this normally impossible task is to be achieved : foreign investment and further raising exploitation at home . Normally the most competitive branch of manufacturing, in this case machinery, would be the main source of the domestic surplus, but because of this industry's progressive movement abroad it is not going to have much more weight even than construction . So rather than any one of the material production industries being singled out for the task of sustaining the growing service sector, the Japanese bourgeoisie is aiming at an acrossthe-board tightening of the screws . The maximum possible surplus will be squeezed out of productive workers in all industries, and the drains on this surplus will be minimised by maintaining a comparable regime over workers in the unproductive sector . The extent to which this attack will go will depend on the degree to which foreign investment can bring material wealth into the country . However, since the outflow of capital in all its many forms is proceeding so rapidly, the expected returns are too far away for the bourgeoisie to relinquish the pressure at home at this stage . It is raising the exploitation of both productive and unproductive workers in the standard ways : new technology, speedups and wage cuts . Increasing exploitation: new technology

The Japanese media talk about hai teku and knowledge-intensive production as if this were something new to capitalism or peculiar to particular industries . However, competition among capitals within all industries has always compelled each to rely predominantly on technical superiority as its chief weapon against rivals . Accumulation within each industry is always spearheaded by knowledge-intensive production . Like the term 'modernisation' which became a fetish in the literature on underdevelopment, the term 'new technology' can also obscure the never-ending technical changes which capitalism propels, so that'new technology' simply refers to capital's latest weapon against rivals at a particular point in time . In this sense, there are currently three broad types of 'new' technology which are spearheading change in a wide range of Japanese industries as a result of the intense competition accompanying the recession . These are microelectronics, which includes 'mechatronics', that is, the use of microelectronics in machinery as in robotics ; new materials, for example, what are called fine chemicals and fine ceramics ; and biotechnology, for example, in

High yen crisis pharmaceuticals . The Economic Planning Agency recently estimated the changes in the market for products incorporating these three types of technology in the years 1980-2000 : their overwhelming importance is in their adaptation for the more efficient and higher-quality production of existing goods (Keizai kikakucho [Economic Planning Agency], 1987 : 47). The introduction of new technology is a highly politically charged process, which is part and parcel of the rationalisation programmes currently destroying jobs wherever there are signs of falling competitiveness, that is, everywhere in the manufacturing industry following the rise of the yen . Indeed the massive introduction of robots into motor vehicle assembly in the late 1970s and early 1980s was only accepted by workers because the enormous expansion of the industry at that time maintained overall levels of employment. Now that the car industry is moving abroad, the effect on jobs of its fait accompli automation will be bitterly felt . Much the same applies to the electrical industry, where, for example, automating circuit-board assembly often allowed one worker to replace ten or more . Increased intensity of work The second way the Japanese bourgeoisie aims to raise the exploitation of workers is through speed-ups and a whole range of `cost down' measures . For example, capital has put catchy slogans to its campaigns to intensify the labour process . Daihatsu's ' MP 30' drive is to cut meetings and paper by 30%, while Toyota's 'c 50' is a responding challenge to achieve a 50% such cut . The 'TP Movement' refers to Toshiba's aim for total productivity through rebuilding the production line, while'DIULt' is Mazda's slogan to cut costs by probing repeatedly into one's job to eliminate waste . NEC has a campaign to double efficiency and halve production costs (Nimomiya, 1987 : 68ff; TE7, 9 May 1987: 4) . The Japanese working class has long been made to toil away for more hours than its western counterparts . In 1985, the average working week in manufacturing for production workers in Japan was 43 .6 hours, in comparison to 38 in America, 40 .7 in Britain, 36.5 in West Germany and 37 .2 in France. The number of working days per year is also between 20-30 more in Japan than in these countries, all of which have about twice as many paid holidays and almost universal five-day working weeks, while only 6.1 % of Japanese workers regularly enjoy a five-day working week. In all, Japanese workers must put in about 200-500 more hours a year than western workers . Moreover, in Japan overtime is in effect compulsory and comprises over 10% of total working hours, but a 10% which employers expand at will in boom times

111

Capital & Class 112

and reduce with equal impunity during recessions . All the talk of increasing leisure time is thus just a euphemism for unemployment, since regular hours in manufacturing were actually higher in 1986 than they were in 1974 and 1975 (Rodosho [Ministry of Labour], 1987, statistical appendix : 60-62 ; Nihon ginko [Bank of Japan], 1986 : 145 ; NKs,19 July 1987: 8) . The current campaign to intensify the labour process comes on top of an already strict regime, but one which feigns benevolence . For example, a bill recently submitted to the Diet claims to reform the Labour Standards Law by shortening the present legal working week from 48 to 40 hours, but it allows an extension of the working day from the present 8-hour limit . Employers will be able to force 12-hour working days without overtime pay, so long as over three months the hours average no more than 40 a week . The flexibility employers used to have in relation to overtime, but for which they had to pay extra (albeit only 1 .25 times regular pay), they will in future have free of charge . The potential fall (no date was set for achieving the new limit) of some three hours a week will be more than paid for by the added flexibility and the savings in overtime which the `reform' will allow . Toyota, in addition to slashing overtime by a half, has already set up its own calendar with holidays during the week so that it can take advantage of reduced power costs by bringing workers in on the weekends . The normal sources of employer flexibility to raise the intensity of work are the temporary labour and subcontracting systems . We have seen how easily temporaries can be laid off, but employers can with equal ease hire them . A recent law restored to legality a practice which had been notorious before the war and which was banned afterwards, even though in practice it crept back with the mounting recession : labour bosses as intermediaries between workers and their actual employers . The Labour Dispatch Act (1986) again allows the hirer of workers to `dispatch' them to hungry employers, and a number of such parasitic companies have emerged from the woodwork, dealing mainly in women workers in the industry of the future, services . These are an advance on the `part-time bank', which was more a source of information on vulnerable workers than an agent for dispensing them . The growth of part-time women workers has been a major feature of the entire recession since 1974 : higher-paid secure male jobs have been giving way to low-paid insecure female jobs . While government statistics do not record the full measure of this trend, they confirm it . Table 13 shows that in commerce almost 30% of women workers are officially regarded as part-time, which typically means a 30-40 hour week on Y 500-600 an hour.

n

m

Table 13

Part-time women workers,

non-primary indusn,es,1970-86

1970 (1,000)

Total Construction Manufacturing Textiles Chemicals Machinery Other Transport/Communications Commerce Finance etc . Services Public administration

1,300 70 410 80 40 140 140 50 330 80 340 20

1975 %

12.2 15 .9 10 .7 7.8 9.1 10.6 13 .2 12 .8 13 .0 14.3 13 .1 8 .3

(1,000)

1,980 100 560 90 70 200 190 70 550 110 530 40

1980 %

17.4 20 .8 15 .8 10 .8 16 .3 16 .9 17 .1 18 .9 19 .2 15 .7 17 .4 13 .3

Source: Rodosho (Ministry of Labour), 1987, statistical appendix : 28-29 .

(1,000)

2,560 130 650 110 50 270 220 70 840 130 690 50

%

19 .3 22 .8 17 .1 14 .3 13 .2 18 .4 18 .2 18 .4 24 .2 16 .0 18 .2 15 .2

1985 (1,000)

3,330 140 800 120 90 330 260 80 1,170 150 910 60

%

22 .0 25 .0 18 .6 14 .3 18 .0 19 .0 21 .5 20 .0 29 .0 16 .9 20 .0 17 .6

1986 (1,000) 3,520 150 830 120 90 350 270 90 1,240 170 980 60

22 .7 22 .3 19 .3 14 .3 18 .0 20 .0 22 .5 20 .9 29 .7 17 .7 21 .0 17 .6

Capital & Class 114

In the 16 years since 1970, the proportion of women workers who are `part-time' has almost doubled in all industries, with each downturn accelerating the trend . While today about one in six workers is officially irregular, the Economic Planning Agency hopes this can be raised to one in three by the year 2000 . The bulk of them will be women (Kaji, 1986). Another source of cheap temporary labour is to take on seconded workers, who fall into two groups : those temporarily seconded from their original employers and those who have been finally retired off. The Labour Ministry recently did a survey to gauge the extent of this practice, and found that in the five years to January 1987, 568,000 (3 .3%) had been temporarily seconded, 149,000 in 1986 alone, which year also saw the final secondment of another 26,000 . Almost 92% of giant firms with over 5,000 employees were involved in the practice in 1986, and they have so far dealt with some 7% of their workers in this way (AS, 12 July 1987 : 1) . The subcontracting system is the other main source of flexibility for capital, and workers in the smallest firms are as vulnerable to the grossest intensification of work as are temporaries . In 1975-85, which roughly corresponds with the restructuring out of raw material processing into the export-oriented machine industries, there was a huge increase in the establishment of new small firms, in their rate of disappearance, in their capacity to expand and contract production, as well as in their shifting from one industry to the other . The Small and Medium Enterprise Agency proudly announced that the country's dependence on small firms (4-299 employees) to spearhead the restructuring had increased greatly since 1975 . For example, in electrical machinery there were 23,307 small firms that year, but in the next decade another 20,616 were established, so that even with the very high attrition rate (10,899 disappeared) that is common to subcontractors, the period ended with 33,430 small electrical firms (Chusho kigyocho [Small and Medium Enterprise Agency], 1987 : 39-43) . The task facing small firms now is to produce parts more cheaply. For example Toyota recently instructed its numerous affiliated component makers to lower their prices by 3-5% from the fall of 1986 (7T, 24 July 1987 : 12) . However, small firms sometimes find their `parent' companies have moved abroad . One survey has already shown that 72% of owner-operated businesses are threatened by declining orders, sluggish sales, or dwindling numbers of customers (7Tw,15 August 1987 : 12).

High yen crisis Wage cuts

The final means of raising the exploitation of the Japanese working class is by cutting wages . Although wage costs are also reduced when employers bring in irregulars or expand subcontracts, they have maintained a very tight ceiling on the wage rises allowed even to their regular employees . From 1974 to 1986 the latter's real wages rose by an average of only 1% a year, and the spring 1987 wage negotiations (one could no longer call them an `offensive'), even in the opinion of the Journal of Japanese Trade and Industry, resulted in a : complete rout for labour . The wage hikes agreed on during the annual parleys were the thinnest ever, reflecting the deteriorating exports and dwindling financial resources of Japanese industry - both factors attributable to the rapid upswing in the yen . (7JTI, July-August 1987 : 7) The average increase was only 3 .57%, while in the steel industry it was 1 .55%, in metals and shipbuilding 1 .74%, and in commerce 1 .50%. The government flatly refused to give any rises at all to government enterprise workers, although in August the National Personnel Authority advised the Cabinet to grant a base-up of 1 .47% to public servants (Ibid ; NKs, 22 May 1987: 9 ; 7 August 1987 : 5) . The Federation of Iron and Steel Workers' Unions, which was traditionally the pace-setter in the Spring Labour Offensive, did not even press for wage hikes at all . Increases in bonuses had also come to a complete halt in 1987, with an actual average reduction in manufacturing by 1 .8% and by much larger margins in all the export industries : 9 .7% in precision instruments, 7.9% in general, 7 .4% in transport, and 3 .3% in electrical machinery (Nn, 7 June 1987 : 21). Far from raising workers' living standards, the rise of the yen has resulted in a powerful campaign by employers to cut workers' wages . By reducing the wages of American relative to Japanese workers, it is making investment in the us increasngly more attractive than in Japan . Urakami Hiroshi, President of Ryobi, the world's top die casting maker which has one joint venture in the United States, remarked : Americans are willing to work at $10 an hour at the firm's factory in Shelbyville, Indiana . Suppose a us worker works for 1,800 hours a year, his annual wage is $18,000, which is Y 2 .7 million on the rate of Y 150 for the dollar . We cannot employ a Japanese at Y 2 .7 million a year. (7Tw,18 July 1987: 5) South Korean wages, which were about 27% of those in

115

Capital & Class

Japan at an exchange rate of Y 240 to the dollar, have fallen to only 17% at Y 150 to the dollar. Again the distortions resulting from the high value of the yen have made the differences in employers' costs bear no comparison with the differences in workers' living standards . It is this discrepancy which makes the current level of the yen `unnatural' and constitutes the break with the past . Previous revaluations might have raised costs in Japan, but not to levels above those of other advanced countries . Japanese wages are now too high and too low : too high from the point of view of employers' costs, but too low to constitute an effective demand for consumer goods. Even executives and other managers have been accepting cuts . In March 1986, the bonuses of directors at Fujitsu were reduced by 17% and their salaries by 10% . Matsushita Electrical Industrial cut directors' bonuses by 10%, while in 1987 Showa Shell lowered the retirement age for upper-middle management to 55, retaining 60 for its other employees . The latter also decided to lop off 350 workers in its three-year streamlining plan (STK, 28 February 1987 ; NKS, 31 July 1987 : 13) . Cutting managerial salaries is of course mainly a propaganda device to help workers tighten their belts, because most company executives were among the property owners (shares in particular) whose incomes from capital gains soared in 1986-87 .

116

Conclusion

I suggested that the internationalisation of capital always results from some crisis in the capital exporting country . What actually forces capital abroad is the course of the class struggle following the crisis, or more fundamentally, the historically determined organisational strengths of the bourgeoisie and the working class . It is indeed these which in the end account for the developments discussed in this article . On one side is the extraordinary power of the Japanese bourgeoisie, on the other a labour movement which is in total disarray (Steven, 1983 ; recent issues of AMPO) . It was the total inability of the Japanese working class to oppose the bourgeoisie's strategy of looking for cheaper labour outside Japan while continuing to sell in the advanced capitalist markets abroad which lies behind the current flight of capital overseas . To get round the growing conflict with the us and the high yen resulting from that conflict, the Japanese bourgeoisie is relocating production abroad, confirming once again that major historical developments in Japan are spurred more by the organisational might of the western powers than that of the Japanese working class . Such has been the course of the Japanese class struggle.



Note

117

1. NKS, 27 June 1987, section 2 : 1 . Unless otherwise sourced, the data in this section comes from this or the other general sources such asJEJ,15 August 1987: 11, the Bank of Japan's forecast (NKS, 13 August 1987 : 1) and that of the Economic Planning Agency (NKS, 15 August 1987 : 3). Abbreviations AS AWSJ BT FEER JEJ JJTI JT MITI JTW NKS STK TBT

Asahi Shinbun Asia Wall Street Journal Business Tokyo Far Eastern Economic Review Japan Economic Journal Journal of Japanese Trade and Industry Japanese Times Ministry of International Trade and Industry Japan Times Weekly Overseas Edition Nihon Keizai Shinbun Shukan Tokyo Keizai Tokyo Business Today

Capital & Class 118

References

Chusho kigyocho (Small and Medium Enterprise Agency) (1987) Showa 62 ckusko kigyo kakusko (1987 Small and Medium Enterprise White Paper). Tokyo: Okurasho insatuskyoku . Kaji, E . (1986) 'Herded into the Labour Market', AMPO, Vol . 18, Nos. 2-3 . Keizai kikakucho (Economic Planning Agency) (1987) 21 seiki e no kihon senryaku (Basic strategy towards the 21st century) . Tokyo: Toyo Keizai shinposha . Kudo, A . (1987)'Ijo entaka to sangyo kozo no chosei' (Industrial restructuring and the unusual value of the yen), Keizai, No. 274, February. Ministry of International Trade and Industry (Mm) (1987) Statistics on Japanese Industries, 1986-87 . Tokyo : International Trade and Industry Association . Nihon ginko chosakyoku (Research Bureau of the Bank of Japan) (1986) Nikon keizai o ckushin to suru kokusai kikaku tokei (Comparative international statistics centering on the Japanese economy). June . Okurasho (Ministry of Finance) (1997) 'Showa 61 nendo ni okeru taigai oyobi tainai chokusetsu toshi todokede jisseki' (Actually reported internal and external foreign investments for the fiscal year 1986) . 28 May. Rodosho (Ministry of Labour) (1986) 'Nihon-Amerika oyobi NihonNishidoitsu no shohi kobairyoku heika (suihei)' (Estimates of the consumer buying power par value between Japan, America, and West Germany) . November. Rodosho (Ministry of Labour) (1987) Sham 62 nenkan rodo kakusko (1987 Labour White Paper) . Tokyo: Nihon rodo kyokai . Sasaki, N . (1987) Oshiyoseru shinuiyo: zaikai no 21 seiki senryaku to sangyo kudoka (Mounting unemployment : deindustrialisation and the financial world's strategy for the 21st century). Tokyo: Shin Nihon shuppansha . Steven, R . (1983) Classes in Contemporary Japan . London : Cambridge University Press . Takeuchi, H . and others (1987) Entake fukyo: gekiken sure Nikon keizai shinchizu (The high yen recession : the rapidly changing new economic map of Japan). Tokyo : Yuhikaku Livret. Tsusho sangyosho (Ministry of International Trade and Industry) (1987a) Showa 62 nenkan tsusho hakusho (1987 Trade and Industry White Paper) . Tokyo: Okurasho insatsukyoku . Tsusho sangyosho (Ministry of International Trade and Industry) (1987b) Showa 62 nenkan tsusko hakusho (1987 Trade and Industry White Paper), kakuron (details) . Tokyo : Okurasho insatsukyoku.

The British left's response to the Tory government's labour market strategies has been piecemeal and ineffective. It has been severely compromised by the historical involvement of the Labour Party and the TUC in the msC. The adherence of • By 1989, almost a million workers may suffer economic the labour conscription through new arrangements for the Youth Training movement to the Scheme and the proposed 'Unified Training Scheme' . The major- work ethic, the idea that each should be ity of workers are now threatened by the weakening of the social paid according to security safety net and the erosion of statutory wage protection labour contributed and other employment rights . The article attempts to find a focus rather than to need, for the struggle against workfare and for the defence of working- has become a class incomes in the face of continued mass unemployment and stumbling block. Gray argues that a weakened trade unions . It argues that a priority form of inter- left labour market vention for a counter-attack should be to oppose availability for strategy must first work testing, and that this must be placed in the context of an protect the weak, the exploratory discussion about an unconditional universal benefit growing part-time, temporary and (referred to here as uuB), a new form of social security benefit casual 'under-class', which would be paid to all persons over 16 irrespective of income and enable them to or employment status. A second important demand is a national refuse low-paid minimum wage, and a UBB is helpful in avoiding over-reliance on work . The present mood of defeatism, state mechanisms for its enforcement . of demanding jobs at 119 The twin concepts of a national minimum wage and a uni- any price, must be versal unconditional benefit (uuB) are not put forward here as challenged . With utopian blueprints, or items for the agenda of the next govern- workfare on the ment of the left . Rather, they are presented as mobilising demands ; state's agenda, the 'right to work' is the firstly, as demands which open up new perspectives for the wrong emphasis; labour movement, and which may help to move its horizons what matters is the forward in the current period of defeatism ; and secondly, as right to an income.

Ann Gray Resisting economic conscription



Capital & Class 120 demands which help to unite the unemployed with wage earners . As argued in section 4, a campaign for a uus could be a valuable backcloth for struggles against compulsion in recruitment of the unemployed to government 'training' schemes . In so far as doubts exist about the feasibility of a UUB, they are about whether such a proposal could be implemented without fundamental changes in the labour movement's emphasis on the work ethic . 'The right to work, the right to a job, and the right to an income have been confused for a long time . . . The fundamental aim of keeping full-time work as the norm [is] to maintain the relations of domination based on the work ethic' (Gorz, 1983 : 34) . It is worth attempting to spell out the framework for a left strategy on social security and income maintenance . Firstly, the state has an important role in setting the context of wage struggles, whether by labour market regulation, through social security, through the discipline and control of the unemployed or through personal taxation policies . These functions of the capitalist state are an obvious arena of class struggle . Secondly, the state appropriates a large part of working-class wages and salaries through taxation, and what it does with the proceeds is an important part of the circuit of capital . Thus, to the extent that tax monies raised from the working class are returned to employers as subsidies of various kinds (regional aid, investment grants, etc .) or spent on provisions of services for capital, this parallels the process of surplus value extraction at the point of production. Thirdly, the content of training and the question of who bears its costs is, likewise, an arena of class struggle . Fourthly, the freedom to change jobs at will, to choose one's occupation or training, and to withhold one's labour or not to take a job, is fundamental to workers' capacity to struggle . Financial penalties for withholding or withdrawal of labour have a conscriptive effect, and must be resisted .

The context of the Tories' labour market strategy: Is the work ethic out-dated?

The policies pursued by the Thatcher government for restructuring the labour market take place in the context of a long-term structural shift away from unionised labour and from those workplace conditions which are most favourable to workers' organisation. The long-term shift from manufacturing towards private services has fostered the relative growth of smaller workplaces, and of the use of part-time labour (Hill, 1987) . The attempt to shed labour overheads in the recession has contributed to a marked increase in part-time, casual and temporary working in all sectors (Cnrrs, 1986 ; Standing, 1986) . It has also led to a significant growth in self-employment, in particular of labouronly sub-contracting, which deprives workers of sick pay, holiday

Economic conscription

pay and other forms of social protection normally given under employment contracts . The restructuring of the labour market has placed large sections of the labour force in situations where unionisation is relatively difficult ; these are part-time women, workers in very small establishments, temporary workers and self-employed subcontractors . All of these factors as well as increasing unemployment (Labour Research, September 1987 : 13-15) may explain falling union membership . There are now over half a million people on job creation or training programmes run by the Manpower Services Commission (Msc), suffering poor conditions and also very weakly organised . Some firms, particularly foreign investors, have introduced single-union agreements involving far-reaching changes in industrial relations practice and intended to undermine workers' power (see, for example, Garrahan,1986, and Holloway, 1987, on the Nissan plant in Sunderland) . New technology and the need to shed labour overheads have led to a quest for `labour market flexibility' involving a breakdown of traditional job demarcation and a severe erosion of shop stewards' influence over the labour process (cArrs, 1986). The unifying themes of the Tories' labour market strategy are to capitalise on these trends and accentuate them, and to reduce unemployment by `pricing people into jobs' (see White Paper, `Employment : The Challenge for the Nation', 1985) . Backed by monetarist economic theory, which identifies the failure of wages to fall to a `market clearing' level as a major `deficiency', the Tories argue that lower wages are an essential condition for making British products competitive, as if the rigidity of the rate of profit were a law of nature . But the wage rate which is consistent with a given volume of employment being offered is only determined if the rate of profit is given . Whether it is wages or profits which should be flexible is a political question, as is the proportion of workers' incomes which should come from wages . The Tories have put this second question on the agenda through their mass share ownership campaigns ; here, it is raised as an issue of the size and nature of the social wage . The 'counter-concept' to that of `pricing people into jobs' is the notion of a floor below which individual incomes may not fall, even when people are out of work . Such an income would give workers the freedom which the capitalist labour market has always given to employers with few constraints - the freedom to make or break an employment contract on terms of their own choosing. For the labour movement to pursue full employment as a primary goal, rather than attempting to sever the relation between income and work, is to play into the bosses' hands . The continued

121

Capital & Class 122

loss of manufacturing jobs due to automation, and increased competition from the third world, makes full employment unachievable except at unacceptably low wages . In clinging to full employment as a policy goal, Labour councils are led into a pathetic competition for foreign investors, bribing them to buy the labour power of local populations at whatever rates of pay and conditions are offered. Recent debates within the labour movement about the introduction of a statutory minimum wage have been dominated by a fear that to demand too high a wage would throw people out of work . Although this has always been true of any wage demand in any context, the preoccupation with the `trade-off in this particular context is an example of the current mood of defeatism, in which preserving jobs takes precedence over most other objectives . The relative fall in real wages of the unskilled under the Tories, and the fact that of the jobs on offer, an increasing proportion are part-time and provide an inadequate weekly income, has driven an unknown number of workers into the underground economy, claiming dole at the same time as they are working . In some instances, employers are not only conniving at this, but actively seeking workers who are prepared to subsidise the employer by their illicit dole claim . This presents a severe problem for trade unions, who are obviously concerned about the aspect of exploitation, as well as the inequity between workers who claim dole and those who do not, and about the threat that illicit claims pose to established wage rates . Rapidly rising productivity in the face of almost stagnant international demand makes it almost impossible to return to full employment (see for example Standing, 1986 ; Handy, 1984) . To reduce unemployment to, say, 3% would require an expansion of up to 25% in the total number of jobs . It is difficult to see how the state sector could provide this, and the job losses occurring through automation in the manufacturing sector are tending to outstrip the growth in private services . Even to the extent that the state sector could expand, textile mill workers cannot necessarily become construction workers nor miners become nurses ; there is a very real problem about re-training, gender-bound occupational categories and geographical mobility . Some form of work-sharing is clearly necessary, but in the present state of the labour market, it is hard to achieve shorter working hours without loss of pay by negotiation ; other methods must be sought . This implies a need to break with the wage relation as the main source of income, demanding that all adults receive a guaranteed subsistence income irrespective of whether or not they have work, and thus permitting them to choose how much to work . Such a demand challenges the basis of wage

Economic conscription labour, and is capable of mobilising the unemployed alongside

123

waged workers in the struggle over the distribution of income . Trade unions have generally accepted the work ethic, the notion of 'to each according to his labour' because it could be counterposed to that of 'to each according to his capital and the profits it makes' . But the work ethic can become a blindfold which prevents the labour movement from recognising the importance of the state's attempts to discipline the unemployed . It is also the source of a tendency to give unemployed people lower status than those who have jobs in the political life of the 'working' class . The unemployed are not considered as an estate or a constituency either within the Labour Party or within the TUC . Much is said in labour movement circles about what should be done about 'unemployment' (thus depersonalising it from being an experience of individuals into a mere abstraction), or worse still, what should be done 'for' the unemployed, thus making them the passive objects of social policy . The need is to find demands and' forms of struggle which will unite employed and unemployed and which will recognise that unemployment is no longer a temporary misfortune, but a way of life for many people over several years. Whilst the trade unions have always attempted to control the way in which labour is supplied, they have done so by methods which, on the whole, have excluded the unemployed . It is necesary to define demands and forms of struggle which would address the needs of the unemployed (and those on Msc schemes), actively involving them .

The Tories have adopted a highly interventionist labour market

The Tories'

strategy, quite at variance with the 'free market' philosophy of

policies and the

monetarism . They have used the state apparatus to attack trade unions, to browbeat the unemployed into accepting low-paid

labour movement's

jobs, and to encourage a reduction in wage rates by adopting

response

particular forms of special employment measures . And they are now moving closer to the American 'workfare' system, of compulsory work at low wages in return for benefit . The Tories' labour market strategy is, broadly speaking, made up of three elements :

a) legislative attacks on trade unions and on employment conditions The first plank of the Tories attack on the working class in the labour market has been to reverse much of the protection hitherto enjoyed by trade unions under the law (for a summary of these provisions, see Hyman, 1987; LRD, 1986) . This is by now familiar ground, and the details need not be repeated here . In addition to the attacks on trade unions' legal position, the Tories have severely weakened Wages Councils, the tripartite

Capital & Class 124

bodies which have regulated wages in certain low-paid sectors in Britain since 1909 . Each Wages Council is now confined to setting a single minimum hourly rate of pay for the adults protected by it. Despite the poor enforcement of minimum rates (see Low Pay Unit, 1985b), Wages Councils are an important form of protection for over 3 million workers, many of them women working in small establishments difficult for unions to organise . They are the main wage-setting mechanism in the growing sectors of retailing, hotels and catering. The government's introduction in 1985 of lower national insurance contributions from employers in respect of workers earning less than £130 per week also encouraged wage cutting (LPu,1985 : 44-5) . Lastly, the Tories have doubled the duration of employment required to obtain protection against unfair dismissal, from one year to two . This measure complements the transfer of vast numbers of workers from local government and health services to sub-contractors via privatisation, because it makes union organisation more difficult under these new employment contracts . The Labour Party's position on making good the damage done by Tory anti-union legislation and their withdrawal of social protection from the labour force has been weak . No commitment has been made to restore the right to secondary picketing, or to repeal the Public Order Act 1987 . This puts any demonstration in pursuit of industrial action (which is by definition likely to be called at very short notice) under threat because seven days' notice is required . Labour made no pre-election commitment to restoring full benefit rights to strikers' families, nor to restoring the right to take action in pursuit of a dosed shop or the protection of strikers from dismissal . As Hyman (1987) points out, the acceptance by the Labour Party and the trade unions of an expanded role of the state in industrial relations carries considerable dangers, making the future of trade union struggles highly vulnerable to the outcome of national elections . In the Tories' third term, the legal shackles placed on trade unions make it all the more important to resist the Tories' increasing pressure on the unemployed to join workfare type schemes . But without the active support of the unemployed (and of consumers) this will be difficult . b) special employment measures : the role of the MSC

The MSc has played a major role in restructuring the labour market . Conceived of by the Heath governent before its fall in 1974, and adopted by the subsequent Labour government as a vehicle for the modernisation of industrial training, the MSC under Labour foreshadowed, to some extent, the role which it

Economic conscription

has later come to play under Thatcher . The Youth Opportunities Programme (YOP), the precursor of the Youth Training Scheme (YTS), was started in 1978 under Labour as an explicit attempt to reduce the relative wages of youth (Finn, 1987 ; Benn & Fairley, 1986) . The Community Enterprise Programme (CEP), similar in concept to Community Programme, was also started under Labour. It paid a more reasonable wage rate than YoP, of £100 a week . The Tories, on replacing cu by Community Programme (CP), cut the wage to £65 per week, with the effect that most cP places are part-time only . The strategy of `pricing people into jobs' which the Tories explicitly adopted in their 1985 White Paper has used the MSC as its instrument in several ways . This has been extensively documented (see, for example, Benn & Fairley, 1986 ; Unemployment Bulletin, quarterly issues throughout 1986 and 1987) and only a brief summary of these arguments will be presented here . Firstly, YTS and CP have been used to reduce wage expectations of youth and the long-term unemployed respectively . Secondly, low pay has been encouraged by government schemes which have offered employers a subsidy to pay newly recruited teenagers less than a specified wage (firstly the Young Workers Scheme, later replaced by the New Workers Scheme) . The Jobstart scheme, introduced in 1986, offered £20 per week to unemployed people who accepted a job paying less than £80 . It attracted few takers and has now been ended . Thirdly, the Job Training Scheme (in), introduced in 1987, involves working for benefit on private employers' premises, undercutting negotiated wages and conditions (Heywood & Faulder, 1987 ; Finn, 1987; Unemployment Unit, forthcoming). Low take-up both by claimants and by employers have forced the government to now combine it with Community Programme into the Unified Training Scheme involving work for benefit plus £10 . CP is not merely an instrument for reducing wage expectations . It has also been used extensively to substitute for 'real' jobs on the fringes of local government work and in the voluntary sector (Gray & Heywood, 1986 ; Unemployment Unit, 1987). Furthermore, cp funding of voluntary projects has been used to shackle community groups and in particular to prevent unemployed workers' centres from carrying out political mobilisation of the unemployed, through a rule that Msc funds may not be used for political activity . 'Workfare', the generic term given in the USA to a variety of American programmes involving compulsory counselling for the long-term unemployed and work placements as a condition of receiving benefit, has become increasingly the model for Tory policies . Workfare has inspired both ITS and the Restart pro-

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gramme of counselling of the long-term unemployed (introduced in Britain in July 1986) . A further import from America, and also part of the Workfare group of programmes, are Job Clubs, offered to long-term unemployed people as a form of help with intensive job search . Attends s are rquired to apply for ten jobs a day, and must attend for four hours a week, thus pressurising them to reduce the wage they are willing to accept, and flooding the market with applications which in turn may induce employers to offer lower pay . The Restart programme, which echoes the compulsory counselling of us workfare, is becoming the key mechanism for directing the long-term unemployed to MSC schemes on penalty of losing benefit . Since its introduction in 1986, Restart has attracted considerable suspicion and hostility from claimants and brought them few positive results (Gray, 1987 ; Merseyside Trade Union Resource Unit, 1987 ; Unemployment Unit, 1987). With interviews repeated each six months, Restart now involves regular checks on claimants' job search behaviour and is a recruitment channel for CP, JTS and other special schemes (Independent, 10 September 1987) . A complementary measure has been the new, stricter availability for work test introduced early in 1987 for new claimants and later extended to Restart interviewees . This test restricts claimants' ability to hold out for a job at an appropriate skill level or wage level, or one within convenient commuting distance ; claimants who are not prepared to accept any job of any kind may be in danger of losing their benefit . Although participation in each single MSC scheme is voluntary, there is increasing pressure on claimants to take a job or choose one of the schemes, on penalty of losing benefit because it will be alleged that they are `unavailable for work' (Independent, 31 December 1987 ; Unemployment Unit, forthcoming) . The option of choosing a job from job centre vacancies is coloured by the fact that many of them pay sub-standard or illegal wage rates (Gray, 1987 ; Winyard & Ahsin,1983) . The proposed `Unified Training Scheme' brings the British system still closer to 'workfare' ; no less than 600,000 people per year will go through special work schemes receiving a benefit rather than a wage . Together with the government's refusal to pay social security benefit, from December 1988 onwards, to young people who refuse to join rrs, this represents a serious move towards economic conscription . The government's claim that the new scheme will be `voluntary' rings hollow . Not only does the Restart programme put claimants at risk of losing benefit if they do not choose one or other of the programmes offered to them, but the 1987 Employment Bill extends the definition of `voluntary employment' for which denial of benefit

Economic conscription is the punishment. A claimant can now be disqualified if s/he has `not availed of a reasonable opportunity' to go on an `approved programme' (Unemployment Unit, 1988) . The Unified Training Scheme can be expected to become an 'approved programme' as YTS and some older adult training schemes have been .

The labour movement's response to the changing role of the MSC The part which the Trades Union Congress (TUC) had played in the development of the Msc made it difficult for it to resist the Tories' move to more right-wing policies . The government has several times outmanouevred the TUC by presenting first oneyear YTs and then the two-year YTS, as constructive responses to the TUC's criticisms of YoP. The Tuc and the Labour Party have made little response to young people's criticisms of YOP and YTs and trainees' attempts to organise . There was widespread opposition by several unions to individual Yop schemes by 1981, two strikes in that year amongst trainees who were members of NUPE, and campaigning by the Trainees Union Rights Campaign (led by the Militant Tendency), as well as the more broadly supported People's March for Jobs (Finn, 1987) . Yet the TUC continued to support the MSC as the latter developed YTS (see Finn, 1987 ; and Eversley, 1986) . On Community Programme, the TUC at least struggled for `the rate for the job' when cp replaced CEP, but failed to prevent the wage from being reduced by 35% . The system of Area Manpower Boards, through which trade union representatives have to approve CP schemes in areas of work with which they are not always familiar, mitigates against `the rate for the job' being strictly enforced . In the last few months both individual unions and the TUc have shown strong opposition to JTs. But the TUC's policy of non-cooperation with 1TS has had only limited effect; the government anticipated it by reducing the role of trade unions in the MSC, and by bypassing the procedures for approval of individual JTS schemes by local Area Manpower Boards . Placed in a comer, the TUC has allowed its opposition to 'workfare' to collapse into a debate about whether the new Unified Training Scheme will be voluntary, and has naively accepted the government's assurances that it will be . In short, the TUC's response to Msc schemes has been characterised by a weak and reactive political strategy, and a failure to suport and help develop the grass-roots struggles of the unemployed and of trainees . Individual unions have therefore had to fall back on a position of resisting the use of YTS in particular industries (for example, in printing and engineering), or of 'non-cooperation' with cP and JTS (e .g. NALGO in local

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128

government). But if the exclusion of Msc scheme participants is seen as the only response of trade unions to the unemployed, it threatens to alienate them . It stigmatises the unemployed as cheap labour and contributes nothing to the organisation of the unemployed (whether on government schemes or not) in a common struggle with trade unionists to refuse 'workfare . It is this question of unity between trade unions and the unemployed which above all needs to be addressed . In this context, it is important to note some unemployed workers' centres' suspicions of the 'Hands Across Britain' campaign to demand work for the unemployed . Unemployed people have been little involved in its national organisation . Despite this, 'Hands Across Britain' has been widely supported by Labour Party groups . It is associated with the 'Charter for Jobs' pressure group, whose demand for a 'guarantee' of work (at unspecified wages) for every long-term unemployed person has been criticised because it seems to imply loss of benefit if the 'guarantee' is refused ; in other words, it is little different from workfare (Camden Unemployed Action Centre, 1987) . c) the Fowler Review and the intensified discipline of the unemployed

Major changes in the social security system are the third arm of the Tories' anti-working class strategy for the labour market (Erskine, 1986). Having abolished earnings-related unemployment benefit, they embarked upon a far-reaching attack on the standards of living of the unwaged through the Fowler Review of Social Security, most of which will become effective in 1988 . Firstly, supplementary benefit entitlements (the income support for people not covered by social insurance, such as the long-term unemployed) are severely reduced, or replaced by discretionary recoverable loans (Action for Benefits, 1995). Secondly, the 1986 Act makes a severe cut in benefits for youth, thus re-defining young people as dependent on their families ; people under 25 will receive a lower sB allowance. This is reinforced by the time limits, introduced in 1985, on the housing element of benefit paid to young people living in hotels and guest houses . This re-assertion of the family as the primary source of income support for the individual implies more of a concern for youth discipline than for labour mobility . But in so far as many unwaged individuals lack a family to provide support, it threatens to drive them into the underground economy or to crime . This highlights the need for a social security system based on entitlements for individuals rather than families, asserting the rights of unwaged youth and women to an independent income .

Economic conscription

The cuts in supplementary benefit complement the Restart programme, the new availability for work test and other changes in the treatment of the unemployed in putting extreme pressure on the unemployed to accept a job at any wage ; their bargaining power in the labour market is being made weaker than ever by cuts in social security and additional bureaucratic hurdles which have to be faced in order to receive it . The Labour Party's 1986 pre-conference statement envisaged independent taxation of married women and in the long run independent benefit assessment, as well as a rise in benefits for the long-term unemployed . But by the election manifesto, these commitments had been dropped . It is significant that along with the Labour Party itself, most criticisms of the Fowler Review from trade union and socialist sources have taken the Beveridge Report (1942) as a timeless model to follow. Beveridge wished to register, distinguish and discipline the unemployed, saying that `the danger of providing benefits which are both adequate in the amount and indefinite in duration is that men (sic!), as creatures who adapt themselves to circumstances, may settle down to them' . Therefore, attendance centres (shades of workfare!) were to be used for those who had been unemployed over 6 months (Beveridge, 1942 : para . 130) . An availability for work test, discipline against `scroungers' and stigmatisation of the unemployed are inevitable consequences of an insurance-based social security system, and have been an established part of it since the 1920s (Ginsberg, 1979). However, the challenge of the Fowler Review has promoted an extensive debate about the future of social security . An alternative system 'must be based on the reform of taxation ; dispense with the need for degrading means testing; provide a minimum income for all groups as a step towards the eradication of poverty . . .' (CPSA resolution, quoted in National Campaign against Social Security Cuts Bulletin no . 7, 1986). But the idea of separating income maintenance from employment status is alien to the labour movement in so far as it conflicts with the work ethic, as noted in Alcock (1985) in discussing schemes for a universal benefit : If it [the uuB] is high enough to provide a standard of living sufficient to make paid work unnecessary . . . it will destroy completely the wage system as the basis for the distribution and holding of wealth . No bad thing, socialists may say; but how feasible is it as a progressive plan for socialist change now, particularly if we want to attract the support of the trade union movement for it? (1985 : 43)

C&C/34-I

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Capital & Class

130 The keystones of a counter-attack

The problem for the left is to find a method of struggle against economic conscription ('workfare') which goes beyond seeing the unemployed as cheap MSC labour and unites them with waged workers. The mechanisms for recruitment of the unemployed to government schemes - the availability for work test, the Restart programme and the denial of benefit to youth who refuse YTS now need to be attacked as a key development in the government's strategy. In the short term four forms are suggested for this : 1) a refusal to implement these mechanisms (a tactic already used in places by the CPSA, who refused to operate the availability for work tests in some job centres, and were encouraged and supported by some unemployed workers' centres). 2) trade union support and participation in the work of unemployed workers' centres in accompanying unemployed people to interviews with Restart teams and claimant advisors . 3) trade union coverage for persons recruited to Msc schemes in the workplace, unions to take up the cases of those who have been obliged to join under penalty of losing their benefit (since the government has stated that each scheme is 'voluntary') . 4) a trade union campaign for job centres to only advertise vacancies at trade union rates ; this could expose employers who use this channel to recruit unemployed people at substandard rates. The test of availability for work, which is a key feature of the Beveridge system, has become a stumbling block to struggles against 'workfare' type schemes . If it was abolished, many workers might react enviously against those who appeared voluntarily unemployed . It is necessary to establish that the abolition of availability for work testing is in the interests of the whole working class . This requires a new social security system . The demand for such a system offers a framework within which trade unions can approach and organise workers who are claiming dole illicitly . An unconditional universal benefit A uuB is defined here as an explicitly socialist variant of the `basic income guarantee' or `social dividend' proposal which has been put forward by writers from a curiously wide political spectrum . It would be given to all adults over 16, regardless of employment status or position within a household . In order to improve individuals' ability to refuse low-paid work, it would need to be at least the current levels of supplementary benefit, so that no unwaged person would be worse off than at present ; this is one of four conditions for the scheme to have the desired labour

Economic conscription

market effects. The UUB would replace almost all other social security benefits except child benefit, maternity, disablementrelated and lone parent benefits ; and it would also replace personal tax allowances . Some form of housing subsidy could be incorporated, or given separately ; as shown later, it is important that it should not be income-related . Starting with the original demand for a guaranteed minimum income made by the Federation of Claimants' Unions in 1984 (Fcu, 1984), the demand for a UUB has frequently featured in campaigns by unemployed people's groups. A UUB is suggested here as a framework within which to explore four notions which are central to the development of `counter-concepts' to the Tories' labour market strategy : 1) It provides a structure for struggles against availability for work testing and economic conscription. In a system which gave each adult a basic income regardless of employment status, no availability test would be needed . Employed and unemployed could develop a common interest in unified struggles about the size of the universal benefit, paving the way for a revitalised working-class politics which could develop the concept of incomes policy as part of a wider shift to socialised production and distribution . 2) It is a form of social security which shifts the balance of power in the labour market towards the working class, because it makes it easier for individuals to refuse low-paid work . By implication, withdrawal of labour in collective struggle also becomes easier. In particular, a UUB provides an independent income for women and youth ; since these are the most exploited groups in the labour market, it is of key importance to improve their bargaining power. Young people, with a guaranteed income from the age of 16, would be free to study or work, to study what they wanted rather than be pushed into narrow vocational training schemes, and would be less dependent on their parents. Women, who form the bulk of the un-registered, non-claimant unemployed, would gain more from UUB than any other group . A general reduction in working hours would widen the opportunities open to women, reducing the 'ghetto-ising' effect of being a part-time worker. 3) A UUB represents a major degree of vertical redistribution, challenging resource allocation within the state budget . Costello, for example (Costello, 1986a ; 1986b), argues that a UUB close to Supplementary Benefit levels could be achieved without higher rates of personal taxation on working-class incomes than have existed under some post-war Labour governments . It would require a major re-structuring of state expenditure, with cuts in defence spending, the rate of interest paid on the national debt,

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Capital & Class 132

and subsidies for private companies ; and it would need a restoration of the levels of taxation of profits of the early 1970s . (A more detailed argument that uuB is feasible without massive increases in the standard rate of income tax is presented in Annex 1 .) A uuB represents a form of re-appropriation by the working class of movies taken from it by the state and not returned as services to it ; it is a socialist response to the Tories' call for further cuts in personal income tax. 4) A UUB is, above all, a form of social security appropriate to the current phase of capitalist development, in which a return to full employment appears very difficult, and so does trade union organisation of the growing peripheral (temporary, casual and part-time) labour force . This makes it necessary to challenge the relationship between income and work and to shift the struggle about working-class incomes to the arena of the social wage . It may be argued that to increase the social wage through a monetary benefit runs counter to the labour movement tradition, which historically has tended to demand a universal social wage in kind, in the form of health care, cheap public transport, school meals etc . Socialists have argued for a collective form of provision of welfare, which would minimise the scope of the market sector. In contrast to this tradition, the demand for uuB has been associated with `green' politics, with opting out of the corporate state in favour of community and parent-run schools, the decentralisation of the health service, alternative medicine (Green Party, 1986), and a re-growth of unpaid `caring' work (Robertson, 1985 : 88) . Thus, socialists may draw back from the concept of a cash social wage for fear that it encourages individualism and privatisation, that it facilitates an enlargement of the market sector rather than of non-market collective consumption . However, the cash social wage need not be at the expense of a social wage in kind ; that is a question to be decided at the level of struggles over the size and form of state expenditure . uus facilitates the re-appropriation of non-wage labour time as useful time, in place of the wasted and stigmatised time of unemployment. `Green' writers (Handy, op . cit . ; Robertson, op . cit .) envisage this leading to an increase in petty commodity production or unwaged domestic labour. Alternatively, it offers the opportunity to develop new forms of non-state collective provision, such as self-build housing co-ops or unwaged child-minding circles . By contrast, in the sphere of public services, privatisation and the growth of powerful capitalist interests in the private hospital sector, contract cleaning and catering, etc ., make it difficult to find ways of expanding the social wage in kind which do not imply its partial re-appropriation by capital . Such a predicament makes attractive the possibility of alternative forms of non-market

Economic conscription

collective provision outside of the state sphere . Previous arguments for a UUB

A case for a social dividend scheme has been made by several writers from a `green' standpoint (Green Party, 1985 ; Handy, op . cit . ; Robertson, op . cit . ; Ekin, 1986), from a utopian socialist viewpoint (Gorz, op . cit. ; van der Veen & van Parijs, 1986), as a socialist alternative to the Beveridge-based system (Costello, 1986 ; Jordan, 1985 ; 1987), and, curiously, from within the Conservative Party (Parker, 1984) . It has also entered policy discussions in the Liberal Party (Vince, 1986) and the SDP (see Parker, 1984); but has reached their programmes in an emasculated and anti-working class form . The arguments advanced for a social dividend scheme have several elements : a) technocratic ; the integration of the tax and benefit systems is administratively cost-saving and secures maximum take-up of benefits . b) reducing dependence on wage labour, fostering petty commodity production, on an individual or co-operative basis (Robertson, Handy, Green Party), or, in Gorz's thinking, as a route to the abolition of wage labour . The route by which the relations of production reach this happy state is far from clear in his writing . c) as a feminist demand, giving more bargaining power and choice to unwaged or part-time working women (Jordan, Ekin, ops cit .) . However, the concept has been opposed by the women's movement in the Netherlands, on the grounds that it would reduce women's economic activity rates (Dekkers, 1986) . This issue is considered below . d) as a wage subsidyfor socially worthwhile work for which the full value of labour power cannot be afforded (Ekin, op . cit .) . e) to induce work sharing as a response to mass unemployment, by removing the `poverty trap' and disincentive to part-time work for the unemployed, and offering others the necessary extra income to enable them to work shorter hours (Green Party, Ekin, Robertson, Handy, Standing, 1986b) . Standing (1986a) suggests that a UUB is a way of reconciling the individual's need for income security with capital's need for labour market flexibility, but from a different political standpoint . He regards the shift to part-time and temporary work as an inevitable reality, a trend which is already taking place and needs no encouragement. A basic income, he argues, is the best way of alleviating the impact of these changes on workers in the secondary labour market . f) as a way of pricing people into jobs, inducing lower wage costs (Parker, Roberts) . Certain other strands in the literature also

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argue that a UUB is not without advantages for capital . For example, some writers (Handy, 1984 ; Robertson, 1985) have seen a UUB as a route, not only to work-sharing, but to an increasing 'entrepreneurialisation' of the labour force, and as a way of making casual and temporary work available . The benefits for capital may be much more cheaply obtained from a rightwing negative income tax scheme of the type proposed by Minford (Minford, 1984) . However, Standing (1986b) thinks that the greater is unemployment and under-employment, and the greater are existing income maintenance expenditures, the less the capitalist state has to lose by implementing a basic income scheme . g) as a way of increasing choice in the labour market (Ekin) and to enable people to refuse low-paid work (Costello, op . cit . ; Jordan, 1987; van der Veen & van Parijs, 1986) . An important extension to this point, particularly in the context of the drift towards 'workfare' in Britain, is that a UUB would eliminate the policing of labour market behaviour through the benefit system, which as shown earlier, is now verging on economic conscription. Clearly, not all of the claims which have been made for basic income schemes are mutually consistent. In particular, (f) is an anti-working class objective, and contradicts (g) . Moreover, if (d) is desirable, there are ways of doing it which are less likely to subsidise sweatshops at the same time . Distinctions between social dividend schemes Some confusion has been created for the labour movement by the apparent similarity of various benefit schemes presented from many different political standpoints under the titles of social credit, tax credit, social dividend, guaranteed basic income and negative income tax. Fis, the existing wage supplement for low-paid families, as well as the SDP's tax credit proposal, are clearly intended to reduce wage costs . A distinction can, however, be made between forms of universal benefit proposal which will encourage low pay, and those which will actually assist individuals to refuse low-paid work . To be regarded as a socialist policy, that is, one which improves the bargaining power of the working class, a UUB has to meet the following principles for socialist social security . It would need to : 1) preserve the real value of existing support for the unwaged ; 2) maintain benefits at the same level regardless of employment status ; 3) exclude means testing and withdrawal of the benefit as earnings rise ; 4) exclude availability for work testing .

Economic conscription

These four features distinguish a socialist UUB scheme from schemes which subsidise low pay and reduce employers' wage costs . The reason for the first condition is a self-evident one; defence of claimants' existing conditions . The second condition is necessary to remove the `poverty trap' inherent in withdrawing benefit when an employed person returns to work, which constitutes in effect an almost 100% tax rate on earnings up to unemployment support level . The incidence of reproduction costs

The third condition is necessary to avoid a transfer of wage costs from employers to the state . Fis, Family Credit and tax credit schemes all attempt to do this . In these schemes, wage cutting is encouraged partly because the high withdrawal rate of benefit (in effect a high marginal tax rate) reduces the value to the worker of any wage increase, and insulates the worker to some extent against a wage cut, eroding resistance to such cuts . With Family Income Supplement, and the Family Credit which will replace it in April 1988, the wage-cutting effect occurs because FIS and Family Credit explicitly confine the 'poverty-relief benefits of a negative income tax to those who are working . This increases the supply of labour to low-paying employers . The Liberal and SDP tax credit schemes offer an additional payment to those in work, which acts as a bonus on top of low pay . It is important to note that an income-related housing benefit has the same labour market effects as a negative income tax ; although a flat rate housing allowance or one related to housing costs up to a certain ceiling would not do so . Fis, Family Credit and tax credit are all conditional on accepting a job at low pay, whereas child benefit is not; it is universal and unconditional . This is why, after an initial period of scepticism by the TUC during the 1940s, it has not commonly been suggested that child benefit reduces wages . Clearly, the cost burden of a uus system has to fall somewhere; Roberts cannot maintain that it will both permit lower wage costs and higher living standards (Roberts, 1983), as O'Kelly points out (O'Kelly, 1984) . If, as argued here, it leads to higher labour costs, the rate of profit must fall; additionally, higher taxes on profits and lower subsidies to companies could be a major source of finance for a uus, and the managerial and professional employees who will be the main losers through higher taxes may pass these on to their employers . Przeworski (op. cit .) argues that the fall in profits caused by a uus may encourage disinvestment and flight of capital ; but alternatively, it has been argued that increased labour costs may promote

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labour-saving technical progress (van der Veen & van Parijs) . The size of each effect would clearly depend on the market situation, the consumption effects of redistribution, and the extent of tax reliefs on investment, etc. Although possible flight of capital needs further discussion, socialists are accustomed to considering administrative controls on capital outflow for many situations, and in any case would not rely on the profit motive to secure satisfactory levels of investment . The need to avoid a poverty trap Right-wing negative income tax proposals withdraw benefit as earned income rises at a greater rate than the standard rate of income tax (Institute of Economic Affairs, 1970 ; Friedman, 1%2). Minford, for example (see Parker, 1984), has proposed a version of negative income tax in which the benefit would fall by 70p for each extra pound of earnings - a horrendous `poverty trap' . By contrast, a key feature of the uua proposal is that the marginal tax rate for the low paid or for part-time workers would be no greater than for people on average wages . This avoids low-paid workers being more easily exploited because the net effect of a wage cut is heavily cushioned by the state . It is also consistent with the notion that an equitable tax system must be progressive (Kaldor, 1973) . The need to avoid availabiliy for work tests The fourth condition for a socialist UUB, exclusion of availability for work testing, is needed to ensure that the individual chooses freely between working and not working, and has the right to refuse work if the rate of pay is inadequate . The dangers of transitional proposals The distinction between a basic income scheme which encourages low pay and one which helps people resist it is a crucial one. A low level of basic income cannot be accepted as a compromise or transitional proposal . If condition (2) above is not met, the scheme will drive people into low-paid work . For example, Jordan (1987) describes a proposal from the Netherlands (PBI or Partial Basic Income ; see Dekkers, 1986) which amounts to a very low UUB coupled with a negative income tax, and which was designed by its authors partly to reduce labour costs (p . 157). Yet he then describes how a state-guaranteed basic income would lead to a reduction in labour supply and a subsequent rise in wages (p . 162). Finally, he espouses both the Netherlands pro-

Economic conscription

posal and Parker's scheme (Parker, 1984a ; see below), as 'practical' concepts for 'transitional reform', although they both infringe some of the conditions for a socialist scheme . Trade unions in the Netherlands have opposed the Pat proposal, on the grounds that this particular scheme has no redistributive intentions and is intended to provide cheap labour (Dekkers, 1986) . Parker's Basic Income Guarantee (BIG)

Parker (1984) points out that conventional social security systems, which withdraw benefit when a person returns to work, in effect impose a 100% tax rate on earnings up to the unemployment support level . She argues that this reduces the supply of labour and makes lower wages less acceptable . She shares the present government's concern to 'price people into work' . From this example, it is clear that it is not sufficient for a basic state income to be unconditional ; it must also be high enough to reduce the supply of labour at the low-paid end of the market, to enable people to withhold their labour from the market if the wage they are offered is inadequate. Elsewhere she argues against a £50 per week level of basic income, not only on grounds of cost but because 'it would undermine work incentives' (Parker, 1985) . Of the two options which she considers, the cheapest ('BIG 2(c)') would reduce income for those with no earnings substantially below current sB level, making claimants partly dependent on NIT . As earnings rise from zero, NIT is gradually withdrawn . It operates just like Fns to subsidise low pay. Moreover, there would be pressure from employers to introduce an availability for work test, which would then drive claimants into the labour market at Nrr-subsidised low wages . Parker's second option, 'BIG 1(a)', suffers from the same problem; here, a higher level of basic income is coupled with means-tested housing benefit, which bridges the gap between basic income and current SB levels . Housing benefit would be withdrawn at the rate of £ 1, for every £3 earned, so the state has a strong incentive to ensure claimants earn enough not to need it . Conversely, it would subsidise employers . Although the second option preserves current support levels for a large proportion of working-age claimants, it infringes the third condition for a socialist utm; the meanstested housing supplement to the basic grant would encourage low pay, and would also set up pressures for an availability for work test, thus infringing the fourth condition as well . Effects on activity rates and wage rates

It is important to examine whether the supply of labour

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would rise or fall as a result of introducing a uuB . If it would rise, wages would tend to fall . If it would fall, this would help to restore the bargaining power which the working class has lost during the recession. Writers on social dividend schemes are divided about their effects on the supply of labour and on wage rates . As well as Parker and the Netherlands Scientific Council on Government Policy (the authors of the Dutch proposal referred to above), Keith Roberts (1983) and Peter Ashby (1984) also argue that wage rates will fall . Their assumption is that the removal of high marginal tax rates on the low paid (i .e . high benefit withdrawal rates) together with a guaranteed subsistence allowance, will make people more ready to take on work at low wages . Van der Veen and van Parijs (1986), by contrast, suggest that `a substantial universal grant will simultaneously push up the wage rate for unattractive, unrewarding work . . . and bring down the average wage rate for attractive, intrinsically rewarding work' . Przeworski, in commenting on their paper (Przeworski, 1986), adds that `wages increase because the supply of labour falls as the grant is introduced . In particular, the supply of labour for high-toil, low-wage jobs is drastically reduced' (pp . 702-3). Jordan (1985) says that a basic incomes scheme would allow people who have now only two effective choices, full-time low-paid employment or full-time unemployment, to work only part-time, thus reducing labour supply in the low-paid sector, and driving up wage rates . The labour market effects of a basic income scheme and its capacity for income redistribution depend partly on the design of the scheme and partly on the kinds of taxes used to pay for it and their economic incidence . Parker and Vince see a basic income as being totally financed from income tax, so that its cost falls mainly on employees, except in so far as trade unions can shift its economic incidence to employers. Costello (op . cit .) argues for a re-allocation of state expenditures away from those which serve capital, and, like Miller (1983) and Ekin (1986) for higher capital taxes . Clearly these can be passed back to labour in weak bargaining situations, through pressure on real wages . Miller (1983) argues that the grant will have an income effect on people's work/leisure choices, and the change in tax rates (in her scheme to a standard 50%) will have a price effect . It is difficult, she says, to predict whether the balance of these effects will be a fall or a rise in labour supply . It is useful to define and list the several effects which need to be considered : 1) Because they would receive the uun whether they worked or not, some people in low-paid jobs would leave . This may be particularly true of the lowest-paid groups - part-time women

Economic consc7iption and youth . Part-time women and workers under 18 total around 5 million, an unknown fraction of whom would `opt out' if supported by a UUB . Additionally, some workers, especially low-paid manual men, might choose to retire early . There are also about 1 .5 million men between the ages of 60 and 64 . 2) Since unemployed people would no longer be subject to availability for work testing or Restart interviews, some of them would not seek work . This would probably be a very small proportion of the total, since most people would want a higher income than the UUB . Many unemployed people would be more discriminating about which jobs they applied for, rejecting lowpaid work with greater ease than under the present social security system . 3) A converse effect is that identified by Parker- the'pricinginto-jobs' effect . In contrast to those unemployed people who would tend to refuse low-paid work when offered a UUB, some others would perceive low-paid work as more attractive than before, because they could take it without losing their benefit . Employers, on fmding this, would reduce wages further . 4) Some unemployed people would respond to the removal of the poverty trap by taking part-time work in well-organised sectors (e .g . teaching) or skill shortage sectors (e .g. construction trades) . 5) Some dependent women would enter the labour market because the abolition of means test on their unemployed partners' benefit now made it worthwhile for them to work . They would not necessarily be concentrated in low-wage sectors . 6) UUB would also affect the number of hours individuals wanted to work . In fact, some of its advocates value the proposal because it is likely to promote a switch from full-time working to part-time working (Robertson, 1985 ; Handy, 1984 ; Standing, 1986) . It might also reduce overtime working . Double job holding by part-time workers (now thought to involve over 260,000 people - see Ruskin College, 1987) might also be substantially reduced . . The labour supply increase effects (3, 4 and 5) are very likely to be outweighed by the labour supply reduction effects (1, 2 and 6), although only extensive research on elasticities would be able to estimate these effects exactly . The probable net fall in the supply of labour would help people to refuse low pay, and, above all, would help to eliminate the `reserve army' of labour, helping to restore trade unions' bargaining strength . In practice, however, it would be politically very difficult to argue that protection for the low-paid should rely solely on the gradual `working through' of these withdrawal effects on wage rates. A national minimum wage is a necessary additional demand,

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and moreover one which has already been adopted by the Tuc and the Labour Party . A UUB and statutory wage protection for low-paid and difficult to organise sectors would be mutually reinforcing . The labour supply reduction effects of a uuB do not all imply a loss of output. To the extent that the win induces shorter hours or part-time working, or withdrawal from economic activity, additional vacancies would be offered to the unemployed, which, in turn, give them more choice of work and avoids a 'pricing into jobs' effect . A true UUB, meeting all four of the conditions posed earlier, would be a powerful instrument for redistribution of income (not only between classes but towards women) ; for increasing the bargaining power of the individual and of trade unions in the labour market ; for inducing a reduction in working hours without loss of income, and thus for reducing unemployment . It would also de-stigmatise unemployment because the individual would not be subject to bureaucratic policing about her or his 'availability for work' .

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A national minimum wage

If the social security policies advocated in the last section were adopted, the function of a minimum wage would be not so much the relief of poverty (however defined) but to ensure that employers carry a higher proportion of the social cost of reproduction of the labour power they use. Present statutory wage protection relies on wages councils, which not only have partial coverage, but their regulations are very poorly enforced . The strengthened ability of the individual to opt out of the labour market under a UUB system would make it easier to enforce a minimum wage ; many people would vote with their feet against employers who did not comply . A further reason for linking UUB and a minimum wage is that the present tax/benefit regime results in a poverty trap ; from the point of view of the low paid, it is of little use to introduce a national minimum wage (NMW) if any gain in income is largely lost through the withdrawal of means tested benefits . Fears have been expressed that a NMW which significantly raised pay levels would lead to further unemployment . A UUB would destroy the significance of the distinction between 'employed' and 'unemployed', so that the question is then less about unemployment than about loss of output. Frank Wilkinson (Brosnan & Wilkinson, 1987) has estimated that a minimum wage of £ 100 in 1987 would actually lead to an increase of at least 10,000 jobs, due to the consumption effects of redistribution . He allows for a small reduction in VAT to offset the inflationary effects . Wilkinson estimates that the increase in wage costs to the

Economic conscription public sector from a NMW would be offset by the increase in tax revenue due to higher wages . As Hyman (1987) says, NMw is not necessarily progressive . In the USA trade unions regarded the introduction of Federal minimum wage regulation in 1938 as a pre-emptive measure to arrest the spread of trade union organisation in certain sectors . It has never covered much more than 60% of the labour force (although individual states in several cases have separate laws with wider coverage) . Wage expectations became defied by the frozen minimum . The legislation has even acted to fix wages below the market clearing level in the 1980s . Thus, by 1985, a number of employers were breaking ranks and offering above the minimum (Nasar, 1986) . This example shows the importance of designing mechanisms for enforcement of a minimum wage which will increase trade union power, rather than reduce it . One way might be to give trade union officers the legal powers of wages inspectors (with sufficient public funds to do it effectively) . But whatever the mechanisms for enforcement of a NMw, they can probably never be perfect. As a safeguard we need a social security system which enables the unemployed individual to hold out for a decent wage without fear of having his or her benefit cut off. In this way, a UUB supports the enforcement of a NMW; the two measures are complementary in securing a guaranteed floor to the labour market. A statutory minimum wage at any level which would make it a progressive demand may be regarded as currently `off the agenda' . Paradoxically, it is conceivable that the Tories might introduce a very low level one. They might do so: 1) as a deterrent to employers to rely too much on Family Credit and housing benefit . (Already, the government has instructed local authorities to refuse housing benefit claims which seem to arise from the claimant earning wages which are well below the normal rate for the job .) 2) as a response to the trade unions' increasing commitment to improving the wages and conditions of part-time women . The government might use a minimum wage to secure a statutory `enclave' in which trade unions were perceived as unnecessary . For either reason, pressure could arise from within the state apparatus for a minimum `reasonable' wage consistent with the government's overall wage-cutting policies. The question is how the trade union movement could resist or pre-empt such a move . A minimum negotiating target accepted and publicised by the TUC would clearly be a step forward . Support needs to be given to the unemployed in resisting job offers at less than the target wage. Consumer support and pressure could be sought to enforce

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a minimum wage target in shop, hotel and restaurant work, some of the worst-paid areas . Conclusion

The present policies of the Thatcher government, of attacking the trade unions, of weakening the social security system and of pressurising the unemployed to join cheap labour `workfare' type schemes, may succeed in reducing unemployment by `pricing people into jobs' ; or they may collapse under the weight of their own contradictions. The expansion of MSC schemes does not avoid the fiscal crisis consequent on continued high unemployment ; the experience in the USA is that such schemes do not save much money (Unemployment Unit, 1987 ; Gray & Meyer, 1986). Given the very poor response of private employers to the chance of getting cheap labour under JTS, which has consistently failed to secure enough placements (see Unemployment Unit, forthcoming), it is clear that the MSC needs local authorities and voluntary organisations to participate in its new unified `training' scheme. But both NALGO and civil service unions are resisting 'workfare', and many local authorities are refusing involvement with UTS. Job centre staff have sporadically refused to use the availability for work tests which are a key mechanism for recruitment to Msc schemes, and less than a quarter of the government's target number of unemployed people joined JTS. As government statements move progressively closer to putting workfare on the agenda, an `escape route' continues to be offered to the unemployed through the Enterprise Allowance, which in effect offers people £40 per week with no questions asked for a year. This scheme is, at the same time, a key part of the government's 'entrepreneurialisation' policy . If these problems and contradictions of their current policies become unmanageable, the Tories could well switch back to the social security policies which they were preparing in the mid1970s . A re-appearance of some kind of tax credit scheme, plus a higher 'earnings disregard' for those on benefit, may emerge during the Tories' third term if their 'workfare' strategy encounters too many difficulties. It might appear together with a very low minimum wage policy ; or alone. If this happens and trade union power is weak, such a measure would facilitate the growth of casual, low-paid and non-unionised employment, and of labour-only sub-contracting. If the Tories move to a negative income tax scheme under conditions of strong union pressure, these conditions could bring Tory electoral defeat . Favourable conditions could then emerge for the introduction of a much more progressive social dividend scheme. What could be achieved would depend critically on the extent to which the unions regarded the state and the social



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security system as an arena of struggle, the extent of mobilisation of the unemployed and of marginal groups in the labour market, and the extent of unity between them and the rest of the labour movement . Whichever way the Tories move, socialists must begin to pose questions and demands of this type . Otherwise it is difficult to see how we can get out of the current morass . If the demand for a UUB and resistance to workfare can be articulated so as to unite waged and unwaged members of the working lass, the conditions for a new political economy of labour will begin to be realised . This article is offered in the recognition that it cannot hope, in such a short space, to cover many important aspects of the questions raised. Many key feminist issues have been given insufficient attention, as have questions of costing and labour supply effects . The intention is to produce discussion which will lead to new horizons .

The cost of a uuB

Hermione Parker's costing of a BIG (Parker, 1985) finds that even a BIG which falls somewhat short of supplementary benefit level for a single adult householder would imply a standard income tax rate of 40%, and higher rates of 45-60% on earnings above the national average, but no additional national insurance contribution . If we regard this as the maximum standard rate of politically feasible tax, the question is then what other funds can be used to increase the level of the grant . Miller (1983) considers doubling corporation tax to bring in an extra £6 .2 billion (1981 prices) as well as a 1 .5% wealth tax raising £0 .6 billion (probably a very low estimate of the yield of such a tax) ; Costello (1986a) argues for small cuts in corporation tax relief and capital gains tax relief, and for a 25% cut in defence spending, saving £4 .55 billion in 1985/6, and measures to secure a 10% reduction in interest paid on the national debt, saving £1 .8 billion . Smaller, but significant sums could be added by reducing various subsidies to capital (regional aid, enterprise zones, Urban Development Corporations, etc .) . Mortgage relief is an obvious target for savings, but may be needed to pay for a flat rate housing allowance instead . The difference in costs between giving 44 million people over 16 a grant equal to the full single householder rate of supplementary benefit (of £23 .25 in 1982, the date at which Parker's costings were done) and giving them only £18 .60

Annex 1

Capital & Class (Parker's option) is £10 .64 billion. This sum could be raised by tapping the sources mentioned above, and still leave some resources for health, education and housing which obviously are essential parts of a left programme for the re-allocation of public expenditure .

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References

Action for Benefits (1985) Reform ofSocial Secwiy: Briefing Paper no . l, Overview ofGovernmearProposals . scrs, London. (Action for Benefts was a coalition of several civil service unions and anti-poverty pressure groups set up to oppose the Fowler `reforms' of 1985-6 .) Peter Alcock (1985) 'Social security: where should we be going and why?' Critical Social Policy, issue 13, vol . 5, no. 1, summer 1985, pp. 29-48 . Peter Ashby (1984) Social Security after Beveridge: what next? irevo, Bedford Square Press, London . Caroline Benn and John Fairley, eds (1986) Challenging the msc. Pluto Press, London . Peter Brosnan and Frank Wilkinson (1987) Cheap Labour. Britain's False Economy. Low Pay Unit, London . CAITS (1986) Flexibility: who needs it? cArrS, Polytechnic of North London, London. Camden Unemployed Action Centre (1986) Signing on Times, issue no . 3, p . 5, London . A Costello (1986) 'A radical new approach to move social security beyond Beveridge', Tribune, 25 July 1986. A Costello (1986b) 'Review of Esam, Good and Middleton, Who's to Benefit?', Critical Social Policy, autumn, no. 17 . Jos Dekkers (1986) 'Safeguarding Social Security in the Netherlands', Basic Income Research Group Bulletin, no. 6, autumn, pp. 11-12. John Ekin, ed . (1986) The Living Economy : A New Economics in the Making. Routledge, London. Angus Erskine (1986) 'Fowler's foul plans', Capital & Class 28, pp . 16-24 . John Eversley (1986) 'Trade Union responses to the MSC', in Benn & Fairley, op. cit . Federation of Claimants' Unions (1984) A Guaranteed Minimum Income . London. Milton Friedman (1%2) Capitalism and Freedom . University of Chicago Press, Chicago. Dan Finn (1986) 'Free Enterprise?' Unemployment Bulletin, issue 22, winter, pp . 5-10. Dan Finn (1987) The New job Training Schemes . Unemployment Unit, London . Dan Finn (1987) Training forjobs. Macmillan, Basingstoke . A Faulder & V . Heywood (1987) 'The Job Training Scheme', Local Work, issue no . 5, August . Centre for Local Economic Strategies, Manchester. Philip Garrahan (1986) 'Nissan in the north east of England', Capital & Class 27, winter, pp . 5-13 . Norman Ginsberg (1979) Class, capital and social policy . Macmillan, Basingstoke.

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Andre Gorz (1983; English edition 1985) Paths to Paradise . Pluto, London . A Gray (1987) Trial by Restart. Unemployment Unit, London. A Gray & V Heywood (1986) 'What is the CP doing?', Initiatives, vol. 3, no. 5, October, pp . 3-5 . A Gray & P Meyer (1986)' Workfare . . . work . . . fair?', Initiatives, vol . 3, no . 4, August. The Green Party (1985) Information about the Basic Income Scheme . Green Party, London . Charles Handy (1984) The Future of Work. Basil Blackwell, Oxford . Stephen Hill (1987) 'Working Time Changes and Employment Growth', Lloyds Bank Review, no . 163, pp. 31-46. John Holloway (1987) 'The Red Rose of Nissan', Capital & Class 32, summer, pp. 142-64. HMSO (1985) White Paper Cmnd 947d : Employmeru: the challenge for the nation. HMSO (1985) White Paper Cmnd 9691 Reform ofSocial Sectaity. Institute of Economic Affairs (1970) Policy for Poverty. lEA, London. Bill Jordan (1985) 'Exploitation and Basic Incomes', BfRG Bulletin, autumn, pp. 12-13 . Bill Jordan (1987) Rethinking Welfare . Blackwell, Oxford. Nicholas Kaldor (1973) Memorandum to the Select Committee on Tax Credit, vol . II of evidence, pp. 211-36. HMSO, London . Labour Party (1986) Statements to Conference . Labour Party, London . Labour Research Department (1986) Employment Law Under the Tories . LRD Publications, London . Labour Research ( 1987) 'Unions face fall-out from industrial decline' . Vol . 76, no . 9, September, pp . 13-15 . LPD Publications, London . Ruth Lister, Jo Roll & Roger Smith (1985) What Fume forSocial Security? Child Poverty Action Group, London . Low Pay Unit (1985) Low Pay Review, no. 22, t.PU, London. Low Pay Unit (1985b) No Return to Sweatshops. t.PU, London . Merseyside Trade Union Community and Unemployed Resource Centre (1987) Campaign against Unemployment, no . 5, spring. Liverpool . Anne Miller (1983) In Praise of Social Dividends (working paper 1982/3 no . 1) . Unpublished paper available from Department of Economics, Heriot-Watt University, Edinburgh . Rory O'Kelly (1984) 'Why Social Dividend is not the Answer', Policy Studies, vol. 5, part 2, October, pp . 24-31 . Hermione Parker (1984) Action on Welfare . Social Affairs Unit, London . Hermione Parker (1985) 'Costing Basic Incomes', BIRG Bulletin, spring, pp. 4-15 . Adam Przeworski (1986) 'The feasibility of universal grants under democratic capitalism', Theory and Society, vol . 11, no. 5, pp. 695-707. Washington University, St Louis. Keith Roberts (1983) Automation, Unemployment and the Distribution of Income . European Centre for Work and Society, Maastricht . James Robertson (1985) Future Work. Gower, Aldershot. Ruskin College Trade Union Research Unit (1987) Labour market Issues Paper no . 8: A Million New Jobs Since 1983? Ruskin College, Oxford . Guy Standing (1986) Unemployment and LabowMarketFlexibility. International Labour Office, Geneva . C&C/34-J

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Guy Standing (1986) 'Labour surplus, flexibility and security', B1RG Bulletin, no . 5, spring, pp . 17-19 . David Taylor (1987) 'Forceful arguments', UnemploymentBulletin, issue 23, spring, pp. 18-20 . Unemployment Unit, London. Unemployment Unit (1986) 'Restart half way', Unemployment Bulletin, issue no. 22, winter, pp. 1-2 . Unemployment Unit (1986) 'The Community Programme', UnemploymentBulletin, issue 20, summer . Unemployment Unit (1988, forthcoming) Training or Workfare? Unemployment Unit (1988, January) Briefing on the New Adult Training Programme .

Robert J van der Veen & Philippe van Parijs (1986) 'A capitalist road to communism', Theory and Society, vol. 11, no . 5, pp. 635-55 . Philip Vince (1986) 'Basic incomes ; some practical considerations', BIRG Bulletin, no . 5, spring, pp. 5-7. For an account of British special employment measures, see Half Measures, published by the Unemployment Unit (1987) and various issues of their quarterly Unemployment Bulletin . For an account of British social security systems, see Child Poverty Action Group, National Welfare Benefits Handbook, and The Rights Guide to Non-Means-Tested Social Security Benefits, both published annually .

Acknowledgements Many thanks to Irene Bruegel, Sue Ward, Ariane Hegewisch, Shaun Hargreaves-Heap, Eileen Davenport and Les Levidow for their help in re-drafting this paper . The errors and omissions which no doubt remain are entirely the author's responsibility .



Bob Jessop Regulation theory, post Fordism and the state : more than a reply to Werner Bonefield • It is good to see Capital & Class returning to some of the issues which so animated CSE conferences in the 1970s . Werner Bonefeld has performed a valuable service in presenting and criticising some recent work of West German state theorists on the capitalist state and the current crisis-ridden transformation of capitalist societies . But there are several problems with his account of this work and its links with French regulation theory as well as with his critique of both theories; and there are also problems with his own alternative approach to political analysis and the transition to post-Fordism .' 1 . Bonefeld's main arguments Werner Bonefeld critically examines the reformulation of Marxist state theory undertaken by Joachim Hirsch, Josef Esser, and their colleagues in Frankfurt and its application to the current crisis and transformation of West German capitalism . He also adds some critical remarks on some of Bob Jessop's recent contributions to state theory and the debate on Thatcherism . Bonefeld claims that this 'reformulation' has reversed the slow-down in the West German state debate and has attempted to regenerate state theory by combining it with the assumptions, concepts and explanatory principles of the French regulation

jessop criticises Bonefeld's analysis of the French Regulation Approach to the state as it has been utilised by the German 'Reformulation' theorists (C&&'C 33) . jessop sets out an agenda for future research on the state which develops the regulation approach, but himself criticises 147 some of the formulations of the post-Fordist state.

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school . Thus it has gone beyond abstract, formal analyses of the capitalist state in general (e.g . as in 'ideal collective capitalist') to develop a more concrete, institutionalist theory of the state under different accumulation regimes . This can be seen, according to Bonefeld, in the attempts of the reformulation to describe two different types of state system, corresponding to the Fordist and post-Fordist accumulation regimes . Bonefeld also notes that these interrelated changes in both accumulation and political regimes have implications for socialist strategy . Thus Hirsch and Roth (1986) argue that the old working-class movement can no longer play a revolutionary role and that new sources (rooted in civil society and the state) and new forces (new social movements) of resistance have emerged . Bonefeld's critique consists in three interwoven sets of comments concerning the methodological assumptions, substantive arguments, and political-strategic conclusions of the reformulation . The principal methodological criticism is that, even though the reformulators initially intended to re-introduce class struggle into state theory and to give it the central role, their work still analyses structure and struggle separately and regards struggle as secondary . According to Bonefeld, the reformulation first describes the structures of capitalist society together with the pregiven, objective laws of capitalist development that are inscribed within these structures ; and it then suggests that class struggle serves merely to accelerate and/or retard the realisation of these laws and thus has no truly independent role in capitalist development . Against such arguments Bonefeld insists that class struggle is the primary motor force of historical development . Thus class struggle is somehow always already present within all the various moments of the capital relation rather than being external and secondary to the structures of capitalist society . In turn this implies that 'the crisis-ridden process of social reproduction should be understood in terms of de- and recomposition of society rather than in terms of 'correspondence-regulationregularity' (Bonefeld, 1987 : 106) . He develops this alternative approach in several directions to provide a general methodological critique of the reformulation . Bonefeld also offers several substantive criticisms of the reformulators' analysis of West Germany and post-war Britain. He does not provide an alternative analysis beyond that implicit in his criticisms but does cite John Holloway's paper in Capital & Class. 32 which gives some clues as to his preferred approach (Holloway, 1987) . Related to this critique is the political-strategic claim that reformulation analyses tend to legitimate the current changes in capitalism by treating them as inevitable and, in so doing, undermine the working-class movement and its capacities

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for resistance . My chief disagreements with Bonefeld concern his methodological remarks ; there is much that I agree with in his more substantive criticisms . Thus my own remarks will concentrate on questions of methodology in both state and regulation theory . Specifically I will examine : 1) his account of the regulation approach and some of its key concepts ; 2) his functionalist reading of the reformulation and its relation to the regulation school ; 3) his understanding of the dialectic between structure and strategy ; and 4) his comments on Fordism and post-Fordism as analytical categories . My paper concludes with some general remarks on the most appropriate research agenda for regulation and state theory . Bonefeld's account of the regulation school is largely intended to establish some affinities and shared assumptions with the reformulation and does not develop a detailed critique . He gives only a short summary of its analysis of capitalism and therefore glosses over some important differences within the overall approach . His main point is that, although the regulationists and the reformulators recognise that capitalism is a relation of class struggle, they deploy analytical categories which uncouple struggles from structure and then subordinate them to a structural logic . This can be seen, according to Bonefeld, in such central concepts as correspondence and regulation : for correspondence, defined as a `relatively stable form of regulation', has structuralist connotations and regulation itself appears functionalist . Before commenting on this critique, I will present more fully the regulation approach . Genesis and concepts ofthe regulation school The French regulation school 2 developed in the 1970s . Emerging in part out of Althusserian structuralism (Aglietta, 1979, 1982a ; Lipietz, 1987), but intending to overcome the latter's assumption that structures somehow maintain themselves quasi-automatically without effective social agency and without significant transformations, regulation theorists replaced the notion of `reproduction' with that of `regulation' . They asked how capitalism could survive even though the capital relation itself inevitably generated antagonisms and crises which made continuing accumulation improbable . They found an answer in specific institutional forms, societal norms, and patterns of strategic conduct which both expressed and regulated these conflicts until the inevitable tensions and divergencies among these various regulatory forms reached crisis point (Lipietz, 1987 : 3-4) .

2 . The critique of French regulation theory

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The key concepts offered by the French regulationists were `regime of accumulation' and `mode of regulation' (e .g. Aglietta, 1979; Lipietz, 1985a) . An accumulation regime is a particular combination of production and consumption which can be reproduced over time despite conflictual tendencies ; and a mode of regulation refers to an institutional ensemble and complex of norms which can secure capitalist reproduction pro tempore despite the conflictual and antagonistic character of capitalist social relations (cf. Lipietz, 1985a; Boyer, 1986) . After the initial studies of Aglietta (1979) and CEPREMAP/CORDES (1977), regulationist analyses have multiplied with two contrasting effects . Further concepts have been added to produce a richer and more complex conceptual matrix : e.g . mode of growth, international strategic space, regional armatures, and hegemonic blocs . But the school has also divided into several currents . These differ not so much in terms of their substantive focus (which still remains wide) as in the relative weight given to Marxian, Keynesian, Kaldorian and Kaleckian concepts in the overall institutionalist perspective (cf . de Vroey, 1984; Mjoset, 1985 ; Noel, 1987 ; for further nuances, see appendix below) . It is worth emphasising here that regulation theorists have not confined their analyses to economic matters . Indeed they emphasise that the improbable discovery of effective modes of regulation is an outcome of social and political struggles which stabilise to form a hegemonic system - class alliances, based on consensus armoured by coercion, which shape the interests both of the ruling and dominated lasses into conformity with the accumulation regime (Lipietz, 1986a : 20; cf. Aglietta, 1979). On class struggle and crisis tendencies

These comments suggest that regulationists are well aware of class struggle and crisis and their interrelations ; indeed, they take all this for granted . For them, the problem is not to explain the generic origins of class struggle and/or crisis tendencies but the specific forms that these actually assume in different conjunctures . In turn this should help to explain the capacities of capitalism to survive despite both class struggle and crisis tendencies . Regimes of accumulation are stable to the extent that they provide specific means of mobilising counter-tendencies to the generic and specific crisis tendencies of a given stage of capitalism . Likewise modes of regulation provide means of institutionalising class struggle and confining it within certain parameters compatible with continuing accumulation . Bonefeld claims that class struggle only enters as an `and also' or `but also' factor, separated from objective laws and, at

Regulation Theory

most, affecting how they are realised . This argument is directed mainly against the reformulation but is also relevant to the regulationist approach . In both cases it is based on misunderstanding . Regulation and reformulation theorists alike deny that there is a single objective logic of capitalist development which transcends all particularities : the development of capitalism is always mediated through historically specific institutional forms, regulatory institutions, and norms of conduct . Included here are the wage relations; forms of competition ; monetary emission ; the state ; international commercial and financial system ; and the norms of conduct and modes of calculation which correspond to these institutional forms and regulatory institutions . Far from regulationists assuming that accumulation regimes or modes of regulation somehow precede strugle, they argue that these are always the product of past struggles and are always penetrated with present struggles . The legacy of past struggles is a structurally inscribed, strategic selectivity which favours some class forces over others . Thus, once accumulation regimes and modes of regulation have become relatively stable, they comprise a specific strategic terrain on and through which paticular forms of struggle take place. Since there are no institutional guarantees that struggles will always be contained within these forms and/or resolved in ways that reproduce these forms, the stability of an accumulation regime or mode of regulation is always relative, always partial, and always provisional . Thus regulation involves a set of temporary institutional solutions which contain and limit the basic conflicts of capitalism but cannot do so for ever (Aglietta, 1982 ; Lipietz, 1986a) . Sometimes crises can be confined within the dominant accumulation regime or mode of regulation through marginal adjustments or incremental change ; but sometimes this is not the case . When the accumulation of contradictions and struggles is no longer manageable, regulationists speak of a crisis of(rather than in) an accumulation regime or mode of regulation (cf. Boyer, 1986a ; Lipietz, 1986a) . They stress that the transition to a new phase of accumulation depends on class struggle, trialand-error experimentation, chance discoveries, and so forth . There is no objective developmental logic of capital that inevitably and painlessly ensures passage from one regime to another (Lipietz, 1986b) . Three specific misreadings As well as this general problem of interpretation, Bonefeld makes three specific misreadings . Firstly, he suggests that regulation theory is concerned with value-theoretical issues and ignores forms of domination. But not all regulation theory adopts value-

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theoretical categories even indirectly (let alone directly) to analyse the historical transformation of capitalist production and its regulatory forms : thus Boyer, one of the three leading regulation theorists, examines the wage relation rather than value production as such. Likewise Lipietz (1986a), Andre and Delorme (1982), Ominami (1986) and Mjoset (1987) have examined forms of domination, hegemony and political organisation . Secondly, Bonefeld conflates the concepts of 'reglementation' and `regulation'. Whereas reglementation refers to detailed regulation by an institution located outside and superordinate to a system of social relations (such as the market), regulation refers to complex processes of mutual adjustment and accommodation within and among different institutions. Thus Aglietta, the first French regulation theorist, rejects the notion of general equilibrium and market-mediated regulation ; and also denies that the state can act as a subject intervening from outside in the name of a global regulation of the whole economy to compensate for any or all market failures (Aglietta, 1982) . Regulation assumes no sovereign power of command or privileged point of coordination and does not imply that there is a unique hierarchy of institutions . Instead it is a complex, multilateral, and provisional process mediated through institutions and conducted by social forces . In this sense it refers to specific forms of institutionalisation of the class struggle and not to the suspension or abnegation of class struggle . 3 Thirdly, in arguing that `correspondence' is a structuralist notion referring purely to relations among structures, Bonefeld ignores its links to the Gramscian concept of `historic bloc'. For Gramsci (and the reformulation theorists) an `historic bloc' is a configuration of economic base and political and ideological superstructures that are mutually supportive and co-evolving and whose coherence depends on specific practices rather than deriving from the objective laws of capitalist development (Gramsci, 1971 : 137, 366, 377) . In so far as such a correspondence among structures exists, it is not an automatic effect of structures or objective developmental laws (a view Bonefeld incorrectly ascribes to regulation and reformulation theorists) . Instead it is the product of a long-term equilibrium among class forces institutionalised on a specific field of class conflict and organised under the hegemony and/or domination of the capitalist class . Concluding remarks on regulation theory

This brief account of regulation theory shows that Bonefeld has not fully grasped its implications for crisis and class struggle . This suggests that his account of how regulation theory could be

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taken up in developing state theory might also be weak . However, since his critique is primarily aimed against the reformulation, it is more important to see how reformulation theorists have used regulation concepts than to see whether Bonefeld himself correctly understood them in their original form . This is the task of the next section . The reformulation, according to Bonefeld, founds state development on accumulation . It supposedly argues that the forms and functions of the state correspond to a regime of accumulation and thereby constitute a unity determined by objective laws of capitalist development and also class struggle. The key to this emergent unity is the mode of regulation and this operates in turn through state apparatuses (ideological, repressive, and mass integrative) . Thus it is in and through the state that regulatory processes are condensed, homogenised, and achieved . The pivot around which these processes occur is, however, the tendency of the rate of profit to fall . In this sense one could perhaps argue that the economy plays a determining role but the political has the dominant role . Bonefeld's principal criticisms of this analysis (as understood and presented in his account) concern its structuralism, functionalism, teleologism, and politicism . He claims that the reformulation is too concerned with structures and their relations (neglecting the primary role of class struggle) ; treats the state's role as one of functional compensation for the social disintegration continuously generated through capitalist relations of production ; analyses the transition from one accumulation regime to another as a linear, quasi-automatic process determined by objective laws of capitalist development ; and reduces the complex ensemble of regulatory mechanisms to the functions and activities of the state . I will respond to each of these criticisms below but in reverse order . Politicism

The charge of politicism is partly justified . The West German state theorists have focused primarily on politically-mediated counter-tendencies to the rate of profit to fall and/or on the role of the state in consolidating modes of regulation . In turn this has sometimes led them to suggest that the 'state constitutes, regulates, integrates and secures capitalist reproduction' (Bonefeld, 1997 : 108); and it does mean that'Hirsch's and Roth's claim that "the state is the functional center of social reproduction" fails to apply the proposed concept of "regulation" which was initially seen as the mode of articulation between a regime of accumulation

3 . The reformulation of state theory

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and hegemonic structures' (ibid .) . But there is more to be said on these issues . These politicist tendencies occur partly because the West German contributors to the reformulation are first and foremost state theorists; thus they tend to ignore issues such as forms of competition, the nature of monetary emission, patterns of collective bargaining, and so forth and/or to focus primarily on their political implications. Their politicism can also be explained by the fact that the main outlines of their analysis of the West German state were developed before they turned to regulationist concepts to deepen their analysis of the crisis tendencies of post-war capitalism. This belated discovery of the regulation approach means that the correspondence between new regulation concepts and more established concepts in the reformulation approach is sometimes weak (cf. Jessop, 1988a) . This does not seem to me too destructive a criticism because it can be remedied within the overall methodological framework adopted by, the reformulation theorists . For the method of articulation means that the conceptual and empirical links between economic and political factors in accumulation regimes and modes of regulation can be redefined without serious difficulties . Teleologisin

This charge is more difficult to sustain : the basic thrust of the reformulation is anti-teleological. It is systematically stressed that there is no single objective logic of capitalist development : indeed, it is for this reason that Jessop (1983) has written about the alternative logics of capitalist development corresponding to different regimes of accumulation, modes of growth, and regulatory patterns and has developed the concept of accumulation strategies to emphasise the alternative paths of accumulation which could be pursued within the basic framework of the capital relation . Where the charge might be justified is in the empirical rather than the theoretical analyses . For it is true that reformulation theorists have tended to use formal categories such as Fordism and post-Fordism not only as heuristic ideal types but also as descriptive categories imposed directly on complex and contradictory conjunctures . This is particularly serious when it is actually agreed by the reformulation theorists that we am still living through a transitional period whose eventual outcome cannot be forecast or guaranteed. But even then it is clearly recognised that there are different national Fordisms, different national roads to post-Fordism, and different possible postFordist futures ; and that these national specificities are the result of the balance of class forces in specific national conjunctures (see

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especially Hirsch & Roth, 1986 ; and Jessop, 1988b). Functionalism

This charge is also hard to sustain . The West German contributors to the reformulation developed the anti-functionalist approach in the state derivation debate . Two main approaches can be discerned in the inordinately complex and convoluted state derivation debate (for general accounts, see Jessop, 1982 ; Rudel, 1981). Starting from the inherent capitalist tendencies to market failure, economic crisis, and class struggle, one approach tried to derive the necessary form of the capitalist state from the functions it must perform to correct these deficits and thereby secure capitalist reproduction . But the other approach first derived the form of the capitalist state from the nature of generalised commodity production in the capitalist economy and then showed how this form problematised the state's functionality for capitalist reproduction. The former approach soon re-entered the theoretical cul de sac of economic reductionism because it adopted a capital logic analysis in which politics was reduced to the global dynamic of class struggle and/or policies to the needs of capital (cf. Hirsch, 1980: 54-6) . But the latter approach remained fruitful because it opened a space for a sui generic dynamic of political struggles and a specific institutional logic in policy-making . This has provided the theoretical means to avoid functionalism in so far as the activities of the state are determined in the first instance by political considerations and need not coincide (even in the last instance) with the `needs' of the economy. A further consequence of this approach is to deconstruct the concept of the 'needs' of the economy : if the economy is not self-sufficient, self-reproducing, and self-steering and, if the political is formally rather than functionally determined by the economy, there can be no unambiguous economic needs. The needs of capital must be assessed strategically in relation to complex conjunctures rather than formally in terms of an abstract, purely economic, circuit of capital (cf. Jessop, 1984) . Moreover, in opening up a space for politics in this way, the second approach has permitted more detailed and conjunctural analyses of politics and political struggles. This may reinforce the politicist tendencies within the reformulation but it tends to undermine any functionalist bias . Structuralism

This is the most difficult of the four charges to uphold . Indeed, in making it, Bonefeld is guilty of misreading the reformulation on several points . These concern : the concepts of

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correspondence, regulation, and apparatus ; the meaning of 'process without a subject' ; and the nature of the dialectic between structure and strategy. Since I have already addressed the first misunderstanding in my comments on regulation theory, I deal here only with the last two problems . Bonefeld interprets the claim that capitalist development is 'a process without a subject' as meaning that it is a process without subjects: this is wrong . All that this phrase means is that there is no transcendent, global subject which alone determines the logic of capitalist development : this is beyond the scope of the productive forces, the economy in the last instance, the state, a given class, or any other putative 'cause without cause' . It does not mean that there are no subjects : indeed both regulationists and reformulators recognise many different subjects, modes of calculation, patterns of strategic conduct, and forms of struggle . In turn this means that the course of development is the result of interactions on many different terrains and among many different forces . Accordingly there is no inconsistency between the Hirsch/ Roth claim that the imposition of a mode of regulation flows from quite complex economic, political, and ideological struggles and their claim that this occurs as a process without a subject . Bonefeld's comments on the structure-strategy dialectic are complex . He refers to a duality of structure and strategy (or structure and struggle) ; claims that the reformulation subordinates struggle to structure; and then sometimes charges the reformulation with structuralism and sometimes with voluntarism . There is some evidence for such a duality but not where Bonefeld claims to find it . Elsewhere I have noted that there is a doubling of concepts in Hirsch's work so that key concepts appear twice : accumulation regime and accumulation strategy, mode of regulation and Regularionsweisen, hegemonial structures and hegemonic projects . My own work also refers to accumulation regimes and accumulation strategies and to two aspects of hegemony : structural determination and class leadership . The relations between these two sets of concepts may not always be clear but I believe they can be established theoretically and empirically . Accordingly, to reply to Bonefeld's twin charges of structuralism and voluntarism, I will now summarise briefly the nature of structure/ strategy dialectic (see Jessop, 1983, 1988a) . The dialectic between structure and strategy

We can best begin this summary by looking at the possible relations between structural and strategic categories in the regulation and reformulation theories . What purpose is served by talking about accumulation regime and accumulation strategies,

Regulation Theory modes of regulation and regulatory strategies, hegemonial structures and hegemonic projects? If one or other concept in each pair is not to become redundant, two theoretical fallacies must be avoided . The first fallacy would be to reduce the structural category to and/or derive it from a strategic category ; the second would be to derive a single strategy from a given structure . But neither an accumulation regime nor a mode of growth can be understood as the product of a single accumulation or a single national growth strategy. Except when analysed at high levels of abstraction, accumulation regimes and modes of growth have only a relative unity : they are better described as structural ensembles than as simple structures. Among the elements which could be articulated into an accumulation regime or mode of growth on a given territorial space, there will be many irrelevant, residual, marginal, secondary, and even potentially contradictory elements and the unity of the more central elements will always be marred by gaps, redundancies, interstices, and contradictions . Likewise, given the complex and overdetermined structure of an accumulation regime (or mode of growth), one could not calculate an effective general strategy to maintain it : the relative success or failure of a strategy typically depends on unacknowledged structural conditions of action which may alter as well as on the changing balance of forces (including changing organisational capacities and strategies) relevant to its successful realisation . In addition, of course, there are always competing strategies . Thus the actual course of accumulation (over a given economic space from global to local levels) always results from their interaction in particular circumstances on a given terrain constituted not only by the existing regime or industrial profile but also by existing modes of regulation. This means that there can never be a one-to-one correspondence between structures and strategies . To argue otherwise is to run the risk of re-introducing a transhistorical subject whose global strategy is realised and/or of re-introducing the concept of reproduction and reducing concrete subjects to the necessary Traeger (supports) of the dominant structure . And Hirsch and the regulationists alike reject both these theoretical fallacies . The dialectic between structure and strategy does not involve a simple oscillation between two formally homologous poles (structural and strategic) which dove-tail neatly together . Instead it involves a complex process of mutual historical conditioning and reciprocal recursive transformation . Both the structural and the strategic moments are complex and changeable: the boundaries and articulation of structural ensembles are unstable, the world of strategies is pluralistic and conjunctural . Their dialectic

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is nothing more (and nothing les) than the structural conditioning of strategies (both as explicit reference points for strategic calculation and as a partly and partially unacknowledged set of structural constraints and conjunctural opportunities) and the strategic transformation of structural ensembles (both through deliberate, if often unsuccessful, attempts to modify them and through the unanticipated consequences of interaction among patterns of strategic conduct with other objectives) . Even if one allows for competing strategies and thus for a certain contingency in their interaction, another risk still remains : that the emergence and subsequent dynamic of structures might be endowed with greater intentionality than is actually justified . This is an issue difficult to resolve in the abstract beyond the comments already made . But it is worth noting that Aglietta (1982) has described the emergence of modes of regulation as improbable and Lipietz speaks of them as Fundsachen (chance discoveries) (1985a). In both cases this is meant to stress the contingent, non-intentional emergence of accumulation regimes and modes of regulation ; strategic conduct might be involved but with no guarantee of success and, perhaps, more concerned to impose some coherence and direction on an already emergent structure than to bring it into existence . Hirsch's position on this point is less clear . On occasion he treats the emergence of new structures as the result of successful strategies but sometimes they are simply treated as emergent historical ensembles . Finally, given that strategies have unacknowledged conditions for success and are always realised in specific structural contexts, what sense can be attached to the notion of alternative strategies? This question must be answered on several levels . In general terms structure should be seen as the ensemble of structural constraints and conjunctural opportunities which exist over a specific time horizon and within given spatial boundaries for different social forces : what is a constraint for some forces could be an opportunity for others . In this sense alternative strategies could exist to the extent that a) calculating subjects are differentially located in relation to the structure (so that the same structure presents them with a different ensemble of constraints and opportunities); b) calculate their strategies over different time horizons and/or spatial boundaries; c) engage in strategic conduct over a more or less extensive social terrain - embracing various fields of action (economic, political, juridical, moral, educational, etc.) ; and d) enter into different types of alliance with other social forces . If we now shift attention from what makes alternative strategies possible to what makes their more or less successful realisation possible, we must consider the relations among different strategies . The success of the 'nth' strategy depends on its

Regulation Theory complementarities to all other relevant strategies within the overall structural ensemble . Moreover, since the success of all other strategies depends on the nature of the 'nth' strategy, there is clearly a complex web of contingencies . It is for this reason that some of the French regulationists insist that accumulation regimes, modes of growth, and modes of regulation are `discovered' rather than planned . There is no global subject to plan accumulation strategies, regulatory mechanisms, or hegemonic projects and to guarantee their successful implementation . Instead we find only different subjects whose activities are more or less co-ordinated, whose activities meet more or less resistance from other forces, and whose strategies are pursued within a structural context which is both constraining and facilitating . Thus, whilst there is real scope for class struggle in the structure-strategy dialectic, class strategies can never be purely voluntarist . To understand how capitalism is reproduced despite these complex contingencies, we must examine both the institutional inertia and strategic selectivity inscribed in specific accumulation regimes, modes of growth, and modes of regulation. The multiplication of institutional forms and regulatory mechanisms (as well as the self-substituting character of many of them such that, for example, black markets emerge when normal markets are suspended) actually create significant barriers to a general attack on the capital relation by fragmenting and disorganising opposition and resistance and/or channelling it along particular paths where it threatens less harm to the core institutions of capitalism . Thus the structure/strategy dialectic does not separate struggle from structures but shows their complex forms of interaction . Structures are only prior to struggle in the sense that struggles always occur in specific conjunctures : but these conjunctures (with their complex and differential sets of constraints and opportunities) are themselves the product of past struggles .

Although he notes, correctly, that the description holds better for West Germany than Britain, Bonefeld agrees with much of the analysis of Fordism and post-Fordism in the reformulation . His objections concern less the description of certain tendencies discernible in the current transition than to their subsequent treatment as the process of realisation of objectively pre-given features of the coming post-Fordist system . Thus he argues that the reformulation sees class struggle merely as an accelerating or retarding factor in the transition rather than as its primary motor force . He also criticises the strategic conclusions and resulting political passivity which supposedly follow from this approach .

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4. Fordism and post-Fordism

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I have already addressed the methodological criticism in general terms but some specific comments are appropriate . Bonefeld is quite right to criticise the formalism of general models of Fordism and post-Fordism: these must remain abstract until specified in terms of specific national growth models and their corresponding modes of regulation . Such models are particularly misleading when they are simply generalised from one specific rational model. Thus Hirsch fails to distinguish between the Fordist accumulation regime in formal, abstract terms and the national modes of growth compatible with Fordism on a global scale and then compounds this failure by failing to note the specific features of the West German mode of growth . Further problems arise when certain tendencies in the current transition are reified to become the post-Fordist model . This will prove difficult because post-Fordism differs from Fordism in a key particular : whereas Fordism could plausibly be interpreted in terms of the diffusion of the American model to other national economies, there is currently no single hegemonic growth model (Japanese, American, and West German models are in competition) and ever more extensive financial and industrial internationalisation makes it even more important for most national economies to find distinctive niches in the worldwide division of labour . But recognising these problems does not as such invalidate regulation or reformulation theories - it merely cautions against over-hasty generalisations within their overall theoretical framework . Bonefeld is also right in criticising the reformulation for overestimating the extent of changes which have already occurred . This stems from the contraposition of abstract, formal models and the corresponding neglect of the 'impurities' of national modes of growth and regulation as well as of the incomplete character of any transition . In this sense the danger of imposing normative models on complex changes is very real and care must be taken to avoid it . It is for this reason that my own recent work has focussed on national modes of growth and their insertion into the international hierarchy constituted through the global division of labour and international modes of regulation (e .g . Jessop, 1988b) ; has considered different strategies (neo-liberal, neostatist, neo-corporatist) which could be adopted in the transition from Fordism to post-Fordism (Jessop, 1986, 1988b) ; and discussed different forms of the welfare state which would be consistent with a transition to a post-Fordist accumulation regime (Jessop, 1986) . Likewise recent work by French regulation theorists has been concerned to sketch different trajectories and types of post-Fordism and their different economic and political preconditions (e.g . Lipietz, 1987 ; Boyer, 1987). Here too, then,

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the solution is to be found within the regulation approach ; not in rejecting this approach . Further elaboration on these lines would also provide the basis for avoiding the final criticism which Bonefeld offers . For, the more clearly it can be shown that there are different types of post-Fordism and different national roads, the more self-evident it becomes that there is nothing inevitable about the transition . Not only is a transition to this or that type of post-Fordism an open question but so too is' the issue of whether any sort of transition to post-Fordism will occur . If national roads and the eventual form of national post-Fordism depend on the course of class struggle within the structural conditions established by an initial starting point, then there may be nothing inevitable about the transition at all . In this respect it is worth noting that Bonefeld's criticism about political passivity is directed mainly against left theorists in Britain (notably contributors to Marxism Today) and not to the regulation or reformulation theorists themselves . At most one could criticise Hirsch and Roth for their relative neglect of the working-class movement compared to the attention they give to new social movements . But their discussion of the integration of the old working class into the Fordist model does not mean that it was inevitable when it occurred (as opposed to being a problem to be overcome now) ; and it does not mean that new social movements will inevitably be absorbed into the structures of post-Fordism - indeed they might even be criticised for their excessive `faith in the democratic miracles' to be worked through these movements . In the final analysis Bonefeld's criticisms are mainly directed at the method which he attributes to regulation and reformulation theories . But, as I have tried to show, the method is not really that of either theory . The separation which Bonefeld discerns in them between structure and strategy is at most analytical and it certainly does not involve the subordination of class struggle to pre-given structures which exist beyond struggle . On the contrary, as this paper tries to establish, regulation theory introduced the concept of 'regulation' precisely to overcome the structuralist bias of studies of 'reproduction' . Likewise the type of West German state theory with which Hirsch, Esser and their colleagues are associated has long argued that the form of the capitalist state problematises its functionality for capital and therefore places a premium on the political class struggle in securing the conditions for continued capital accumulation and political class domination . In this sense I believe that Bonefeld's principal criticisms are misdirected . But this does not mean that we should accept all the substantive arguments put forward by regulation and reformulacac/34-K

5 . Concluding remarks

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Lion theorists : indeed, since they are often ambiguous, contradictory, or plain wrong, this would be foolish . What is more important is to decide whether the basic research agenda implied in regulation and reformulation theory offers more chance for theoretical and political advance than available alternatives . And here I take my stand with the regulation and reformulation theorists . Their research programme shows a dear commitment to concrete analysis of concrete conjunctures through a rich and complex range of economic and political concepts directly related to the nature of the capitalist exploitation and domination . That some of the analyses so far offered have short-circuited the analytical method implied in the overall research agenda does not as such condemn the approach but merely points to the dangers of applying it too hastily and/or unthinkingly . I would also argue that it is only through the detailed conjunctural analyses which this method facilitates (but whose accuracy it cannot guarantee) that one can develop alternative strategies which have some chance of success. Indeed, as Hirsch himself remarked, in drawing on (and extending) regulation theory and combining it with West German state theory, he can `proceed from general (and therefore abstract) political theory to a concept useful for the analysis of actual changes in the political apparatus, essential for the political usefulness and relevance of theory' (Hirsch, 1983 : 75). In terms of a research agenda, a synthesis of regulationist and reformulation concepts is needed . Both the state derivation debate and the regulation school have produced concepts at a middle range, institutional level ; both are concerned with stages and phases of capitalist development rather than with the abstract laws of motion and tendencies operating at the level of capital in general ; both are sensitive to the relative autonomy of the economic and political spheres - seeking to avoid economic reductionism and to explore state intervention ; both are committed to conjuncturel analysis ; and both emphasise the role of strategic conduct and struggle in the transition from one phase to another of capitalism . But there is still much work to be done . So far the regulation approach has been extensively applied only to the French and Nordic economies (Mjoset, 1987) and, to a lesser extent, to the American, West German, and British economies . Some other comparative econometric studies of European economies exist (e .g. Mazier et al, 1984) and Lipietz (1986) and Ominami (1986) have written general studies on accumulation regimes in less advanced economies (a short bibliographical guide can be found in Boyer, 1986a) . Clearly, until more detailed local, national, regional, and international studies have been completed, the dangers of analytical short-circuiting will remain . Particularly important for such research are inter-

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mediate concepts such as modes of growth and international regimes for economic analysis, forms of state for political analysis, and modes of regulation and historic blocs for societal analysis . It is in this intermediate area that the regulation and reformulation approaches are most promising . What is needed above all are accounts of national modes of growth, their insertion into the international economy, the specific national modes of regulation with which they are associated, the dynamic of specific forms of state, and the specific `historic blocs' to which these have given rise . Only through such detailed studies will it be possible to formulate general strategies oriented to current changes in capitalism rather than to engage in specific forms of resistance or struggle and/or to fight old battles in radically changed conditions . The success of Thatcherism has much to do with its ability to discern some order in the myriad confusing changes currently under way in Britain and to give a particular coherence and political direction to them . This does not mean that the strategies pursued by Thatcherism are the only feasible strategies nor that the emerging neo-liberal Thatcherite strategy is guaranteed success . The appropriate lesson to draw is that a socialist alternative must also take account of current changes and adapt its strategy to them . But the coherence it discerns and the direction it will seek to give these changes will be entirely different . In this sense an alternative socialist project must start out from the current changes - but not through passively acquiescing in them but through developing a coherent alternative to them and mobilising broad popular support for this alternative.

We can distinguish four main regulationist approaches in terms of their substantive focus (national or international) and theoretical complexity (concern with economic mechanisms alone or also with societalisation mechanisms). Together with some examples these are portrayed in Diagram 1 (see below); and they can be briefly described as follows : • One approach focuses on national accumulation regimes and modes of growth understood mainly in terms of their economic determinations . This was the approach adopted by Aglietta in the first regulationist analysis : a study of Fordism in the United States from a value-theoretical viewpoint (1974-1979) . Subsequent studies have extended this approach to other national economic formations : either in terms of the diffusion of the American model of Fordism to other countries and/or in terms of the development of sui generis national modes of growth analysed

Appendix : Four types of regulation analysis

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without regard to their insertion into the international economic order . Some of these studies have remained within a valuetheoretical framework but others have considered the economic mechanisms in different, but still primarily economic, terms (e .g. the rapport salarial or `wage relation') . • A second approach focuses on the international economic dimensions of regulation. It studies the distinctive modes of international regulation and/or the form and extent of complentarities among different national modes of growth . Rather than treating the global economy as the mechanical sum of different national modes of growth and regulation, it argues that the international economy has its own sra generis properties, modes of regulation, and problems . Thus it examines the international accumulation regime as a hierarchy of national modes of growth, with its own specific modes of regulation, its own crisis forms, etc. ; and it examines national modes of growth in terms of their possibilities of adhesion or exclusion from the international order and the interaction between nationalisation, transnadonalisation, and internationalisation tendencies . Aglietta, who pioneered the regulation approach for the USA, has also presented an important account of the complementarities among national modes of growth in his analysis of France and West Germany (1982) . Likewise we find approaches to the peripheral Fordism and bloody Taylorisation in Lipietz (1986b) and Ominami (1986) . • A third approach examines the complex patterns of societalisation (Vergesellschaftung) or `social structures of accumulation' (in the American equivalent to regulation theory) on the national level. The concept of 'societalisation' refers to the dynamic process of structuration and regulation at a societal level ; it implies that the emergence and maintenance of societies is problematic. The reproduction of societies depends on a complex ensemble of institutionally mediated practices which secure at least a minimal correspondence among different structures (the `system integration' aspect of the 'social formation') as well as an 'unstable equilibrium of compromise' among social forces (the 'social integration' or 'social cohesion' aspect of the 'social order') . Thus the concept of societalisation adopted in the state reformulation adopts cimiiar assumptions and explanatory principles to that of 'regulation' in the regulation school . This approach is concerned with the development and dynamic of modes of regulation extending beyond the economic sphere as well as with the 'historic blocs' (i .e . the contingent societal formations based on structured complementarities between the economic base and political and ideological superstructures) which arise on the basis of relatively stable modes of growth and regulation and help to consolidate them . This approach gives particular attention

Regulation Theory

to the state and hegemony as central elements in societal regulation but also examines other social forms and institutions .

• A fourth approach would study international'societalisation', i .e. the complementarities among emergent international structures and strategies and/or attempts to establish a global order through international regimes of one kind or another . As yet this approach is relatively underdeveloped within the regula-

Diagram One

Four foci of regulation approaches : some examples

Economic focus

Societalisation focus

National level focus

A .1 Aglietta (1979) on American Fordism A .2 Mjoset (1987) on Nordic models A .3 Boyer (1979) on wage relation A .4 Mazier (1982) on growth and crisis

B .1 Hirsch and Roth (1986) on 'Model Germany' B .2 Gordon (1980) on social structures of accumulation B .3 Davis (1985) on Reaganism B .4 Jessop (1986) on welfare state

International focus

C.1 Aglietta (1982) on complimentarities C.2 Lipietz (1982) on peripheral

D.1 (Beaud (1987) on global hierarchies) D.2 (international regimes)

Fordism C.3 Mistral (1986) on 'international space' C.4 Ominami (1986) on crisis in Third World

tionist school and should therefore figure centrally in any future regulationist research agenda. An interesting approach close to regulation theory can be found in Michel Beaud's recent study on interrelations among national societies within the framework of evolving global hierarchies (Beaud, 1987) . This is all the more urgent because of the' growing hold in anglophone literature of the so-called 'international regimes' approach with its mixture of idealist and realist arguments (for recent critical surveys of international regimes studies, see : Krasner, 1983; Haggard & Simmons, 1987; Wolf and Zuern,1986).

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Notes

1. In writing this paper I have benefitted from discussions with Werner Bonefeld, Robert Boyer, Josef Esser, Joachim Hirsch, Hans Kastendiek, and Hugh Ward . Naturally I alone am responsible for the final arguments. 2. Strictly speaking this should be termed the 'Parisian regulation school' : a second, grenoblois school is associated with G. Destanne de Bemis 91977) and a third 'regulation' approach with the PCF's state monopoly capitalism analyses of overaccumulation and devalorisation most consistently presented by Boccara (1976). 3. Likewise Bonefeld errs in arguing that the notion of 'apparatus' implies 'a degree of planned interference from "above" which dominates the course of struggle' (1987 : 107); and also implies 'the domination of the state over social relations, which is enforced by the successful homogenisation of the apparatuses and thus their functionality' (1987 : 107) . Although the Second International usage of apparatus does treat the state apparatus as an autonomous origin of power, subsequent use of the term (especially in the Gramscian tradition) denies the autonomy of state power and treats the state apparatus as the material condensation and centralisation of power relations . For further discussion, see Balibar (1982) .

References

Aglietta, Michel (1979) A Theory of Capitalist Regulation : the us Experience . New Left Books, London. Aglietta, Michel (1982a)'Avant-propos a la deuxieme edition', Regulation et crises du capitalisme: l'experience des Mats Unis . Calmann-Levy, Paris. Aglietta, Michel (1982b)'Capitalism in the Eighties', New Left Review, 136, pp. 25-35 . Andre, Christian & Delorme, Robert (1082) L'$tat et l'economie. Seuil, Paris . Balibar, Etienne (1982)'Appareil', in Georges Labica (ed .), Dictionnaire critique du marxisme . Presses universitaires de France, Paris . Beaud, Michel (1987) Le systime national mondial hifrarchise . La DEcouverte, Paris. Boccara, Paul (1976) Traits d'&onomie politique: le capitalisme monopolists d'etat. Editions sociales, Paris (2nd edition) . Bonefeld, Werner (1987) 'Reformulation of State Theory', Capital & Class 33, pp. 96-127 . Boyer, Robert (1979) 'Wage Formation in Historical Perspective : the French Experience', Cambridge Journal of Economics, vol . 3 . Boyer, Robert (1986a) La Theorie de la Regulation : une analyse critique . La Decouverte, Paris . Boyer, Robert (ed .) (1986b) Capitalismes fin de siicle . Presses universitaires de France, Paris, pp . 167-202 . Boyer, Robert (1987) 'The Eighties : the Search for Alternatives to Fordism' . Paper for the panel on 'Neo-Fordist Accumulation Regimes and the Regulation Model?' Washington DC. de Bemis, G. Destanne (1977) 'Regulation ou equilibre dans l'analyse economique', in Lichnerowicz et al (eds), L'Idee deregulation daps les sciences . Maloine-Douin, Paris .

Regulation Theory (1977) Approches de linflation : L'Example francais, rapport an CORDES (Benassy J . P . et al), CEPREMAP, Paris, Mimeo . Davis, Mike (1986) Prisoners ofthe American Dream . Verso, London . CEPREMAP/CORDES

Gordon, David (1980) 'Stages of Accumulation and Long Economic Cycles', in Terence K . Hopkins & Immanuel Wallerstein (eds), Processes of the World System . Sage, London, pp . 9-45 . Gramsci, Antonio (1971) Selections from the Prison Notebooks . Lawrence and Wishart, London. Haggard, Stephan & Simmons, Beth A . (1987) 'Theories of International Regimes', International Organization, vol . 41, 1987, pp . 491-517. Hirsch, Joachim (1980) DerSicherheitsstaat. EWA, Hamburg. Hirsch, Joachim (1983) 'Fordist Security State and New Social Movements', Kapitalistate 10/11, pp . 75-88 . Hirsch, Joachim (1984) 'Notes towards a Reformulation of State Theory', in S . Haenninen & L . Paldan (eds), Rethinking Marx . Argument Verlag, Berlin, pp. 155-60. Hirsch, Joachim & Roth, Roland (1986) Das neneGesiclu desKapitalumus . VSA Verlag, Hamburg . Holloway, John (1987) 'The Red Rose of Nissan', Capital & Class 32, pp . 142-65 . Jessop, Bob (1982) The Capitalist State. Martin Robertson, Oxford . Jessop, Bob (1983) 'Accumulation Strategies, State Forms, and Hegemonic Projects', Kapitalisrate 10/11, pp. 89-112 . Jessop, Bob (1984) 'Business Organizations and the Rule of Capital', West European Politics, vol. 10, pp. 139-62 . Jessop, Bob (1986) 'Der Wohlfahrsstaat im Uebergang vow Fordismus zum Postfordismus', PROKLA 65, pp . 4-33. Jessop, Bob (1988a)'Post-Fordismus, Massenintegration, and der Staat : eine Kritik zum Joachim Hirsch', DasArgmnent (forthcoming) . Jessop, Bob (1988b) 'Neo-Conservative Regimes and the Transition to Post-Fordism : the cases of Great Britain and West Germany', in Mark Gottdiener (ed .), Modern Capitalism and Spatial Developme,w Accumulation, Regulation, and Crisis Them . St Martin's, New York . Krasner, Stephen D . (ed .) (1983) International Regimes. Cornell University Press, Ithaca. Leborgne, Daniele & Lipietz, Alain (1987) 'New Technologies, New Modes of Regulation: some spatial implications', Couverrwe Orange : CEPREMAP, Paris, No . 8726 . Lipietz, Alain (1982) 'Imperialism or the Beast of the Apocalypse', Capital & Class 22, pp . 81-110 . Lipietz, Alain (1985a) 'Akkumulation, Krisen and Auswege aus der Krise: Einige methodische Ueberlegungen zum Begriff "Regulation" ', PROKLA 58, pp . 109-37 . Lipietz, Alain (1985b)'Le national et le regional : quelle autonomie face i la crise capitaliste mondiale?' Couveratre Orange CEPREMAP, No . 8521,1985 . Lipietz, Alain (1986a) 'Behind the Crisis : the exhaustion of a regime of accumulation . A "regulation school" perspective on some French empirical works', Review ofRadical Political Economy . Lipietz, Alain (1986b) Mirages and Miracles. New Left Books, London. Lipietz, Alain (1987) 'La Regulation: les mots et les chores . A propos de La Thiorie de la regulation : tine analyse critique de Robert Boyer',

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mimeo. Marx, Karl (1857) 'Introduction to the Critique of Political Economy', in idem, Gruandrisse . Foundations of the Critique of Political Economy, trans . Martin Nicolaus . Penguin, Harmondsworth, 1973 . Mazier, Jacques (1982) 'Growth and Crisis - A Marxist Interpretation', in Andrea Boltho (ed .), 77re European Econommy: Growth and Crisis. Oxford University Press, Oxford, pp . 38-71 . Mazier, Jacques, Basle, Maurice & Vidal, Jean-Francois (1984) Quand Les Crises Durent . . . Economics, Paris . Mistral, Jacques (1986) 'Regime international et trajectoires nationales', in Robert Boyer (ed.), Capimlismes fns de sickle. Presses universitaires de France, Paris, pp. 167-202. Mjoset, Lars (1985) 'Regulation and the Institutionalist Tradition', in Lars Mjoset & J . Bohlin, Introduksjon dl Reguleringskolen: ire arbeidsnotater. Nordisk Sommeruniversitet, Aalborg, pp . 1-101 . Mjoset, Lars (1987) 'Nordic Economic Policies in the 1970s and 1980s', International Organization, 41, pp . 403-57 . Noel, Alain (1987) 'Accumulation, regulation, and social change : an essay on French political economy', IatemationalOrganixation, vol . 41, pp. 303-33 . Ominami, Carlos (1986) Le tiers monde dons la crise. La Decouverte, Paris . Rudel (1981) Die Emmickelung der Marxistuchen Staautheorie in der Bundesrepublik . Frankfurt Campos. de Vroey, Michel (1984) 'A Regulation Approach Interpretation of the Contemporary Crisis', Capital & Class 23, pp . 45-66 . Wolf, Klaus Dieter & Zuern, Michael (1986)' "International Regimes" and Theorien der Internationalen Politik', Politische Vienreljahresschrift, vol . 27, pp. 201-220.

George Gaskell and Robert Benewick (eds) The Crowd in Contemporary Britain Sage Publications, 273 pp. ISBN 0 8039 80744 (cloth) £25 .00 ISBN 0 8039 80752 (paper) £8 .95 Reviewed by Andrew Duncan and Hugo Whitaker This collection of essays is a report of research carried out by the Crowd Behaviour Panel set up by the ssRC . It consists of six research projects, a pilot study and a postscript on crowd studies source material, including an archive . The editors point out that the Panel decided that, since the Scarman Inquiry into the 1981 riots was just beginning, they would not concentrate on `the more pressing policy issues', but would rather `frame questions of a basic or fundamental nature focussing on broad conceptual issues rather than addressing the more immediate problems and policy concerns'. They add that `given the complexity of the issues and the plethora of interesting questions the research should be multidisciplinary Ironically, much of the book ends up concentrating on `the pressing policy issues' which the editors set out to avoid . This is not surprising since the editors also state dearly their interests

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170 and motives for studying crowds - their research `informs decision-makers . . and helps to clarify issues on which policy initiatives and further research might be focussed' . They summarise their view of themselves with the statement : `The social sciences are not a substitute for political judgements but can inform the ground upon which political judgements are made' . In short, they see themselves as doing `science' not politics . The book opens with a historical survey -'Violent disorders in twentieth century Britain' . It is followed by an examination of the `issues relating to the confusions, ambiguities and assumptions surrounding street life' . The third essay on the police looks at `the position of patrol sergeants and their responsibilities' . 'Flashpoints of public disorder' is an attempt to create a'model of explanation' that is `flexible enough to encompass a variety of types of disorder while at the same time allowing for the uniqueness of the situation' . The final essays look at `crowd solidarity and the Pope's visit to Britain', and at `the crowd and the community', since `Locality may be a crucially important factor in crowd mobilisation and in understanding the aftermath of disturbances' . The first essay takes Norman Tebbit's statement that `Society today is more violent and criminal and corrupt than it was' as a starting point . It attempts to show that there has been an overall decline in the `incidence of reported crowd violence', relying on a survey of a local newspaper - the Leicester Mercray - for empirical evidence . The `violent disorders' are analysed under four categories: politics, industry, organised leisure/sport and the community, covering the years 1900-

1977 . This empirical approach is justified on the grounds that `It is necessary to go beyond the well-documented argument that "ours is a violent history", and to ask two further questions : first, how, if at all, has the level of violence changed over time ; and second, what, if any, changes have taken place in the pattern or structure of violent disorders?' This research is rather confusing and arises from the arbitrary categorisations made . Thus the authors explain their category `industry' as being 'collective violence that is related to the industrial protests of workers' . The Saltley picket in the 1972 miners' strike is classed as `industry', not politics . Politics refers, among other things, to `disorders connected with public demonstrations ( . . .) which had political objectives' . This implies that confrontations such as Saltley, Grunwick, Orgreave and Wapping have nothing to do with politics . In addition, some of the most serious outbreaks of disorder are never mentioned - for instance violent disorder in Ireland since 1900. The authors conclude that collective crowd disorder has declined in three out of four areas-politics, industry and community - and has increased in the area of `organised leisure/sport' . This is because of 'the decline of the street as a centre of working-class entertainment and leisure and the concomitant increase in the provision of organised facilities for sport and leisure' . This simply hammers home the message that collective `violent disorder' is not something that lends itself to quantitative empirical measurement . The starting point of the research is an attempt to understand the background and build-up to the 1981 riots

Book reviews and answer questions such as `Are the crowd disturbances an expression from the channels of political action and communication?', and 'If such crowds are a form of political action, how effective a form is it?' The researchers' conclusion is that 'the crowd ( . . .) remains an inefficient means of putting a precise message across even about problems, let alone solutions . Community participation increases the reliability of the message and, ideally, stimulates a sense of commitment among participants to peaceful political solutions and procedures' . What is common to all the studies is a belief in the ability to 'objectively' analyse, understand and chart the course of such fundamentally social phenomena as 'the community', 'street life', 'crowds', etc . Such phenomena are transformed by these studies into abstract categories which are not held up to critical examination . The underlying assumption is that these entities exist and present themselves unambiguously. The problem may be illustrated if we imagine a social scientist who wishes to study 'The Person in Contemporary Britain' . S/he would presumably choose a 'representative' source, e.g. newspapers, interviews, etc., choosing, say, every third article in which something was said about 'persons' . They would then look for changes and trends and come to the conclusion that the person in contemporary Britain looked like 'this'. This would be fine as long as no claim was made to 'objectivity' . What is singularly lacking is any real acknowledgement of conflicts of interest in these studies. This is to be expected since the research is consciously aimed at the needs of policy-makers . We must ask ourselves, 'Who decides what the

crowd is? Crowds or social scientists?' 171 In addition, such phenomena do not have clear boundaries over space or time. Where was, is and will a riot be effective? What individual, however much s/he attempts to be 'objective', can provide proofs of the kind mentioned? If we ask 'How effective have rioting, strikes, school boycotts etc . been in South Africa?', we must also ask 'effective from whose point of view?' If we temporarily accept that it is possible to analyse social phenomena objectively under categories, then we should also include the 'state' as a category into which incidents of violence against people by powerful forces are analysed . This omission indicates that the book is already biased in favour of such powerful forces. However, whilst the conclusions drawn are highly questionable, the research is rich enough to enable us to examine our notions of the categories used . Although the categories used in the book tend to mystify, by calling them into question our perceptions of them may be clarified . Certainly these essays manage to dispel many commonly-held myths . Several of them also provide useful reviews of existing literature. The strongest point of the book is the detail of the research results and its postscript on source material which clearly demonstrates the limits of existing knowledge on 'the crowd' . Despite the often misleading and contradictory conclusions, it is worth reading for this alone .

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George Avis (ed.) The Making of the Soviet Citizen Croom Helm, London, 1987,256 pp . ISBN 0 7099 51051 Reviewed by Sally Hickling This fascinating collection brings together recent British research in the area of vospitanie or moral education in the Soviet Union . It is the first project of this kind and covers a wide range of contributions and interests . It examines the latest developments in the vospitarde process as well as the aims and objectives of its major components. The collection includes work on moral and political education, gender and Soviet pedagogy, and multicultural education in the USSR, as well as an examination of the quest to instill socialist attitudes to work in Soviet school children . Finally George Avis gauges the success of vospitanie in his report on recent major surveys on the attitudes of higher education students. James Muckle presents an introduction to the concept of vospitanie in a broad-ranging survey of moral education in Soviet schools, including a criticism of the way in which western commentators tend to see Soviet education as 'indoctrination' while a number of British teachers endorse measures such as 'anti-racist' teaching. In an informative piece about recent developments in political education, John Morison shows how Gorbachev has increased the drive of Brezhnev, Andropov and Chernenko to raise the political consciousness of the population . There are firm obstacles : school

timetables are already heavily overloaded, and there is a certain cynicism surrounding assurances from political leaders . Morison maintains these will have to be altered before a real shift in political commitment can be achieved. Morison's assumption that war or revolution is needed to create patriotism is confusing and also unnecessary in order to explain young people's interest in western fashion and music, which in itself does not imply a decline in support for their country. In the chapter on gender and Soviet pedagogy, Lynne Attwood explores the contradictory nature of Soviet 'sexual equality' . With the recent demographic crisis, a declining birthrate and rising incidence of divorce, the role of women is being reassessed and the message is clear - equal is not to be confused with identical . Women and men, it is maintained, are innately different and it is the 'mascidinisation of women' and the 'feminisation of men' which is causing family instability and breakdown . Attwood's paper contains what amounts to an overview of the recent debate about gender roles and the family as well as a specific analysis of pedagogical writings on the subject . She coherently lays bare the awkward anomalies in Soviet thinking which lead one to ask: 'If sex differences are natural, why is such a mammoth effort required to inculcate these differences into young people?' After a useful discussion of the concept of cultural identity, Nigel Grant tackles the internationally relevant question of unity and diversity with reference to the many and varied Soviet nationalities . He brings alive the complex problems of attempting to achieve a socialist unity in a vast country of such cultural diversity . It is a chilling

Book reviews reflection of the British education system that in the Soviet context, a certain amount of linguistic pluralism is permitted but social customs are largely prescribed by the dominant culture. Felicity O'Dell investigates measures to breed socialist attitudes to work in soviet school children . Their partial failure suggests a striking irony . The family is the weakest link in the process of upbringing and women are particularly criticised . And yet, instead of seriously considering socialised childrearing, suggestions are centred round the idea of strengthening the family and educating women to perceive their role as mother as having at least the same importance as that of worker . This is because the supply of future generations must be kept up at all costs . In conclusion, O'Dell warns that only by lessening the contrast between the exclusively positive images of work fostered at school and the conditions young workers actually face, can further disillusionment and cynicism be avoided . The last chapter focusses on the expressed attitudes and declared behaviour of higher education students, and how they fall short of official expectations and claims. Soviet students do not view communist upbringing as being particularly relevant, although that is in a sense as it should be in a higher education system which unashamedly puts academic excellence before the production of the 'ideal Soviet citizen' . This collection is an essential read for the new Soviet studies student and the seasoned researcher alike . For an up-to-date and accessible reader on contemporary Soviet life in this crucial area, look no furtherl

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John Ure Marx : An Introduction Viewbook 305, Economics, London 1987, 290 pp . Peter Howells Keynes: An Introduction Viewbook 302, Economics, London 1987, 309 pp . Reviewed by Maryam Poya Viewbooks are books on disc, a new publishing venture by Information Education .* The idea is to provide schools and colleges with a range of social science topics which can be read off the screen, with search facilities to enable students to follow chosen pathways through the books, and the facility to print out hard copies of all or part of the text. The discs are available for most types of personal computers, and come with rights to make up to another twenty copies . Marx: An Introduction is a refreshing and stimulating introduction to Marx and Marxist economics . Divided into five chapters, it examines Marx's political philosophy, epistemology, historical materialism, critique of political economy, and also the modern relevance of Marxist economics . Its first merit is that it shows how the life of Marx (1818-1883) was affected by the changing economic and political situation of 19th-century Europe, and the reverberations of the French Revolution . It explains the process by which Marx developed his views 'by believing in a modern, scientific approach to

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problems distinct from a belief in universal moral or religious principles .' The end result was his greatest intellectual achievement, the writing of Capital, as an investigation into the workings of the capitalist mode of production . During Marx's lifetime, Europe went through an unprecedented expansion of trade and industry, new nations emerged, and new social classes consolidated . Classes differentiated in their attitudes on questions of national identity and politics . The new ruling classes forged their own national identities with a firm grip on national political power through the state. Through their use of power, including religious and moral power, they attempted to secure legitimation . Material conditions, however, were all the time exacerbating the social realities of class oppression and exploitation . All philosophers and economists of the time looked upwards, to enlightened rulers, rather than downwards, to the working class to achieve a more equitable society . The greatest social manifestation of working-class action during the 19th century, the Paris Commune, underwrote a different perspective for Marx and Engels, one which had emerged in their assessments of the German revolutions twenty years before . The lesson was clear, `the proletariat can not rely upon the bourgeoisie to establish democracy . Only the socialist revolution itself will achieve this task .' Also especially welcome is the picture this book gives of Marx's philosophical work, and how his historical materialist method emerges from a synthesis of the idealist traditions of dialectics, especially through the work of Hegel, and the materialist traditions

represented in the naturalistic philosophy of Feuerbach . Ure argues that the realist position developed by Marx takes him beyond philosophy. It enabled Marx to see that `philosophers have only interpreted the world, the point however is to change it .' But Ure stresses that this `is not just a call to revolutionary action, it signifies Marx's epistemology, his theory of knowledge, which necessarily involves changing the world .' It is the dialectical unity of thoughtful action and active thought which really takes Marx beyond philosophy . Marx's unique contribution to social theory is the interaction of consciousness and changing material conditions . He views society as constituted of contradictory relations between classes, ideologies and institutions . But it is class struggle that fuels the motor of change in society, and class struggle needs the guidance of retained interpreted experiences . This, more than anything else, was the purpose of Capital. `Capital for the worker is an arsenal of knowledge, it raises class consciousness and self awareness . The working class develops from a class in itself to a lass for itself.' Chapter three of the book deals with Marx's historical materialism, how human societies have reproduced themselves systematically through the labour process . The technical forces and the social relations under which labour is performed, and through which labour transforms nature and society itself, are the neutron and proton of Marx's fundamental concept, the mode of production . Marx is clearer than many of his followers to stress the highly abstract nature of this concept, and by moving to a more concrete level of analysis Marx demonstrates that while

Book reviews each social formation may exhibit common features, they nevertheless `each retain in their culture and society different traces of their past .' Marx and Engels documented social formations sharing a common dominant capitalist mode of production as increasingly polarising between capital and labour, the more so as the forces and relations of capitalism developed . Using the metaphor of base and superstructure, they argued that the material contradictions oppressing and exploiting labour must undermine the ideological defences of bourgeois society . But, despite the more popular interpretations of their texts, neither Marx, nor, insists Ure, Engels held deterministic views . Against inevitability stood their emphasis upon the uncertain outcome of class struggle . For Marx and Engels revolutionary social change requires mass action and the collective consciousness of the working class to be put into effect through a workers' party . In chapter 4, the author looks at the importance of Marx's political economy. Ure explains how Marx, through surveying the work of leading economists of the time analysed the alienation and oppression of the working class . In his earlier writings Marx reveals the degradation of the worker to the condition of a wage-slave, reduced to a commodity status, alienated from her own labour and purpose, and yet dominated by the product of that labour . Here again Marx moves beyond the philosophical boundaries of his early discussions, along the path of historical materialism, tracing the historical rise of capital through its struggle to subsume labour directly under its own control. The result, capitalist exploitation . This historical process separates

labour, as worker, from labour-power, which capital now purchases as a commodity under contract law . Workers become wage labourers, free to sell their labour-power, or free to starve . In all modes of production labour, as work, is divisible into necessary labour and surplus labour, and Marx's own claim to achievement centres upon distinguishing the object of surplus labour, in the form of surplus value, as the source of capital accumulation and growth . Capitalist competition drives the accumulation process, and the accumulation process drives competition . Competition provides the logic behind the intensification of exploitation, the shift from absolute to relative forms of surplus value, the drive towards profitability . Rising organic costs race against rising productivity, profitability cyclically sinks, crises restoring the conditions for the next lap of the race . But `during each round the surviving capitals are likely to have higher organic compositions than during the preceding ones, therefore in the long run the tendency for the rate of profit to fall is reinforced.' The secular trend indicates declining rates of expansion, but this in turn generates increasing cutthroat competition . In the late 19th century the throats that got cut were mostly those of native peoples trying to defend their lands against colonial annexation, or of workers thrown into imperialist war . These periods of world expansion of capitalism stall longer-term crises . Since 1945, a permanent arms economy could be said to have had similar effects, but falling rates of profit are always threatening in the background . Finally, the crucial importance of this book, its real political meat, lies in the analysis of how relevant is Marxist

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176 economics today? Ure explains in chapter 5 that for bourgeois economists the market place determines the wealth of the nation, while for Marxists it is the performance of labour, and that the conditions which govern the performance of labour determine where social and political power rests . By controlling the means of production, including investment, the ruling class exercise social power and allocate society's relatively scarce resources. It is not some `natural law' of supply and demand, but the operation of the 'social law' of value that explains the workings of the capitalist system . What is the `value' that a society places upon a particular range of commodities? It is a relative worth, and the distribution of factors and the distribution of products will reflect, more or less, society's assessments of relative worth . But who makes the aco-tsments? Is it, in the main, the people who have to labour to meet the pattern of demands which 'society' has determined? In the main, it is not, because those who rely upon labour for a living do not have the control over the social resources which would give them a chance to determine the pattern of social demand . Between production and consumption (capital and wagegoods) lies a social control over the productive forces which manipulates both . The law of value ('equal values exchange') is the economic law of social control . Translated it says, from each according to their efforts, to each according to what their efforts cost them, and what's left over, the greater part of the social product, is skimmed off by the ruling class and its unproductive apparatuses of social control . In this review I have mainly pointed to the virtues of this book, but it does

however have its demerits too . Ure quite rightly argues that one of the ideological mainstays of capitalist society is the nuclear family . But his analysis of women's oppression and exploitation is reduced to the extraction of surplus value in the workplace . He does not take into account women's dual role as producers and reproducers . Therefore there is a need for the analysis of the social relations of human reproduction which explains the subordination of women to men . The continuance of the family is the form taken by the oppressive relations of human reproduction, the control of women's fertility and sexuality . Marxist economics has strengths and weaknesses in explaining women's oppression, but women's oppression cannot be reduced to the needs of capital. This is not to say that instead it has to turn into a theory of autonomous struggles between the sexes . Materialist analysis must involve relations between oppression and exploitation, relations between the economic and the ideological, and the role of ideology is more than a reflection of the relations of production . Ideology has material effects on people's lives . Also socialist analysis needs to recognise the gender division of labour which is built into capitalism and results in women's subordination to men . Analyses along these lines will shed light on the importance and necessity of feminist struggles within capitalism . The book of Peter Howells, Keynes: An Introduction, the second of six economics Viewbooks so far issued, is also divided into five chapters . They cover Keynes and macroeconomics, aggregate demand, money, policy, and recent controversies . By setting Keynes

Book reviews in his own times, and reminding us of the state of the art in the 1920s and 1930s, Howells provides for his readers an access to the original flavour of Keynes, as comes out in his reinstatement of Keynes' approach to aggregate demand as opposed to the Hickian isi LM formulation which squeezed Keynes back into a neoclassical mould . Relevant to today is the discussion of Keynes' rejection of the neoclassical view of the 1930s that `low wages will lead to restoring equilibrium' . Howells explains the operations of the money market and goods market as a prelude to modern controversies within and around Keynesian economics, and the rise of monetarist nostrums. Like the book on Marx, this is clearly written, presenting what can be complicated ideas in a simple and crisp way which should be accessible to most students . Since each page of a Viewbook is limited, by the screen, to 110 words, the authors have had to find modes of expression which are economical without being too dense . On the whole they have managed this task well . Whether viewing a book on a screen will catch on is another matter, but as a pioneering project these are technically well produced as well as being readable .

*Details of Viewbooks are available from Enterprise Centre, Bedford Road, Stoke-on-Trent ST14PZ . Telephone 0782-281643 . Education Information, Unit 22, The

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Anthony Lemon Apartheid in Transition Gower Press, 1987, xi + 414 pp . Reviewed by William Cobbett With the current boom in books on South Africa, any addition is subjected to an immediate acid test - does it genuinely have something new and original to say, or is it merely an opportunistic leap onto the bandwagon? Anthony Lemon is neither opportunist nor newcomer - he has been writing useful and interesting material on South Africa for over ten years . This book, however, is a major disappointment . We are told that the aim of the book is' . . . above all to inform, rather than argue : to provide a detailed explanation of the historical context in which apartheid has developed and ways in which it has been implemented, together with the nature, extent and direction of recent change . The perspective is one of commitment to rapid but peaceful change' . Apartheid in Transition contains seven sections: Historical Background; Apartheid Ideology and White Voters ; The South African Space Economy; Population and Urbanisation ; Indians and Coloureds ; Constitutional Alternatives and Forces of Change . One is immediately forewarned to Lemon's'topdown' analysis, accepting the terrain determined by the state . This is the book's pervading weakness - from the non-interrogative nature of the title, one would obviously expect some discussion of the forces that are causing apartheid's stated tran-

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sition . Given that Lemon adopts a liberal approach to South Africa, one cannot reasonably expect a discussion of class struggles . But a Marxist approach is not necessary to discuss many of the historical struggles omitted by Lemon. In the historical overview, for example, there are many glaring gaps for example, the icu is not even mentioned in his discussion of the 1920s . Naturally, one has very limited expectations of a 40-page synthesis of events from 1652-1948 - such an exercise can serve to conceal as much as it illuminates . In discussing the inter-war period on page 41, Lemon states that `The government embarked on a policy of encouraging manufacturing industries to provide a new field of employment for poor whites, and introduced labour legislation designed to protect white workers' . This is superficially `correct' . The readers may also be interested, however, to know the genesis of this legislation, the battles between labour (black and white) and the mine-owners, between the white workers and the state, culminating in the Rand Revolt of 1922, the threat of insurrection, martial law, Smuts' use of artillery in the suburbs, etc. An understanding of these struggles and the Industrial Conciliation Act of 1924 is indispensable to an understanding of industrial relations in South Africa, even in the 1980s . The book's strengths lie closer to the author's obvious fascination with South Africa as a human geographer . There is much useful material - statistics, descriptions of the bantustans, urbanisation, industrial decentralisation and the like . However, to come to grips with apartheid, we have to under-

stand more than legislation, white voting patterns, Afrikaners and 'homelands' . Lemon's top-down and formalistic treatment of the material leads at times to a startling separation between the policies of apartheid and their effects . There is also resistance to apartheid, which has played a rather more significant role than the reader would glean from Lemon . It is in this area that the weaknesses of the book are most telling - indeed, sometimes the very choice of material to be discussed is instructive . In the section on `Constitutional Alternatives', Lemon discusses various models - from the white secessionist state favoured by the far right, to the federal models beloved of mainstream `liberals' and big business . All of these models have one common theme- how to prevent a non-racial democracy in a unitary state, arguably the most popular option in South Africa, and one not discussed by Lemon . The answer to the many omissions is partly to be found in Lemon's uncritical treatment of Buthelezi and Inkatha - `Chief Buthelezi himself is remarkable as a Zulu aristocrat with traditional legitimacy who acts through government institutions and has yet won strong populist support. He has done so with a skilful blend of principle and pragmatism which enables him to make clear his total rejection of apartheid and insistence on majority rule, yet to leave open the door to negotiated solutions which could find sufficient acceptance among whites' (p . 331) . Only fools and hacks deny that Buthelezi has a genuine support baseLemon, however, makes no attempt to uncover some of the coercive and corrupt methods used by Buthelezi and Inkatha to ensure support or, failing

Book reviews

that, compliance . Instead, he uncritically reproduces `evidence' that Inkatha members ' . . . rejected Zulu ethnicity as having a political role . . . and were overwhelmingly opposed to political violence' . Nice sentiments, shame about the facts. Lemon's knowledge of the past decade of resistance in South Africa is extremely weak, as is evidenced by his discussion of the UDF (accorded one page to Inkatha's three), which is as dated as it is inadequate . Instead of discussing the UDF's many successes (and, indeed, its failures), and describing the street and area committees, recent boycotts, people's courts, `People's Power' etc ., Lemon chooses to echo the `accusation' of the state (and Inkatha) that the UDF is the ANCs internal surrogate . There are equally weak discussions of the trade union federations, the Congress of South African Trade Unions (CosATU) and the National Council of Trade Unions (NACTU). For all its advertised virtues as an 'interdisciplinary study' for those `who wish to go beyond the necessary superficialities of the media', Lemon's work ignores most of the research and debates that have so enlivened and advanced the study of South Africa inside the country . This goes a long way to explaining why the book fails. Lemon's omission of so many crucial events and organisations can only be partly explained by the very glaring omissions in the bibliography . Anything of value in Apartheid in Transition is lost in the face of such inexplicable and unacceptable history .

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Communist Working Group Unequal Exchange and the Prospects of Socialism Manifest Press, 1986, 225 pp . Reviewed by Akwasi Aidoo This is in many ways a timely book. For over a decade now, imperialism has dealt fatal blows to some of the promising struggles for socialism in oppressed nations . Chile comes to mind . So do Grenada and, to some extent, Mozambique . In the imperialist countries themselves, the elections and re-elections of ultra-conservatives like Thatcher, Reagan, Nakasone, Kohl, Mulroney, and Chirac indicate that the prospects for socialism are not now too bright . To be sure, the post-Vietnam period has seen impressive national liberation struggles and social revolutions (Angola, Ethiopia and Nicaragua being among the most prominent), but it has also been a period of profound difficulties for socialism globally, as imperialism has re-doubled its efforts to recover lost ground . This situation raises several important questions: Why has the revolution not occurred in the imperialist countries? What are the chances of it occurring? What are the prospects for socialism in the oppressed countries in the face of mounting imperialist aggression and counter-revolution? What social forces remain revolutionary and can be expected to struggle for socialism? These questions require serious attention, if only for revolutionaries to learn the proper lessons from past experiences .

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The book is devoted to these issues . The preface is by Arghiri Emmanuel, whose controversial theory of unequal exchange (first propounded in the 1970s) is used as the theoretical starting-point. The first chapter explains a number of basic Marxist concepts and categories: the dialectics of theory and practice, dialectical materialism, base and superstructure, etc . It also provides statistics to show what we already know : that the `population of the world is divided into rich and poor' . The second chapter describes the historical background of unequal exchange, and the third explains the essential aspects of the theory of unequal exchange . Chapter four provides concrete illustrations of unequal exchange by reference to wage differentials between 'rich and poor countries' . The final two chapters, the most original parts of the book, consider the prospects for socialism in both imperialist and oppressed countries, and what actions must be on the political agenda of communists in imperialist countries . The entire book is premised on the argument that the imperialist countries exploit third world countries through unequal exchange, as illustrated in wage variations, consumption differentials, and trade imbalances in the world market . On the basis of this premise, the authors argue the thesis that the proletariat in the imperialist countries is better off materially than the people of the poor nations . Moreover, this proletariat constitutes a labour aristocracy that actually shares in imperialist exploitation . It cannot, therefore, be revolutionary . In fact, it has time and again betrayed the people of the poor nations in their anti-imperialist struggles. We are told that in the imperialist countries,

'. . . there are no classes today which are objectively interested in overthrowing the imperialist system, because all classes in these countries profit by this system .' (p . 197) Also, since the proletariat in these countries have a stake in imperialist exploitation, there is really no basis for expecting it to struggle for socialism which implies anti-imperialism. The authors argue the situation in poor countries is different . In these countries, genuine and effective antiimperialist struggles are possible and do occur, for 'anti-imperialist mass movements are only found where imperialism means exploitation and impoverishment' (p . 198) . The national liberation struggles that exist in these countries constitute 'the greatest threat to the imperialist system today. They do their share towards creating crises in imperialism . These crises are of crucial importance, if a revolutionary situation ever is to arise in the rich part of the world.' (pp . 198-9) In other words, the 'prime movers' (indeed the prospects) for socialism are rooted in the poor countries . What is to be done? Communists in the imperialist countries must support (materially) the anti-imperialist movements and struggles in the exploited countries . That is where the future is . There is no other . There are a number of obvious' problems with the premise, thesis, and conclusions of the book. First, the division of the world into simply rich and poor nations is conceptually limiting . Since the authors claim Marxism (Marx, Engels and Lenin are quoted profusely), the least we can expect from

Book reviews them is class analysis . In Marxism, imperialism is first and foremost a class (not simply a national) phenomenon . It is class exploitation . And, therefore, to say that an imperialist country exploits a poor country and leave it at that is to gloss over class differentiations in the poor countries at least . Not all classes in the so-called poor countries have a stake in defeating imperialism . The comprador class, for example, survives and thrives as a result of imperialism . It is this failure to undertake concrete class analysis that leads the authors to assume that all 'national liberation' struggles are by definition anti-imperialist . The experience of Africa, at least, sharply contradicts this . There is also the characterisation of the proletariat in the imperialist countries . Even if we were to accept the contention that this class wholly constitutes a labour aristocracy, the burning question remains : does this make them imperialist? Is a labour aristocratic class objectively an imperialist class? Does it have monopoly capital with which it exploits? Obviously not . The proletariat in Europe or North America is not better off, that is, in comparison to the capitalist class, its own or any other . The authors' answer to this is that the proletariat is 'bribed' to support imperialism . But what, then, do we make of the popular straggles in those countries in solidarity with the Vietnamese people, the Nicaraguan revolution, South African liberation, etc .? What do we make of the evermounting working-class struggles in those countries against capitalist exploitation? In all the imperialist countries today, there is ever-increasing unemployment, homelessness, poverty, hunger, etc . What stake does the

working class which suffers most from these crises have in imperialism? Related to this, of course, is the obvious question : If there is no anti-imperialist class left in the imperialist countries, then in what social class are the communists, whom the authors call upon to support the national liberation movements, based? These are only a few of the issues not considered . The book is, however, very wellwritten ; and the authors show a good grasp of very basic Marxist concepts . It also represents the first effort to draw the political implications of Emmanuel's theory of unequal exchange . Its thesis is likely to receive considerable attention ; and may even appeal to some third world progressives, if for no other reason than the psychological satisfaction that will come with being perceived as the most revolutionary force in the world . Beyond this, it is not likely to have much social liberating influence, for in the final analysis there is something fundamentally flawed with a revolutionary organisation that bids farewell to oppressed classes of its own country .

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Boris Frankel The Post-Industrial Utopians Polity Press, 303 pp. ISBN 0 7456 0039 5 ISBN 0 7456 0040 9 Reviewed by Richard Gunn Those whom Frankel terms the 'postindustrial utopians' include Alvin Toffler, Andre Gorz and Rudolph Bahro, and throughout the major part of his book his concern is to identify evasions, confusions and inconsistencies in their thought . In his final chapter, he sets out his own 'concrete utopia' for what he calls an 'eco-socialist semi-autarky', thereby attempting to reformulate various of the postindustrialists' programmatic declarations in a 'feasible' and politically cogent way . The strength of the book lies in the awkward questions which it raises . For example, what sort of 'post-industrial public sphere' is needful if 'basic communes' (Bahro) and 'electronic cottages' (Toffler) are to be more than renewed sites of parochialism and exploitation? What sort of provision of 'social wage' goods and services is required if such an impasse is to be avoided? What sort of larger-scale institutions should be present in order to ensure co-ordination between basic living- and production-units? (Frankel argues forcibly against marketsocialism in so far as it involves a labour market, because inequalities, especially of sex, are likely to be perpetuated .) Further : how do the post-industrialists expect us to move, politically and

socially, from 'here to `there'? Purely technological development-computerisation, 'flexibilisation' and microelectronics - cannot be relied upon to do the job . Quite apart from the exploitative potential of these developments, there is the question of how far such developments reach. Frankel cites research demonstrating that 'high technology jobs will account for less than 4 per cent of new jobs in the use by 1995' and that 'janitors or building custodians will account for more new jobs than the five fastest growing high tech jobs combined' . And again, sheer 'radical antistatism' is argued by Frankel to be selfdefeating, not least because it is the state which currently supplies 'the very social wage services' on which the 'decommodified' groups who form a large portion of the supporters of new social movements depend . Frankel challenges the political naivety of appeals to altruism which come down to asking people to cut their own throats. All this is excellent material for provoking, on the left, a timely debate . Reservations about The Post-Industrial Utopians become inescapable, however, when one asks : on what conceptual and political framework does Frankel himself rely? The problem concerns the term 'post-industrial' which, roughly, signals a social order located beyond the class divisions of factory-based capitalism and has received a new lease of life on the left from the rise of 'flexible' technology, new social movements and ecological political views . The term seems to capture something of what is novel in political and social developments in the 1980s, and offers to consign to history's dustbin notions of class struggle appropriate - so it is urged - only to an 'industrial' age . This being so, the evaluation of the

Book reviews

term 'post-industrial' must be political . Despite its (numerous) phases of dogmatic distortion, Marxism has always construed new political and technological outcomes as mediations of class struggle, and as mediated by class struggle in their turn . No reductionism is involved here, but rather a concern that social interrelations and revolutionary opportunities be made theoretically and politically clear . 'Displacement of research' and 'displacement of the [revolutionary] subject' go hand in hand : the constitution of a new social structure and 'a new form of antagonism' (Negri) are one and the same . Capitalism, that is, has always developed in terms of breaks and thrown up novelties (it just is the revolutionising of the forces of production) so that a temptation, and a danger, becomes inescapable . The temptation is to see a current break in capital's development as definitive and unprecedented, and as sanctioning a wholly new conceptual frame (e.g. 'postindustrial') . The danger is twofold . In the first place, such a move threatens to take at its face value capital's own 'appearance', i .e . the categories in which it presents itself. In the second place, such a move threatens to construe a break in capital's development as a break with capital, as though 'postindustrial' society were no longer capitalist or alternatively were capitalism already evolving beyond itself . Frankel is rightly cautious about overestimating the current period's novelty, urging that we still live in a capital-dominated world and criticising, sharply, writers who see new technology as already carrying us beyond capitalist confines . But still he uses the term 'post-industrial' as the methodologically organising concept of his own

work . He favours a 'post-industrial socialism' and even offers his own definition of post-industrialism as 'the transcendence of blue-collar work as new knowledge-based industries become dominant' . To be sure he adds, later, that 'I do not believe that capitalist societies have given way to classless societies dominated by knowledgebased elites', thus guarding himself against exaggerating both the historical and the social novelty of the developments with which he is concerned . Still, however, conceptually : the term 'capitalism' names the historical and social continuity while the term 'postindustrial' is methodologically privileged as naming innovation and break . However much this conceptual structure stresses that 'new knowledgebased industries' are still capitalist, it can say nothing about how in their specificity-or in other words precisely as novel - such industries are forms (mediations) in and of capital itself . To show them in this light would be to show their emergence as rooted in the antagonism of the capital-labour relation : and on this Frankel is silent . On his account they figure merely as developments to which a political response is needed, rather than as a constellation in which class struggle is inscribed . Once again, it seems, the task of the left becomes one of catching capital's all-too-swift-moving and elusive tail . Perhaps for this reason, Frankel's own 'concrete utopia' is a somewhat disappointing one . It combines 'semiautarkic' communities with the continued existence of nation states, and centralised with decentralised planning ; it even allows to markets a minimal role . It is geared, soberly, to 'existing, but surmountable prob-

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lens'. It alters the mix as between various of the elements favoured by post-industrialists, but the elements themselves remain much the same . Perhaps the difficulty, here, is that Frankel remains too close to the postindustrialists (however much he criticises them in detail) in believing that it is important for the left to display a model of a socialist world . Evaluating this belief raises complex issues : Marxism at any rate has always resisted the construction of such models, not least on the grounds that they risk importing into an open future categories which form part and parcel of the status quo . If `the "who" and the "how" of revolutionary transformation constitute a single process' (Negri again), then the construction of model futures - save perhaps in a playful and thereby nonsober spirit - becomes, at best, otiose . Is it really politically irresponsible to say that capitalism's 'existing, but surmountable problems' are best left to capital and that the task of revolution is to find its own, necessarily uncharted, way?

Cynthia Cockburn Two-Track Training : Sex Inequalities and the YTS Macmillan Education, 211 pp . ISBN 0 333 43288 6 and 0 333 43289 4 Reviewed by Judith Squires As a link between the two sexstereotyped worlds of school and work, the Youth Training Scheme -

instituted by the government in 1983was potentially well-placed to shatter the mould of sex inequality. Yet far from enabling young women and men to cross gender-boundaries in training and work, the YTS has accepted and reinforced these boundaries. These two claims premiss Cynthia Cockburn's assessment of what has gone wrong with the YTs and her arguments for change . The first point seems wildly optimistic and the second sadly predictable, yet both are worth making and there is much that is interesting and important in the discussion arising from them . Viewed in the context of changing capitalist relations, there appears to be little scope for positive initiatives within YTS . 'YTS trainees are, for the moment,' Cockburn notes, 'in suspension between the degradation and boredom of the dead-end jobs that have traditionally been allotted to the working-class young, even in the guise of apprenticeship.' Cockburn rightly argues that YTS must be seen in the light of the 'new vocationalism' : as an employer-led scheme in which young people are often taken on instead of workers on a proper wage and led to compete with one another in what amounts to a year-long interview for the few permanent jobs available at the end. But it is not only capitalism that shapes the operation of the YTS; it is also fundamentally patriarchal . Cockburn adds a gender-perspective to the analysis of the YTS, arguing that gendering is a social construct which does not stop at adolescence and that it is formed and changed only by lived experience, including training and work . This offers at least the potential for change . 'Being taught,' she comments, 'gender can be unlearned.' There is

Book reviews then a case for positive action both to involve more women in technical and technological work and to involve more men in the kind of work that develops nurturing and tending skills . This would help to break down the occupational segregation by sex which, argues Cockburn, is reproduced in the YTS. Thus Cockburn perceptively presents the Yrs as structured by, and as an instrument of, the capitalist and patriarchal state . Yet despite this recognition Cockburn argues that the frequent calls for the boycotting of the scheme are difficult to justify in practice . We need, she argues, some kind of training scheme for 16-18 year olds . `The important thing is to know how we want that scheme to work.' Thus she moves beyond the boycott position into an analysis of how the Y rs could be improved - with particular reference to sex-segregation . Discrimination against women has four expressions in YTS : in the careers guidance process ; among managing agents; among employers ; and on the part of trade unions . The MSC and Careers Service, the college and employers are engaged in at best a wishful laissez faire, and at worst traditional sexist practices . Yet even exhorting young women to widen their aspirations is not enough . For women's `choices' are influenced by their experience of domestic work at home ; by a knowledge of what employers will offer women ; by concern about whether they will survive and thrive once in the job ; and by the 'romance market' . In no sense are they making the assumed genuine, free and unconditional choice . YTS is doing little or nothing to break this pattern . What should be aimed for, in and through the YTs, concludes Cockburn,

is not merely equality of opportunity but something more far-reaching. We should take responsibility for similarity of achievement between the sexes, be concerned with what a woman actually gets to do rather than what she is free to attempt, and contradict the assertion that women may be doing something different from men but that they are nonetheless equal . Putting forward an argument that directly challenges the woman-centred feminism that glorifies `female' qualities, Cockburn proposes that women and men may reasonably be expected to have similar activities, live similar lives and distribute themselves over all available occupations in a broadly similar curve . Both the liberal argument for equality of opportunity, and the radical feminist argument for prioritising `women's values', are firmly - and wisely - rejected in favour of a commitment to equality of outcome . And this, she hopes, is a realistic goal. `Something can be done for young women in YTS . People are not irredeemably fixed in their gender-mould.' This is the voice of optimism that rings out throughout the book . But what worries me is that much of what Cockburn herself describes actually leads to much more pessimistic conclusions . Even if women outflank the prejudicial workings of the labour market and the job market and outface the discriminatory practices of recruitment, they still know that they will not escape the gruelling necessity of living out their decision once made . Thus it is only when women can be assured of genuine employment possibilities outside stereotypically female jobs that it will be legitimate to put full weight behind encouraging them to train for such work . Any real challenge to the two-track training in Yrs must be part of a wider challenge

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of the sexual division of labour in employment . In short, if sex-segregation is not to be perpetuated by the TYS, a definitive refusal has to take place . Given that Cockburn is well aware that the context of YTS actually renders it a vast machine for mass-producing age-old inequalities, it is encouraging that she is still so optimistic about the possibility of such a refusal . It is simply a case of pessimism of the intellect but optimism of the will, or does she really see a way of bringing it about? Unfortunately she does not let us know . The analysis of what has gone wrong in YTS is clear and depressingly accurate. The recommendations for future practice are sensible and perceptive . My only worry is the disparity between the two . Cockburn argues that the important thing is to know how we want a youth training scheme to work; yet knowing how to create our ideal is equally important, if much more difficult .

Dan Finn Training Without jobs : New deals and Broken Promises Macmillan, London, 1987,256 pp . ISBN 0 333365 089 h/b £20 .00 ISBN 0 333365 097 p/b £6 .95 Reviewed by Alice Brown Dan Finn's book addresses ongoing political debate on the left about training, and in particular participation in

and support for the Conservative government's Youth Trainihg Scheme (YTS). The success of the YTs depends on trade union and local authority acceptance, but can that training be for labour, or will it necessarily be used against workers? As Paul Willis asks in the Foreword to this book, `How is it, and is it, possible to reconcile the tensions between training as class reproduction and training as working-class interest more in favour of the working class?' In answering this question, Finn sets the current debate within an historical context by examining education and training developments from the introduction of compulsory schooling in the late 19th century to the creation of the two-year YTS in 1986 . Finn describes and analyses some of the contradictions in a number of issues : the introduction of compulsory schooling for the working class ; the temporary employment schemes of the inter-war period ; the raising of the school leaving age to 16 in 1973, the interconnection of this reform with comprehensive reorganisation of schools, and the impact of these measures on teachers and pupils ; and the effect of rising unemployment in the 1970s and 1980s and the role of the Manpower Services Commission (MSc). The main arguments of this book are firstly, that the expansion and reorganisation of education and educational institutions have continually reproduced the major inequalities in British society. Secondly, that the failure of the policies of the 1974-79 Labour government paved the way for Thatcherism and the attempts since 1979 to restructure the relationship between education, training and work . Finn argues that the use of the power

Book reviews of the state to change this relationship, by shifting to vocational preparation and an exmployer-led Yrs, and to manage the continued crisis of youth unemployment, is both fragile and contradictory. On the basis of this fragility and contradiction he contends that it is both necessary and possible for the left to offer an alternative, more progressive, training and education strategy. Finn outlines reforms to shift the balance in favour of the young working class . Key elements of these proposals include a school curriculum and training scheme designed to meet the needs of all young people, broadly defined, rather than the narrowly defined interests of potential employers; the establishment of equal opportunities and rights for all pupils and trainees ; the provision of adequate resources and funding to develop education and training; and payment of appropriate allowances for young people either continuing their education or participating in a training scheme . Such changes have implications for the activities and priorities of the MSC and the involvement of the trade union movement . Finn argues for a reappraisal of the centralised role of the MSC, and the establishment of a decentralised training system to meet the needs of local economies ; he calls on the TUC to change its role from 'one of consensual partner to that of advocate of the interests of trainees and the unemployed' . One of the strengths of this book is that it brings together the links between education and training policies, especially at a time when the distinction between education and training is becoming increasingly blurred . Some may argue that Finn attaches too much coherence to the Conservative govern-

meat's strategy, as many of its training programmes have been ad hoc responses to perceived problems . However, I consider that more could have been made of the logic behind the reforms and the relationship between different policy areas, particularly the definition of areas of social policy such as benefits and housing . Policies on education and training are reinforced and supported by a variety of measures : the government's overall strategy of reducing inflation; the decision to exclude young workers from Wages Council orders ; its aggressive approach to trade union reform and the breaking of trade union control over training (e .g . the abolition of most of the Industrial Training Boards) ; and its attack on the power of local authorities and educators in education decisionmaking and control . Finn does not fully develop the importance of education and training reform for employment strategy . Fundamental to the government's stance is its interpretation of the causes of unemployment and its view of how the labour market should function . Therefore, it is necessary not just to outline proposals for an alternative education and training strategy . Such reforms must be placed within the context of a comprehensive alternative employment strategy which challenges the monetarist approach; moves beyond the sterile debate over the appropriate levels of government spending ; reassesses priorities ; and looks fundamentally at how we should create and organise work in our society in a non-discriminatory way . It may be desirable that training and education should be seen as `goods' and of value to the wider development of young people regardless of their future employability, but the 'success'

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of training is most often judged by young people and their parents in terms of obtaining a job . It is difficult to disagree with any of the proposals for a progressive education and training policy suggested by Finn, although one may wish to make additions . The problem is, however, that even in the short space of time since this book was written, public policy in this area has moved rapidly in the opposite direction . The Conservative victory at the 1987 election heralded a number of changes, for example, the introduction of the Education Reform Bill for England and Wales which proposes a national curriculum, allows schools to opt out of local authority control, and gives increased powers to parents and employers ; and the introduction of compulsion into the rrs by removing benefit from young workers who refuse a training placement, and the proposed introduction of a unified training programme for adults . The introduction of an element of 'Workfare' to the British training system has been done over the heads of the trade union movement and has been coupled with increasing the representation of employers' interests and other organisational changes within the MsC itself. It is ironic that it has been the MSC and not the TUC which has been most vociferous in its opposition to these developments. However, in spite of current regressive trends, it is important as Finn argues that the issue be discussed, not just on the basis of are you for or against the government's proposals, which offers little to the young people who are unemployed or on an inadequate training scheme now . There are major contradictions in the government's proposals : employers do not necessarily

know what their needs areBritain they have traditionally failed- to adequately fund training themselves; and many employers in the private sector will not provide the number of places necessary for the government to meet its objective of offering training to every school-leaver. Further, young people will continue to refuse to accept or leave schemes which do not provide adequate training, and the move towards compulsion may jeopardise not only the necessary co-operation of the trade unions and local authorities, but the vital role of the MsC itself. The labour movement has a role, therefore, in developing and arguing for a radical alternative policy as 'the young working class and their parents are becoming increasingly disenchanted with the MsCs "new deal" of training without jobs.' What is also required, however, is an analysis of how a radical new deal would fit into an employment strategy which offered genuine opportunities for young people to have some control over their future, and live full and active lives .

Book reviews .

ed. Maureen McNeil Gender and Expertise Free Association Books, 1987, 266 pp . ISBN 0 946960 26 7 Reviewed by Janet Walsh This book is a varied and diverse collection of articles which attempt to construct a sexual politics of `expertise' . It is an initiative of the Radical Science Collective, and all the contributions are by women . The articles cover the distinct but interrelated areas of women's nature and rationality, education, technology, and work, with finally, an extensive critical bibliography . The book is opposed to some of the simplistic assumptions underpinning recent campaigns which encourage women into science and technology related areas . To Maureen McNeil such initiatives assume 'we can extract the knowledge without ourselves entering into the power relations' (p . 2). In short, the contributions collectively demonstrate the need for a feminist politics of `expertise' which is rooted in an analysis of gender relations . At the same time, it is argued that changes in scientific ideas must be accompanied by the transformation of the social, economic and political context of science, and that any simple polarisation between female intuition and oppressive male rationality is an insufficient basis for political analysis and debate. Furthermore, a major preoccupation of the book is feminist political strategies which have sought to transform notions about rationality, and scientific and technological practices .

Maureen McNeil poses some fundamental questions about gender and rationality by highlighting some early feminist approaches (e .g. Wollstonecraft, de Beauvoir) which considered women to be unfairly deprived of rationality, and contrasts them with contemporary feminists who consider male rationality a source of oppression . Pam Linn explores the construction of Gender and Technology stereotypes by addressing the influential labour process literature and criticises its narrow focus on technological hardware (i .e . the assembly line). Why are particular types of gadgetry considered to be technically complex? Is it because men use them? An exploration then follows of the ways in which feminists have challenged definitions of technology, particularly initiatives in the male-dominated areas of manual skills and technical training, with an analysis of the operation of a ct-c-funded Technology Network . Other contributions review a selection of influential literature on the gendered construction of jobs and work, the gender dynamics of technological change in the labour process, housework and domestic technologies, masculinity and nuclear technology . An interesting aspect of the book is the attempt to connect critical conceptual analysis and political struggle by examining feminist-inspired strategies for change . For example, Grazyna Baran explores some of the difficulties involved in rendering science accessible and relevant to girls and working-class children, and discusses project-oriented work which attempts to change gendered conceptions of science teaching . Mary Kennedy discusses some of the innovatory approaches to education which have developed out of group

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learning initiatives, assertion training and self-defence classes for women. Maureen mcNeil argues that the Women's Health and Peace Movements posed new and radical questions concerning gender and rationality by challenging conceptions of scientific knowledge and male expertise . The scope of this book is breathtakingly wide . These very diverse contributions pose very important questions relating to notions of scientific rationality, feminist epistemology, educational and technological practices . In addition, the book seeks to make connections between conceptual analysis and feminist political strategies which have challenged the gendered stereotypes pervading science and technology . Nevertheless, the book's eclecticism occasionally becomes its weakness as it attempts to cover a vast subject area rather unevenly . Perhaps this is one of the pitfalls of edited collections where it is sometimes difficult to detect a single, coherent conceptual thread when many different issues are being discussed . It was also surprising to see so many essay reviews (seven of the 14 contributions) which tend to assume that the reader has had a prior access to a substantial body of literature . On a conceptual note, McNeil, Linn and Williamson allude in their respective chapters to the difficulty of constructing a gendered analysis without assuming that `women' are a homogeneous social category with a common set of interests . Clearly, the cleavage of class and race challenge such a notion and it might have been interesting for the book to have explored this in relation to a sexual politics of expertise . Despite these points, however, the book is both stimulating and informative.

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