Capital & Class. - 1988. - Issue 36 issue 36

Business unionism

Jeremy Waddington Business unionism and fragmentation within the TUC

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On the first full day of Congress in Bournemouth the EETPU was expelled from the TUC for the second time in the union's history . In proposing the expulsion the TUC's General Secretary cited the failure of the EETPU to accept two Disputes Committee rulings . The expulsion, therefore, was ratified on the basis of the EETPU's defiance of the Bridlington Principles, agreed almost 50 years ago to restrict competitive recruitment among TUC affiliated unions . The Disputes Committee rulings refer to single union agreements signed on behalf of the EETPU at Orion and Christian 7 Salvesen . The aim of this article is to trace the decline of the TUC's cohesion, the events leading to the isolation of the EETPU, and the political implications for unionism in Britain .

Capital & Class 8

The rise and fall of TUC influence Between 1919 and 1927 the TUC was reorganised to function as a central coordinating agency for trade unionism . The resolution of inter-union disputes and the pursuit of extended links with governments were among the responsibilities constitutionally allocated to the TUC . Apart from a provision to expel unions, however, the constitutional embodied no substantive powers of compulsion over member unions . The Congress of 1939 established the Bridlington Principles covering inter-union competition for membership . Spheres of recruitment were agreed which consolidated the existing recruitment bases of affiliated unions . In other words, restrictions were placed on the expansion of unions into areas already claimed by other affiliated unions . The recruitment bases of the general unions thus afforded were constitutional protection . These restrictions were compounded by the adjudication of the Disputes Committee which is widely considered to favour the larger unions with broad recruitment bases (Kalis, 1977 and 1978) . The TUC has developed as an intermediary agency between affiliated unions and the state . As such, its influence and cohesion has varied with the character of state intervention . Throughout the 1930s the expansion of state intervention heightened the standing of the TUC, whose General Secretary ensured that governments consulted with trade unionism through the General Council . During World War II and the post war Atlee administration TUC influence was unprecedented, based

on the tripartism of wartime production . As rising prices fuelled rank and file opposition to wage restraint during the late 1940s, the TUC was compelled to withdraw support for government economic policy . In consequence, influence began to wane . The decline continued throughout the 1950s on the election of successive Conservative governments . The pay pause of 1961 and the concerted reaction against it among an expanding trade union membership signalled a further period of accumulation in the influence of the TUC . Union representation of tripartite committees was secured primarily through the TUC . During the 1960s and 1970s this influence was bolstered by increasing state intervention . Elected Labour governments were able to work in conjunction with a TUC dominated by the broad left alliance of the AUEW and the TGWU . Strong undercurrents of division, however, became apparent between 1975 and 1979 as the right regained control within the AUEW . With no constitutional mandate to bring to bear on affiliated unions, the General Council was reliant upon securing concessions from the Labour government to maintain its position of influence . The dilution, and latterly outright rejection, of the TUC's economic and social policy priorities led to the demise of the Social Contract amid widespread discontent over declining living standards and higher rates of unemployment . The thrust of the Thatcher governments' approach towards the TUC has been to restrict involvement in broader policy development . The

Business unionism withdrawal of interventionist measures has circumvented the administrative channels through which the TUC derived influence . Moreover, the enactment of antiunion legislation was met by a divided TUC, exemplified by the refusal to back the NGA in disupte with theStockport Messenger and the breaking of ranks by the EETPU and AUEW in applying for public money to fund secret ballots . The Thatcher government continues to restrict the involvement of the TUC . In the absence of direct constitutional means of compulsion, the pressures towards fragmentation inherent in the TUC's structure are thus more exposed . Membership recruitment within the TUC The representation of affiliated unions within the TUC is in large part a function of membership size . During the 1950s, for example, the Praetorian Guard (the General Secretaries of the TGWU, NUM and NUGMW) dominated the TUC in wielding massive numbers of votes in support of the right-wing orthodoxy . The 1960s and 1970s witnessed shifts in the balance of forces within the TUC stemming from the disproportionate growth in public sector and white-collar trade union membership . White-collar trade union membership affiliated to the TUC rose by 75 per cent between 1964 and 1970 wile white-collar representation on the TUC General Council doubled between 1960 and 1972 (Lumley 1973) . Similarly, the density of unionisation among women rose from 25 .1 per cent in 1960 to 39 .5 per cent in 1979, when almost 4 million women were union members (Bain and Price, 1980 and Price and Bain, 1983) . In an

attempt to accommodate these 9 changing contours of representation constitutional reform was introduced in 1982 . The trade group basis of election to the General Council was rejected in favour of automatic representation for all unions organising in excess of 100,000 members and six seats reserved for women . Whereas the shifts in representation within the TUC during the 1960s and 1970s were founded on differential rates of membership growth, the economic restructuring of the 1980s has been accompanied by membership decline . Aggregate trade union membership has fallen from 13 .2 million in 1979 to 10 .6 million in 1986 (Certification Office, 1980 and 1987), heightening competitive recruitment pressures and thereby, weekening TUC cohesion . Furthermore as Table 1 indicates, the decline in membership has been uneven, reflecting the effects of deindustrialisation and shifts in the labour market on the recruitment bases of unions . (see table 1) The public sector unions, NUPE and NALGO, have incurred relatively small membership losses and TASS increased in membership . Seven of the largest ten TUC affiliated unions, however, sustained considerable membership decline between 1979 and 1986 . Responses to these membership losses are as varied as their initial effects . The TGWU and GMBATU have launched their LinkUp and Flare campaigns to recruit temporary and part-time workers employed in the weakly unionised service industries . USDAW has transferred recruitment responsibilities to shop stewards and intensified

Capital & Class 10

a long standing campaign against low pay in distribution where, even in 1979, union density was only 14 .9 per cent (Bain and Price, 1980) . ASTMS, NALGO and TASS have accelerated recruitment efforts among the expanding numbers of professional, managerial and supervisory workers, and NUPE extended NHS recruitment to include nurses and other Health Service professionals . While these recruitment initiatives differ in character, they share the common theme of extending existing recruitment bases into poorly unionised sectors of the workforce . In contrast, the three traditionally exclusive craft unions, the AEU, EETPU and UCATT, are restricted by the contours of existing union recruitment from such extensions .

Furthermore, the traditional recruitment bases of these unions are declining . Extensions of their recruitment bases are primarily achieved at the expense of competing unions rather than through the intensification of recruitment in sectors of low density organisation . For example, EETPU membership displaced that of the print unions at Wapping . The proposed AEU/Ford single union agreement at Dundee would have displaced eleven other unions signatory to the `Blue Book' national agreement and a similar AEU agreement at Coca-Cola continues to raise the hackles of the TGWU, the majority production union within the company . The heightening competitive recruitment pressures were met by a

Table 1 Union

TGWU AUEW/AEU* 1 GMWU/GMBATU NALGO NUPE ASTMS USDAW EETPU UCATT TASS

Membership 1986

Membership Change 1979-86

Fall in Proportion of TUC Membership 1979-86

1,377,944 857,599 814,084 750,430 657,633 390,000 381,984 373,715 249,485 241,000

-33 .9% -34 .5% -15 .8% -0 .3% -5 .0* -20 .6% -18 .7% -15 .8% -28 .4% +20 .5%

-2 .2% -1 .5% +0.9 +1 .9% +1 .4* +0 .2* +0 .2% +0 .4% -0 .2% + 1 .0*

* 1 Excludes the membership of TASS which withdrew from the AUEW during 1984/85 .

Sources : Certification Office, 1980 and 1987 ; TUC, 1980 and 1987

169

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Business unionism tightening of the Bridlington Principles following a campaign by unions displaced at Hitachi in 1984 on the conclusion of a single union deal between the company and the EETPU . To comply with the reformulated Principles, unions were obliged to consult and reach agreement with all unions recruiting within a company prior to the ratification of any single union deals, rather than simply take cognisance of the interests of such unions as previously required . The intention of such a strategy was to limit unions' acquiescence towards employers in the pursuit of recognition and membership . In an attempt to regulate the development of single union agreements on `greenfield' sites the First Report of the Special Review Body (TUC : 1988) stipulates that `no strike' single union agreements signed with an employer prior to the recruitment of members are unacceptable to the TUC . Where an employer insists on such arrangements the affiliated union is required to consult with the TUC . Although single union agreements on 'greenfield' sites are deemed acceptable, the EETPU stands apart from TUC afiliated unions in offering binding arbitration as the final stage of its single union disputes procedure agreements . The TUC's policy on single union agreements consists of two elements . Firstly, such agreements are acceptable providing their terms do not prohibit strikes . Secondly, if the company establishing a plant on a greenfield site is organised on other sites, agreement with the unions recruiting this membership must be reached prior to the ratification of a single union deal . Thus, single union

agreements can only be settled 11 independently of other unions with a previously unorganised company or a company where the union recruits 100 per cent of existing membership . Such provisions, if enforced, strengthen the position of large unions organising within broad recruitment bases .

Membership growth by merger Mitigating the effects of membership decline has been the acquisition of membership by mergers . Mergers allow for marked extensions of existing recruitment bases as the postmerger union is in practice regarded as organising from within the recruitment bases of the pre-merger unions . A merger strategy is, therefore, a means whereby the Bridlington Principles can be circumvented . Furthermore, the autonomy of member unions within the TUC has prohibited the imposition of a central policy covering the form and character of merger activity among affiliated unions . Since 1966 the rate of merger activity has been particularly high (Waddington, 1988), with mergers among TUC affiliated unions exhibiting a strong tendency towards the diversification of recruitment bases . In 1982 the GMWU merged with the Boilermakers to form the GMBATU which subsequently absorbed eleven small textile unions . The original recruitment base of the GMWU was thus consolidated to incorporate craft organisation in shipbuilding and engineering, while the absorption of the textile unions represents an extension of recruitment by the GMBATU into an industry not previously organised in depth by the

Capital & Class 12 union . The TGWU has also absorbed three textile unions, including the Dyers and Bleachers, to expand its recruitment base . In addition, the Stevedores and Dockers, the Agricultural Workers and the small Sheffield Sawmakers Protection Society have been absorbed to reduce inter-union competition within the TGWU's existing scope of recruitment . 1986 Between 1981 and diversification was also the hallmark of the mergers completed by TASS . From a white-collar engineering recruitment base, four craft unions organising metalworkers and the Tobacco Workers' Union were absorbed . While these mergers have arrested the rate of membership decline sustained by the acquiring unions, they have usually involved the absorption of unions with declining or stagnating membership growth . The extensions of recruitment base that they allow, however, do restrict recruitment opportunities for competing unions when allied with the above-mentioned changes in recruitment practices introduced by the TUC . The traditional craft unions have pursued diverse merger policies . UCATT has not completed any mergers . The AEU formalised the unification of the Engineering, Foundry and Construction Sections in 1984 and absorbed the small British Roll Turners' Trade Society . The disaffection of TASS, however, further separated the AEU from expanding areas of employment and union membership in engineering . The historical goal of a union organising all engineering workers is now illusory as several craft unions recruiting in engineering have been absorbed in

mergers . The Vehicle Builders joined the TGWU in 1973 and the Boilermakers the GMWU to consolidate organisation in engineering of the general unions . In addition, the four craft unions absorbed by TASS strengthened broad left opposition to the AEU in engineering, while also allowing TASS to establish a base from which to compete with the AEU for the recruitment of manual workers . The EETPU unlike the AEU and UCATT, has been active in the merger process . From a recruitment base incorporating . electricity supply, electrical and plumbing contracting and maintenance workers in both manufacturing and public services, each completed merger has involved the absorption of white-collar associations into the EETPU's small white-collar section, the Electrical and Engineering Staff ASsociation (EESA) . The associations absorbed were not affiliated to the TUC, but have enabled the EETPU to establish a foothold among recruitment managerial and professional workers .' Recent attempts to amalgamate with APEX, into which are organised clerical, technical and supervisory workers, met with no success . Proposals from the EETPU to merge with other craft unions organising in engineering were rejected in favour of the emergent broad left alliance of engineering unions within TASS . In addition, EESA and the Engineers' and Managers' Association (EMA) entered into a federation, the Council of Managerial and Professional Staffs, in an attempt to counter the recruitment initiatives of ASTMS and TASS . Since its formation

Business unionism in 1982 this federation has attracted 12 professional associations into affiliation from which the EETPU hopes to recruit further merger partners on the basis of an offer allowing autonomy for any merged organisations, while opening access to the EETPU's training and research resources . Similar conditions for merger allowed ASTMS to absorb almost 40 staff and professional associations between 1968 and 1986, the overwhelming majority of which were not affiliated to the TUC . The EETPU's merger policy has sought to retain membership within the `core' of the labour market . The characteristics of business unionism adopted by the EETPU can, therefore, be viewed as a strategy to attract professional and managers into membership . Cooperation with employers, the acceptance of the centrality of enterprise goals and the provision of financial services for members are policies `borrowed' directly from the professional associations with which the EETPU is entering into alliance . The relatively large assets of the EETPU by with professional comparison associations should certainly allow the union to compete in the provision of services . Other features of the strategy are more open to question . Smith (1987) for example, shows that the greater appeal of professional associations by comparison with trade unions is far being clear cut . The from amalgamation of ASTMS and TASS to form Manufacturing, Science and Finance (MSF) in February 1988 provides direct trade union competition to the business unionism of the EETPU . The constituent unions

of MSF have long established and 13 expanding organisation among the groups towards which the EETPU is directing recruitment . The proposed merger between APEX and the GMBATU is also likely to heighten competitive recruitment as the financial stringencies incurred by APEX during the 1980s, which have prohibited extensive recruitment initiatives, will be alleviated by access to the resources of the GMBATU . Three competing approaches to the organisation of white-collar workers are, therefore, emerging . In addition to the business unionism supported within the EETPU, the ratification of the GMBATU/APEX merger, as seems likely, will constitute a central political alliance competing with the broad left dominated MSF . A further area of doubt concerning the EETPU's strategy arises from the capacity of the union to maintain its existing recruitment base . It is no longer protected by the Bridlington Principles and is thus exposed to competition from TUC affiliated unions and membership disaffection . Competing unions will, no doubt, have prepared recruitment strategies to draw membership away from the EETPU . Moreover immediately following the union's expulsion, an Electrical and Plumbing Industries Union was proposed among broad left EETPU members wishing to remain within the TUC . The breadth of support for this initiative is uncertain, but it may form an organisation through which opposition to the EETPU can be focused . Prospects

The political shift towards business unionism is most clearly illustrated by

Capital & Class 14 the EETPU . It is also apparent among other trade unions with craft origins . The AEU, for example, has actively pursued single union agreements to the detriment of competitor unions, while UCATT is reported as establishing a finance company through which members can obtain advice on mortgages, insurance, pensions and investments in addition to discounts on health insurance (Mcllroy, 1988 : 220) . These shifts towards business unionism, albeit varying in degree, are part of a strategy to retain a recruitment bases located within the core of the labour market . The decline in the recruitment bases of the craft unions has been accelerated by the operation of the Bridlington Principles within the TUC . It is uncertain as to whether the EETPU will be successful in terms of both retaining the union's existing recruitment base and expanding organisation to incorporate professional workers and managers . The expulsion of the EETPU from the TUC certainly raises the risks involved, as recourse to the protection of the Bridlington Principles is no longer available . Merger negotiations, however, are currently underway between the AEU and the EETPU . Were these to be successful and the merger ratified, the EETPU may effectively regain access to the TUC as a constituent part of the merged union . Such a merger would also consolidate the tendency towards business unionism . If, as is mooted, this merger were joined by UCATT, tensions within the TUC would heighten on the basis of the emergence of a major, united power block advocating business unionism at

the apex of the trade movement .

union

Note 1 . The unions absorbed by the EETPU and the year of absorption are as follows : United Kingdom Association of Professional Engineers, 1980 Telecommunications Staff Association, 1980 Steel Industry Management Association, 1980 British Officers' Transport Guild, 1982 Rolls Royce Management Association, 1984 Source : Certification Office : Annual Reports. References Bain G . and R . Price . 1980 . Profiles of Union Growth. Oxford : Blackwell . Certification Office . 1980 and 1987 . Annual Reports. London : HMSO . Kalis P . 1977 . `The Adjudication of Inter-Union Membership Disputes : The TUC Disputes Committee Revisited', The Industrial Law Journal, Vol . 6, No . 1 . Kalis P . 1978 . `The Effectiveness and Utility of the Disputes Committee of the Trades Union Congress', British Journal of Industrial Relations, Vol .16, No .1 . Lumely R . 1973 . White Collar Unionism in Britain . London : Methuen . Mcllroy J . 1988 . Trade Unions in Britain 7bday. Manchester : Manchester University Press .

Business unionism Price R . and G . Bain . 1983 . `Union Growth in Britain : Retrospect and Prospect', British Journal of Industrial Relations, Vol .21, No .1 . Smith C . 1987 . Technical Workers : Class, Labour and Trade Unionism . Basingstoke : MacMillan . TUC . 1980 and 1987 . Annual Report. London : TUC . TUC . 1988 . First Report - Special Review Body. London: TUC . Waddington J . 1988 . `Trade Union Mergers : A Study of Trade Union Structural Dynamics' British Journal of Industrial Relations, (forthcoming) Vol .26, No .3 .

The author wishes to thank David Winchester and Peter Nolan for their suggestions .

15

CN Larry Jag an

Social volcano : The Philippines revolution Neither economic progress nor social advance has yet come of the political revolution in the Philippines . Death squads, social reaction against land reform and malnutrition plague the lives of the poor. Yet organisation among workers and peasant labourers is persistent and challenging .

MU 16

The Philippines today is beset with poverty, unemployment tragically low economic growth and immense national debt . Like the rest of the Third World, it is predominantly a rural society, with over three-quarters of its population engaged in agricultural pursuits . But after a century of contact with the West, the Philippines is still economically backward and dependent particularly on the US . When pictures of starving children were published in the Philippines press some time ago, the urban elite were horrified . This could not be the Philippines, they insisted . But it was in fact Negros - Sugarlandia . The poverty in Negros, dreadful as it is, is replicated throughout the Philippines ; infant mortality on Samar island is 80 per thousand, while in the Tondo slum area of Manila the rate is even higher at 130 .

The Philippines After 30 years of despotic government, Cory Aquino was swept into power at the crest of a wave of popular support - `people's power' in February 1986 . Many of the big landowners and Marcos allies, like the `sugar Czar' Roberto Benedicto and Eduardo Cojuangco, have since fled the country . Years of corruption and venal rule have left the Philippines denuded . In Negros, like the rest of the country, the old social order is dying amidst a social upheaval . But as a provincial major pointed out, there `was a political revolution in February 1986, but not an economic or social one .'

Negros a social volcano (Sugarlandia) `We are sitting on a social volcano which could erupt at any time,' warned the Bishop of Bacolod, Monsignor Fortich . The horrific social conditions on the Philippines' sugar island of Negros so moved the Bishop that he felt compelled to make his feelings public . Two years ago he asked a gathering of 3,000 workers in Kabankalan : `How are you, my people?T 'We are hungry!' cried the audience in unison . Negros's 1 .8 million population is 90% dependent on the sugar industry and produces 68% of the Philippines sugar crop . The island is so sugardependent that it earned the name of 'Sugarlandia' . Over half the country's sugar mills are on the island . Now nearly 60% of the sugarlands are idle, two sugar mills permanently shut and the others operating well below capacity . The declining sugar industry has C&C 36-B

thrown thousands out of work . Bishop 17 Fortich says over 250,000 sugar workers are currently unemployed . And increasing malnutrition and starvation has followed . Between 25 and 30 children die every month in Kabankalan, Negros's second largest city, according to a local parish priest, Monsignor Josefino Iledan . The displacement of sugar and mill workers has led to massive migration into the capital, Bacolod . According to a local priest, Father Arman Union says 20% of unemployed workers seek work in the city . Unable to find work or afford accommodation, workers and their families are forced to build temporary dwellings wherever they can . Hastily built shacks are mushrooming in every available space . Of the city's 350,000 population, there are some 100,000 squatters . In fact Negros is a fertile and picturesque island yet centuries of foreign domination have turned a selfsufficient community into an island of misery .

The British connection An old legend in the Philippines tells the story of a stranger who came to the slopes of volcanic Kanloan in search of gold . As he staked his claim around the mountain, a giant rider on a black horse rushed out of of the crater and ate the markers . The rider - the King of the mountain - turned to the stranger and said, `I will not barter this mountain with you, even if you give me two countries in exchange .' Nicholas Loney, British consul and merchant, must have heard this story when he arrived at Iloilo the port city of Negros and Panay, on 31 July 1856 .

Capital & Class 18 He was fascinated by Mount Kanloan, `the gorgeous isle of Negros with purple mountains that look grand in the clear morning air' . He too had come searching for `gold' . When Loney arrived in Iloilo city it was a small thriving commercial centre . With a population of 70,000, it compared in size with Sydney, Chicago and Buenos Aires, and was over twice as large as Manila . It was, according to a visiting historian at the time, 'the largest tin agricultural production, the most active in manufacturing and one of the best instructed among the Provinces .' Apart from an abundant rice crop, it had a shipyard and a fishing port . But most important was its flourishing textile industry . The French scholar Mallat - who visited the Philippines in the 1840s and later published an important work on the region's weaving industry - wrote that Iloilo was renowned for its cloth, 'sinamays and pina' ; 'the combination of their designs and colours is so bright and varied that they have the admiration of the whole world .' In fact Iloilo city was 'one of the textile centres of the world,' its 80,000 looms producing fine weaves which found markets world-wide . 'Almost every family possesses one or two of these primitive-looking machines made of bamboo,' wrote Loney, while the 'more well to do Visayans kept from six to one dozen looms at work .' The textile industry employed over a half of the female workforce .

A new feudalism A few weeks after Iloilo was opened to foreign trade, Loney was appointed British Vice-Consul there . He was also

a representative for several Manchester textile firms . With an acute eye for British manufacturing interests, he pirated the region's best patterns and had them machine woven in England at much less the cost of the local handicraft . He then had these cotton goods shipped to the Philippines, where they sold in the local markets at much lower prices than the locally produced textiles . Twenty years later textiles had become the island's biggest import, constituting over half the total value of imports . 'In one fell stroke he had destroyed an independent industry and had put an end to a way of life that had developed over the generations . Loney introduced sugar production in place of the defunct textile industry . He encouraged the textile merchants to shift their capital into sugar cultivation on neighbouring Negros island . As an incentive he offered the merchants cheap credit, imported steam mills for grinding cane from Scotland and promised the planters guaranteed markets . With the death of the textile economy the necessary ingredients for the development of a replacement industry existed : an educated elite of small businessmen with capital and an army of unemployed and starving workers . People and capital surged across to Negros as the new sugar industry took root . A patchwork of plantations quickly developed . Forty years after Loney's arrival, Negros's population had grown over 450%, to 460,000, 821 sugar mills had been established and sugar exports exceeded 28,000 kilos . The original inhabitants, pagan tribesmen were slaughtered and the

The Philippines cultivated plots of the peasant farmers seized by the greedy invaders . The plantation system, observed an American military officer at the turn of the century, was akin to 'our own South before the (Civil) war where slavery fostered brutality .'

The sweet taste of dependence Sugar's importance to the island quickly grew . By the turn of the century, sugar had virtually replaced all other industry, as one academic commented, between 1855 and 1890 the 'islands traded their industrial economy for one dependent on sugar production . While sugar comprised 90% of the province's exports, imports consisted entirely of rice and European finished goods - textiles, steam mills and luxury goods . The island became totally dependent on the European economy . At the same time it weakened the formerly vibrant economy . In 1888 Iloilo had exports earning some 4 .8 million pesos - 98 from sugar - but spent 4 .7 million pesos on imports - 90 % going on textile and rice . This prosperous region now became subject to periodic famines . As early as 1878 the British vice-consul reported that 'many deaths have occurred from starvation' . Periodic starvation - as the sugar crop failed or international sugar prices slumped - became a recurrent and integral component of Negros life . At the same, time, sugar entrapped the Philippines into an economically dependent relationship . And after the US took political control of the country, this dependency deepened . In 1913 sugar accounted for 15% of

Philippines exports, while in 1932, 19 when sugar production had increased by more than sixfold, sugar accounted for 62% of total exports . More crucially by the 1930s, nearly all sugar exports entered the US market . The relationship became institutionalised in 1934 with the signing of a trade agreement between the US and the Philippines which, although offering favourable terms, tied the Philippines to dual dependence - a single crop for sale in a single market .

Cry of the Sacadas Work conditions in the sugar fields of Negros are reminescent of a Dickensian novel . Workers and their families are totally dependent on the planter for their every need . They have been bonded into virtual slavery by their parents indebtedness, and their own children have no other future . In 1976 a Ministry of Labour survey highlighted this dependence . After extensive research in all Negros sugar districts, the Ministry found that 78% of hacienda workers had borrowed from the planters, 87% of them lived in accommodation provided by the owner, 43% were the children of sugar workers, and 40% had no skills which would suit them for alternative employment . The current minimum wage is 32 pesos a day for sugar workers, while other plantation workers get 44 pesos and the official wage for workers in the sugar mills is 42 pesos a day . However few receive anything like that . According to union officials less than 20% of the planters actually pay the minimum wage . More frequently workers are forced to accept a piece-

Capital & Class 20 work system . For example 14 pesos are paid for a ton of cut and loaded cane . A good worker can complete nearly one and a half tons in a full day - sunrise to sunset - thereby barely earning 20 pesos. Most workers find that they earn less than 10 pesos - 50 US cents - a day . None of the Negros sugar workers have employment contracts - there are no written agreements - and so can be laid-off at any time . Most of the sugar work is actually seasonal . Inevitably workers will be in work only for part of the year . While the most they can hope for is 180 days, workers find they are in paid work for less than 120 days a year . This places an even heavier burden on the sugar workers families . As a National Federation of Sugar Workers (NFSW) organiser pointed out, `during six or so months workers find themselves without work, and therefore without any regular income .' Even if a sugar worker works for the maximum number of days possible and receives the average wage for it, it is insufficient to keep his family in food all year round, let alone provide clothes, medical care and education for them . In these conditions women and children are forced to contribute to the family income - often children as young as 9 or 10 start working in the sugar fields . In the off-season women and children find odd jobs like weeding, producing charcoal for sale in the market or the like to supplement the family income . But this does not go far . A mother of five, Angelina Onas says `I sometimes earnt 20 pesos weeding in the fields, enough to buy rice for two meals .' But now she says she has not been able to regularly earn

that, and her children often go without a meal for up to two days . `They are always crying because of their hunger.' The provision of welfare is largely at the discretion of the landlord . According to a recent survey workers were not entitled to SSS (Social Security System) and Medicare benefits ; women were not granted maternity leave benefits and the Christmas bonus depends on the financial situation of the landowner . In many cases the hacienda's deduct the workers share of the SSS contribution - the employer is required to contribute 75 % of the SSS tax - and retain them, leaving the employees totally without insurance cover, even though they have paid their contribution . In an survey of Negros sugar industry commissioned by the Association of Major Religious Superiors - a union of religious orders - found, that in the 83 haciendas in which they conducted extensive interviews, 58% of those questioned did not receive the minimum wage, 54% were denied social security, 90% did not receive worker's compensation in the case of accidents, and 65% were not allowed medicare . The sugar workers are also forced to go cap in hand to their employer to borrow against their future earnings to pay for marriages, religious ceremonies like captism, medical care and schooling . As conditions in the sugar industry deteriorate, the employers increasingly deny their workers these credit facilities . The worse affected are the children, most of whom are unable to complete their education, and are forced to hang about waiting for work . Less than 10%



The Philippines of children in Negros finish their secondary schooling because of lack of money . This only serves to perpetuate the iniquitous hacienda system of feudalism . But for the casual workers or sacadas - those who do not live on the hacienda, but have come from elsewhere looking for work conditions are even worse . In October 1969, Fr Ateneo Jesena - then a professor at Manila's Ateneo University - having spent his summer vacation working among the Negros cane cutters, published his 'The Sacadas of Sugarland' . In it he exposed the deplorable labour conditions of the Negros' sugar industry . After spending 12 hours toiling under the tropical sun loading some one and a half tons of cane, the sacada was paid 2 .5 pesos the minimum wage for an 8 hour day . But through skulduggery, including forcing the workers to buy their food, clothes, soap and cigarettes at exhorbitant prices from the canteen, the labour contract effectively reduces the sacadas' daily income to a peso a day . At the end of six months of arduous work, the sacadas returned home with less than 30 pesos ($10) in their pocket . Jesena's article had a powerful effect on all who read it . A moderate Jesuit, Jesena was moved to conclude : 'I saw the injustice of it all, and I began to understand why the communists are communists .' From first hand experience, he documented the coercion, exploitation, suffering and despair of the sacadas . 'In the darkness of the many of us huddle around to listen to each one open his heart and recount his personal tragedy . And these though, hardened men - I actually saw them cry!'

21 Don't blame God, blame the planters! Over 90% of Filipinos are christians, with some 85% of the population belonging to the Catholic Church, it plays an important role in Philippine society . 'The enormous extremes of wealth and poverty here in Negros made us all reflect,' recalled Fr Michael Martin, a Columban priest who arrived in the province in the 1960s . 'We started to listen to the poor and became aware of the need to study the structures of Philippine society and history .' In 1979 Church researchers found that 98 .5% of Negros's population were totally landless . Of the 332,000 families in the province, 330 owned 45% of the sugar land, while control of the fishing and lumbering industries were in even fewer hands . And over 82% of Negros's 1 .8 million population lived in extreme poverty . But this merely confirmed what church activists already knew from their parishioners . Fr Brian Gore, a young Australian priest who arrived in Negros in 1969, says everyday conditions quickly forced the Church to critically reexamine its role in Negros' society . 'We were continually burying many children who had died from disease and starvation,' he said . When asked the cause of their children's death, 'Its God's will', parents answered . Angrily 'I would tell them not to blame God for it was the planter's will .' Gore was not alone in taking the side of the poor against the planters . Many in the Church were already actively supporting their struggles . But the appointment of Fortich as Bishop of Bacolod in 1966 - instructed 'to do something for the poor of Negros' -

Capital & Class 22 heralded the Church's new approach . With the Bishop's encouragement, a new generation of priests began to take an increasingly active role on the side of the poor . Fr Gore, like many other priests, took an active role in the farmers organization and intervened on their behalf in disputes with the planters . The schism came to a head in the mid-1970s when the four priests, including Fr Gore, in Kabankalan refused to conduct a mass at the municipal judge's funeral . Notoriously corrupt, the priests felt that `this man had made the poor suffer with his decisions', and they determined to show the people that not everything could be bought by money . Fr Gore and others continued to work for the poor by establishing the basic Christian communities (BCC) . These organised educational programmes designed to develop a new lay leadership within the Church . Through small self-awareness sessions old prejudices - fear and inferiority - were broken down . 'After a couple of days of self-discovery they would noticeably walk a little taller and stand up a little straighter,' said Fr Gore . 'Through this process they saw that they were valuable and that they had dignity.' It was little wonder that the planters wanted revenge . Negros' military commander, Colonel Goyena, once warned Gore that : 'If you turn the people against the government, I'll cut your throat .' On 29 March 1980 seven peasants were arrested by the Long range Patrol . They were tortured and killed . Two days later, two lay leaders from near Fore's parish were summarily executed by the same troops . On 16 September the bodies of

the seven were unearthed in the grounds of the Mayor's hacienda . He was charged with murder and released on bail . On 10 March 1982 he was assassinated . At the time the NPA claimed responsibility, and the local military were inclined to believe them . On 4 November Fr Gore, Fr O'Brien, Fr Dangan and six lay workers were charged with the mayor's murder . Some 15 months later, the trial of the Negros Nine commenced on 23 February 1984 . Mounting international pressure, particularly from Australia, and President Reagan's personal intervention led to the charges being dismissed on a technicality on 3 July 1984 . The Church had firmly committed itself to the side of the poor . The Bishop's `model project' - a concrete way to help the poor as he called it the Dacongcogon Sugar Mill was part of that policy . Run as a co-operative, it grew from 800 shareholders in 1968 to nearly 2,000 families, virtually all the farmers. Beginning with no capital or equity in 1969, the co-operative now owns a controlling interest in a company with assets valued at 11 .3 million pesos . From its inception, Bishop Fortich was opposed and obstructed by the planters, who in Fr Ledesma's words feared that the mill would spark 'a social revolution in sugarland where equality of economic and political opportunities will become a reality .'

The National Federation of Sugar Workers . 'Too much poverty, hunger and oppression pushed the sugar workers to organise their ranks and stand up

The Philippines for their rights,' says Serge Cherniguin, secretary-general of the National Federation of Sugar Workers (NFSW) . `A workers' struggle for better conditions has always existed on Negros, but only in the last decade has it developed a truly representative leadership,' reflected a NFSW member recently. In the 1890s the sugar workers supported Papa Isio's (Pope Isio) revolt - led by Dionisio Sigbela, a poor peasant who worked in the Carlotta sugar district - against the Spanish rulers and the plantation owners . His battlecry `no sugar cane', `no machines' and `equal division of the lands' and rice cultivation hit a chord amongst the sugar workers as 10,000 joined his cause . One of his captured followers later told the press that the immortal Papa Isio had been `chosen by God to redeem the Filipino people from slavery .' Although this rebellion was cruelly crushed, Negros's sugar workers have continued to press for better pay and conditions . At the turn of the century several attempts at unionisation attracted a strong following from among the sugar workers . In 1925, 50,000 sugar workers in Negros and Iloilo provinces supported the Kusog Sang Imol (Strength of the Poor) . But it was the Federation Obrera de Filipinas (FOF) which heralded the modern development of genuine unionism . Established under Jose Nava's leadership in Iloilo in 1928, it soon became the biggest federation of workers with 180,000 members from the Visayas and Mindinao . It organised the Negros sugar workers and successfully demanded better wages and conditions in 1930 .

But the development of workers' 23 organisations was bitterly opposed by the owners of capital . As is recurrent in Philippines sugar history, hacienderos and sugar mill owners, organised scabs and thugs to break picket lines ; organised fake unions to confuse and deceive workers ; and when all else failed, used police and military force to crush strikes and suppress union activity . During the 1960s the need for an independent trade union movement became glaringly apparent . Small sugar growers were being increasingly evicted from the plots they had tilled for generations, by planters anxious to increse their holdings to offset their own diminishing income . Working conditions on the plantations and in the mills were worsening, as employers effectively reduced real wages, permitting dangerous working conditions, and reneged on their responsibility for their workers' social welfare - refusing to pay social security, medicare or children's education loans . In response to this growing need, the Federation of Free Farmers (FOF) was revived - to organise hill farmers and the National Federation of Sugar Workers (NFSW) was established in 1971 to organise the labourers in the lowland plantations . The Church was instrumental in the latter organisation's formation, and providing its leadership . Its primary purpose, its constitution states is : `To unite all the sugarcane, sugar industry and sugar industry related workers and employees into a free, independent, democratic, militant, and Christ-orientedd labour union.'

Capital & Class 24

Breaking the chain of servitude The federation is committed to negotiating `collective contracts with management in order to secure better wages and working conditions (and) to obtain . . . security of tenure' . The federation also aims to promote `social, recreational and religious activities among its members' as well as the development of `adult education, sound home economics, cottage industries and co-operative enterprises .' Instead of immediately adopting the militant strategies of pickets and petitions - under martial law strikes were illegal - to involve workers, the NFSW leadership conducted five-day self-awareness seminar for all its members . Led by priests, nuns and Catholic layworkers, these sessions were aimed at making workers aware of their human potential and to break the servility that hacienda life had ingrained into them . It was a consciousness-raising process similar to the BCC programmes that had a radicalising effect through the restoring to participants their human dignity . The federation quickly established itself as a bona fide representative of the sugar workers' interests . It's membership grew steadily, reaching 6,400 in 1974 . By the time of its fifth convention in September 1982, rank and file membership exceeded 45,000 . Today the NFSW has more than 50,000 members .

Marital Law Although the sugar industry leaders were generally identified with the opposition before Marcos declared Martial Law in 1972 . after that date

his regime established its own oligarchy and the Negros sugar baron, Roberto Benedicto became an important part of it . The `New Society Movement, as Marcos called his political allies, also had its effect on the people of Negros and its representative organisations . Not only were the NFSW's activities severely restricted by Marcos' outlawing of strikes, but its organisers were subjected to increasing military harassment . As the radical guerrilla movement increased its support in the area, so Marcos deployed a larger military presence . Over 5,000 regular soldiers were said to be stationed on the island during the 1970s . At the same time planters increased their own private armies and self-styled vigilante groups sprang into existence . The military became a law unto itself with impunity executing anyone they cared to on the pretext of being a communist sympathiser . Union activists were particularly vulnerable . But even sugar workers who were attempting to grow food on idle land were subjected to continuous militia harassment . On 20 February 1978, 11 workers were arrested for planting sweet potato on a small farm lot, and herded into the municipal gaol where they were charged with the possession of deadly weapons - their farm implements . Military personnel indiscriminately used violence against their innocent victims . Rape and torture became common practice, while those detained often later turned up dead . Soldiers, said one Negros resident, felt that with Martial Law they had been given an `unlimited license to kill .' Sergeant George Presquito of the Philippine constabulary was

The Philippines particularly notorious . The human rights group, Task Force Detainees, documented the cases of 42 people he personally killed . When communist guerrillas executed him 24 December 1978 few people on Negros mourned his loss . Amnesty International concluded in 1982 that during Martial Law `the security forces of the Philippines have systematically engaged in practices which violate fundamental human rights, including the right to life, the right to security of person and the right against arbitrary arrest and detention .

Bitter harvest In Negros there are 33,000 farms and 31,000 planters . But 53% of the farms are less than 5 hectares, comprising 9% of the land under sugar cultivation . In stark contrast only 7% of planters own farms of more than 50 hectares . In other words, less than 2,000 planters control over half of Negros's sugar land . Although these planters live in ostentatious luxury, their wealth in turn is dependent on access to a foreign market, as over 60% of Negros's sugar crop is exported . In the mid-1970s Marcos centralised control of the sugar industry through the creation of the Philippine Sugar Commission (Philsucum) - and its export arm the National Sugar Trading Corporation (Nasutra) - under his crony, Roberto Benedicto . Given exclusive authority to trade in sugar Benedicto exploited the power he was given . Its predecessor body had set the trend when, in 1974 - at a time when sugar prices were at a peak, fetching as much as 678 pesos per picul - the planters were arbitrarily paid less than

150 pesos . In this way the government 25 creamed off the profits, totalling more than a billion pesos. When sugar prices later fell, the planters were further squeezed, as Philsucom lowered the price it paid planters in an effort to maintain its profit levels . The planters in turn reduced their costs by lowering sugar workers' incomes and reneging on education loans and SSS and Medicare payments . Observers in the Philippines had consistently pointed out that production costs were higher than the world price for sugar . But more disturbing was the fact that production costs in the Philippines were over double those of Australia and Hawaii, which were major international competitors . While a heavily mechanised Australian sugar industry produced sugar at 2 .5 cents a pound in 1975, the average cost of production in Negros was around 5 .5 cents a pound, substantially higher even than the world market price of 3 .3 cents a pound . Until 1974 the Philippines had privileged access to the US market under the Laurel-Langley agreement, and the Philippines sugar industry had prospered . The area under cultivation had doubled between 1958 and 1972, though the yield per hectare fell from 112 piculs to 68 . Ironically, in the process of becoming America's major sugar supplier - supplying some 15% of US domestic needs - the Philippines had become the world's least efficient producer . As a result of Negros' dependence on a single export crop, a crisis was almost inevitable . To rectify this planters initiated a concerted campaign of mechanisation in the late 1970s . Negros sugar industry expert,

Capital & Class 26 Alf McCoy said major labour displacement was an integral consequence of mechanisation, estimating that a reduction of nearly 90% was not inconceivable . This was confirmed by Dutch academic Rosanne Rutten and Filipino scholar Violeta Lopez Gonzaga's field research . In particular, casual weeding done by women and children was affected, and desperately poor families found their incomes halved . The Victoria Sugar Mills' own survey in September 1982 was the most revealing, for in the 26 mechanised haciendas surveyed an 89 % reduction in labour was planned, while productivity had increased by 38 and costs has been reduced by 12% . The biggest advantage of mechanisation, according to the study, was the reduction in overhead costs, in 'housing and housing repairs and maintenance, less SSS, and less hospitalisation and related costs .' Machines were cheaper, more productive and eliminated disruptive industrial action . Planters' investment in mechanisation, the report concluded, meant the acquisition of a capital social asset, not a responsibility . Production has fallen drastically . As a result many plantations and small farms have had to virtually cease production. Nearly 80% of sugar farms in Negros are now idle according to a recent reliable account . At the best of times, sugar workers were never able to work the year round . 'During six or six and a half months, workers find themselves without work', a NFSW activist explained, 'and are therefore without any regular income' . Now most sugar workers and their families do not learn sufficient for basic

survival . Bitterness is the only legacy sugar has left the people of Negros . Growing and refining sugar cane has virtually ceased on the island . Some 250,000 sugar workers were laid off after the 1984 milling season . Two of Negros's 18 mills have completely closed down . Unemployment now exceeds 400,000, according to reliable estimates, while it is expected to reach 600,000 within the next year . As a result of the declining sugar industry nearly 80% of Negros's population are virtually starving . `Hundreds of people have been reduced to eating only once a day,' says Zamboanguita Guevarra, an official from the Ministry of Human Settlements . The children of hacienda workers forage for food . 'If I'm lucky,' said one young boy 'I can catch enough frogs in three hours for a meal .' Others are so hungry they are forced to steal - some even try to steal back the sugar cane . The Health Ministry conceded in mid-1986 that there were 156,000 starving children . Other estimates put it closer to 300,000 with tens of thousands suffering advanced malnutrition . According to a recent independent survey 66% of children in western Negros are undernourished . Nearly half of them suffer from second and third degree malnutrition . An average of 25 to 30 children die every month in Kabankalan, according to the local parish priest, Monsignor Josefino Iledan . Bacolod Hospital has a 16-bed ward devoted to patients suffering from malnutrition, nearly all children . Mylame is typical of those in the ward . Five years old, she weighs less than

The Philippines seven kilos -- she should weigh around 20 - she was admitted over a year ago and lost weight when she developed secondary infection, pneumonia and measles are common . Most children in Mylame's situation never have access to medical care . In 1986 nearly 500 children died of malnutrition in Bacolod Hospital alone .

Give us land `Land is the only solution to the problem of Negros,' Governor Daniel Lacson recently said . And diversification is the key' he continued . If Negros's sugar workers are to escape their `poverty trap', a non-sugar dominated agriculture must be developed . In response to this need - as a `partial long term solution' to sugar workers economic plight - and to provide immediate subsistence, the NFSW introduced a farmlots programme . Its implementation began on an ad hoc basis, but in 1980 the federation put forward a general strategy at the ILO sponsored Tripartite Conference on the Landless Rural Workers . Since then, as the economic situation has progressively worsened, the NFSW has continued to press for land to be made available for subsistence cropping . In August 1984, the federation's leadership urged more sugar planters to lend idle lands, free of charge, to their workers, and announced their preparedness to give a written guarantee that the land would be returned once the crisis was over . So far the NFSW has been promised some 4,000 hectares - from 1 to 30 hectares in size, usually in small to

medium size haciendas - for use in its 27 scheme . By the end of 1986, more than a thousand hectares were converted to agricultural production . The NFSW has set up a revolving fund of low-interest loans for the purchase of seeds and is also conducting research into environmentally safe cultivation techniques which will considerably reduce production costs, by replacing many of the commercial fertilizers and pesticides . These include the use of seeds more suitable to local conditions, production of natural green fertilizers and pesticides made from plants . Governor Lacson estimates that some 40% of haciendas now allow farmlots . After all it saves the hacienda owners from providing daily rice rations . But there are planters who determined that the scheme should fail . Last year hired thugs stole the first harvest of some of the newly turned farmers .

The new war on the union `No union activist in Negros is safe,' said a National Federation of Sugar Workers (NFSW) organiser recently . Since the Constitution of the Philippines was approved by referendum last year, there has been a concerted effort by vigilante groups and the military in Negros to curtail union activity . In the past 18 months, the mutilated bodies of more than twenty union activists have been found ; many others have disappeared and are feared dead . `For trade unionists,' says prominent leftist leader, Joma Sison, `life is even more dangerous now than it was under Marcos .' On 4 July 1987 a local NFSW leader,

Capital & Class 28 Amado Cayao, was shot and killed by soldiers . It is widely believed to have been in retaliation for the union's protests against the human rights violations which have accompanied the military's recent counterinsurgency programme . Farmworkers and sugar workers are constantly being harassed and threatened, many are being falsely arrested and badly beaten during interrogation . Ten farmworkers in Ponteverda were arrested on 17 June 1987, for allegedly supporting the NPA rebels . They were hit, kicked and beaten with wooden sticks while in custody . In recent months over a thousand people have fled into Baclod, the provincial capital, reports the KMU, for fear of military attacks . They insist that they will not return to their homes until the local government can assure them that human rights abuses committed by soldiers will cease . According to a local priest there are at least 15,000 displaced people in Negros, fleeing indiscriminate attacks by the military on their villages . Their houses were burnt, their livestock commandeered and their vegetable plots destroyed . All on the pretext of routing out the NPA . Unionists have even more to fear from the ominous growth of violent vigilante groups in Negros - selfstyled anti-communist fighters who are a law unto themselves, They continuously conducted summary executions of NFSW activists including the shooting of Rodrigo Villacuatro and the abduction and murder of Uldarico Antojado, last year. Both were NFSW organisers . On 18 June 1987, on the orders of the plantation owner, 32 vigilantes entered Hacienda Purisma and held

the workers at gunpoint while their houses were ransacked and looted . The owner later warned his workers not to vote for the NFSW local union in the forthcoming certification election . A military detachment has been stationed in one of the main haciendas of La Carlota sugar mill . They have appointed a new union leader and told workers that they must disaffiliate from the NFSW . Workers attending to their crops on their farmlots are also constantly being harrassed . Although some enlightened land owners, mostly the smaller ones, have cooperated with the NFSW's farmlots programme, many of the larger land owners have taken active steps to destroy the project . Their armed security guards have formed the backbone of the vigilante groups, and they provide them with weapons and funds . For the NFSW the farmlots programme is a strategic policy, a bar minimum . With the extent of the island's poverty and malnutrition, there is no other option, apart from permanent food handouts, but to try to grow their own food . As Serge Cherniguin summed it up `when there is so much suffering we must continue to do all we can to alleviate it' . It is essentially an interim measure . The NFSW, along with other peasant and farmers organisations have demanded redistributive land reform . Although the Aquino administration has enacted a measure of land reform, it has left most landless and dissatisfied . `Its a farce,' says a leading proponent of agrarian reform . 'It leaves most of the land firmly in the hands of the landowners' . The landowners have threatened to

The Philippines continue to resist all efforts to divest them of their land . A leading landowner on Negros, Hortensia Starke, formed the Movement for Justice on Land Reform which vowed to take up arms to resist any moves to redistribute their land . Other landowners on the island have gone as far as to call for an independent Negros . The government's failure to enact genuine land reform coupled with the increased violent repression of union activists has served to force many to consider going underground and joining the guerrilla forces . While there is no formal connection between progressive organisations like the NFSW and the NPA, they do share a common concern with improving the lot of the poor . 'We have no relationship with the NPA, but there is a parallelism in what we do', says Serge Cherniguin . Another union activist said there was an almost inevitable 'natural cooperation between the legal groups and the underground' as they often faced the same enemy . Fr Brian Gore preferred to called this convergence of interests, a 'critical collaboration' . In fact the NPA has played an important interventionist role in Negros, as elsewhere in the Philippines, acting as an enforcer and protector . Some concessions wrung from the landowners, others admit, have often been the result of the NPA's muscle and the threat of guerrilla violence . 'They want to avoid trouble with us and therefore settle peacefully' said one Negros party official . In other areas, says another unionist 'where we have trouble organising, the NPA puts pressure on the company's goons .'

For many years in Negros, NPA has 29 come to mean `Nice People Around' . Their support grew from the same conditions of poverty which gave rise to the strength of organisations intent on improving the basic living conditions of Negros' poor . Before 1986 they provided an important political alternative to the misery and oppression of the Marcos years . 'We were subversives,' said Fr Brian Gore . `For when we taught people to hold their heads up high and to seek justice on earth' said Brian Gore, 'we actually left them no real long-term alternative,' other than a revolutionary one . After Aquino came to power in 1986, there was a widespread belief that a new third force had emerged in Filipino politics which offered a `democratic and popular' alternative to Marcos' repression on the one hand and a revolutionary solution on the other . But over the last two years her administration has become increasingly indistinguishable from her predecessor's . There is mounting international criticism of her human rights record . International human rights organisations Amnesty International, the Asian Human Rights Commission and the US-based Asia Watch have all publicised critical reports on the extent of human rights violations and paramilitary's summary executions after extensive investigative visits to the Philippines . The growing strength of the opposition to Aquino in Negros, both on the legal front and in the underground, has led Aquino's military leaders to step up military operations on the island . Many observers believe it has become a

Capital & Class 30 laboratory for testing the military's current anti-insurgency strategy . The result has horrified most recent visitors to Negros . `A state of war exists on the island' says recently returned aid experts . While poverty persists on Negros and the government fails to institute a redistributive land reform programme most people on the island see few options left . Only a real political and social revolution will bring the peace and justice the island's poor seek .

Greg Kaser value for money in the public services " Since taking office in 1979 the Conservative government has introduced new management systems which have, and will continue to have, a significant and even fundamental impact upon the delivery of public services . Trade unions organising public service workers have in many cases found it difficult to know how to react to these changes. There has been little debate within the labour movement . In some instances Left opinion has even been, albeit desultorily, favourable . See for example an article in Marxism 7bday on the 1987/88 Education Reform Bill which comments : "considered separately, there may be something to be said for some of these measures - for instance, financial delegation to heads and governors" of schools (Simon, 1987 :13) . As the authors of a major guide showing the shortcomings of applying accountancy techniques to caring services comment: "the 4000 plus local Value for Money reports (of the Audit Commission) have attracted surprisingly little attention" (Kline and Mallaber, 1986 :8). Even where these changes are recognised as significant their extent is probably still underestimated (e .g . Jessop, 1987 :116-119)' What is argued here is that the Left's silence on these changes is misplaced. The Tories have adopted a strategy to commercialise the management and delivery of public

Based upon trade union experience of new management systems in the public services, the author argues that the defence of public services by specialists should face up to the challenge of `value for money' accountancy.

Capital & Class services . It seeks to apply forms of market competition and the management techniques appropriate there into the public services, creating social disbenefits in the name of efficiency . The problem of information flows in a bureaucracy is `solved' by introducing a market, in which consumer choice (including that of industrial users) influences resource allocation, although not the level of resources - which are predetermined by government . Value for money accountancy aids the reduction in the role of public provision and turns service managers into business operators . The argument presented here is neither for a clear cut rejection of these value for money management systems nor an uncritical acceptance (for whatever motives, such as wanting to be seen to be fiscally responsible and moderate by the electorate) . Instead it is suggested that there are alternatives to these management systems based on a recognition that the ideas of value should be reclaimed by the movement .

32

Defining `value for money'

Value for money auditing of public sector activities is a relatively recent activity in Britain. Its introduction owes not a little to the influence of multinational audit companies, like Coopers and Lybrand, Price Waterhouse and Peat Marwick McLintock (Kline and Mallaber, 1987 :14) . Nevertheless under the Conservatives the British government has made the value for money audit or review a central part of financial control. Value for money auditing has been defined as "investigations of the efficient use of resources by organisations whose main aim is not profit . The accountability of some such bodies is very poor ; they may have no owners, multiple objectives and no clear measure of success" (Nobes, 1985). The Chartered Institute of Public Finance and Accountancy describes value for money as being "where an organisation has made proper arrangement for securing economy, efficiency and effectiveness . . . 'the concept is much broader than merely a cost and benefit equation . It is concerned with the effectiveness of management itself" (CIPFA, 1987). A supporter of value for money principles being applied to local and central government explains the rationale as follows: 'Value for money work must be genuinely concerned to

increase the value of output relative to money spent just as much as to reduce the amount of expenditure for each unit of service provided ; it must allow resources to be moved from low to high priority areas and, by implication, allow increased expenditure in those areas where additional value is needed . Costs alone are not the most important factor' (Wise, 1987) . 2 There is now a recognised framework for achieving value for money : overall objectives should be defined and periodically reviewed for continuing relevance ; there should be individual responsibility for individual output ; there has to be some means of measuring performance if quality of service is to be assessed . These ideas can be neatly expressed in the form of the value for money triangle .

Input

Efficiency

Output

In local government the Audit Commission and auditors have a duty to promote economy, efficiency and effectiveness . These words are defined in the Code of Local Government Audit Practice for England and Wales (Audit Commission, 1984) : C&C 36-C

Capital & Class Economy may be defined as the terms under which the authority acquire human and material resources in the appropriate quality and quantity at the lowest cost . Efficiency may be defined as the relationship between goods or services produced and resources used to produce them . An efficient operation produces the maximum output for any given set of resources inputs ; or it has the minimum inputs for any given quantity and quality of service provided . Effectiveness may be defined as how well a programme or activity is achieving its established goals or other intended effects. Value for money audits are not in fact audits in the sense that they examine accounts . Sometimes they are termed performance reviews. They are an assessment of management, including resource management, whether managers' or organisational objectives are properly set and whether responsibilities have been adequately assigned to meet them . Investigations involving economy and efficiency are normally aimed at cost cutting and contracting out - a focus upon inputs . Recommendations concerning effectiveness frequently try to shorten management chains through devolving responsibility - in theory to enhance accountability - and question the desirability of existing objectives or may propose the introduction of the profit-motive, and hence of privatisation. It has been part of the Left's problem in grappling with the issue that we have too readily taken the words "value for money " at their face value, as it were . Neither the words nor the application are politically neutral.

34

The central civil and public services : efficiency reviews and budgets

Soon after assuming office Margaret Thatcher, as head of the Civil Service, appointed Sir Derek Rayner, on secondment from Marks and Spencers plc, to root out supposed waste and inefficiency in Whitehall. The pattern he set, of regular reviews and in delegating financial responsibility from Ministers to the civil servants on the job, has since been institutionalised. 'Rayner scrutinies' involved teams of civil servants, drawn from or on secondment to the Efficiency Unit of the Management and Personnel Office, examining a block of work to ascertain whether it was being carried out economically, efficiently and effectively . Most of these were scrutinies of specific areas of work within individual government departments

(termed Departmental Function Reviews) : 29 in 1979, 39 in 1980, 36 in 1981, 27 in 1982 and 21 in 1983 (SCPS, 1984). A smaller number were cross-departmental scrutinies such as those of Research and Development support services and of administrative forms (1981) ; resource control, running cost reviews and personnel management (1982) ; consultancy, inspection and review capabilities, supporting services for administrative work and contract and procurement (1983) . By the end of 1982 the government was claiming that Rayner activities had produced a total potential saving of 5274 million per year plus S39 million once-and-for-all since 1979 (Hansard, 1982). Since 1982 some 27,000 forms had been scrapped and 41,000 redesigned, saving around 814 million (Luce, 1987). Previous attempts to change management techniques in the Civil Service were of the 'master plan' variety . One Whitehall mandarin described it thus : "in the past, techniques and systems like programme budgets and management by objective offered a tantalising glimpse of other methods of allocating resources" than those traditional ways which he termed the Gladstonian model (in which each area of spending was overseen in detail by a Treasury clerk) and ministerial competition. But "they failed to follow through into the practicalities ; how to assist Ministers to choose where spending best achieves their objectives, how to develop accountability and how to measure performance" (Moseley, 1986) .4 The Rayner technique and the Financial Management Initiative which overtook it established themselves because they were `bottom up' methods of coping with 'top down' decisions. Cuts in staff numbers and funding imposed under the Conservative government's Medium Term Financial Strategy formed the environment for introducing new management techniques . Rayner scrutinies, in which departments themselves looked for cuts or 'savings', were institutionalised into the Financial Management Initiative launched by the Prime Minister in 1982 . "The aim of the Financial Management Initiative is to promote in each department an organisation and system in which managers at all levels have : (a) a clear view of their objectives and means to assess and, wherever possible, measure outputs or performance in relation to those objectives ; (b) well-defined responsibility for making the best use of their resources, including a critical scrutiny of output and value for money; and(c) the information (particularly

Capital & Class about costs), the training and access to expert advice that they need to exercise their responsibilities effectively" (HMSO, 1982). Central to the FMI is the devolution of responsibility for running costs (e .g . wages and salaries, office services, accommodation charges) and programme (or `policy') expenditure to functional heads and local managers . This has all-party support in Parliament . Indeed the FMI was in the government's response to a recommendation by a House of Commons Select Committee for further extension of the personal authority of line managers . Thus the key management tool in the FMI is budgeting. Under present conditions the FMI is a system for doit-yourself cuts . "It is not a case of first deciding what is needed and then finding the money to pay for it . It is the other way round. The Government must first decide what can be afforded before making plans to spend it . . . Finance determines expenditure and not the other way round" (quoted in SCPS/Northern College, 1987 :7) . In practice the FMI establishes a system of cost centres and budget holders for all Civil Service departments - and of income centres in trading departments, like the Royal Mint, Ordnance Survey and Her Majesty's Stationery Office . All activities undertaken by the Civil Service are therefore subject to day-to-day control particularly in respect of cost by middle grade managers . Yet the resources they need to do their job have been predetermined by overall public expenditure limits . A process of change is underway, of which the decision to abolish staffing ceilings in favour of purely cash limits on running costs was but one example, to determine all activity in cash terms. It cannot be emphasised enough that the FMI applies equally to programme expenditure. An example here is the Social Fund from which income support payments and loans are made by individually accountable officers of the Department of Health and Social Security to the very poorest people . Social Fund officers are responsible for managing and balancing their budgets and disbursing and recovering loans made to the needy and desperate. The FMI is said to be the core of the move towards getting value for money in government (Treasury evidence in House of Commons, 1987 :Q143) . It is also applied to non departmental public bodies, such as the Equal Opportunities Commission, the Civil Aviation Authority, the Atomic Energy Authority, Research Councils, tribunals and advisory committees (Cabinet Office/H M Treasury,

1985 : chapters 9 and 10). To ensure this happens the Treasury and sponsoring departments carry out regular Financial Management Surveys and Policy Reviews of nondepartmental public bodies . As has already been mentioned, measures supposedly designed to improve the efficiency and effectiveness of public services enjoy all-party support in Parliament . Whilst in 1982 management consultants had said it was going to take ten years for the FMI approach to penetrate throughout government, the Public Accounts Committee believed that "a major effort is needed to speed implementation" of the FMI and expressed concern that "departments' progress in establishing (clear and quantified) objectives for administrative running costs . . . has not been matched on programme activities" (House of Commons, 1987 : para . 44). Furthermore in its concern that "scepticism and mistrust of FMI seems to be widespread among middle and lower management grades" the Committee recommended that line management be given "more incentive to use . . . resources economically, efficiently and effectively", a clear signal in favour of performance related pay (House of Commons, 1987 : para . 44). In fact amongst this chorus of approbation the only critical voice has been that from the trade union movement, notably the Inland Revenue Staff Federation and the National Union of Civil and Public Servants . Crucially the civil service trade unions have pointed to the inadequacy of assessing value for money if measurement of the output of public services is neglected and only lip service paid to what resources are needed or how the service could be improved (memorandum from the Council of Civil Service Unions in House of Commons, 1987). One hundred and twenty thousand jobs were lost from the Civil Service between 1980 and 1987 - a drop of 17 - with half of them between 1980 and 1982 . Figures on how staff have been cut show that by the Treasury's own reckoning just 15% of the reductions during 1980-81 and 1981-82 were due to real efficiency savings (SCPS, 1983). In effect the application of the FMI, and the Rayner scrutinies, has been to reduce staff numbers at the expense of quality of service . Much of the struggle within the central civil and public services has taken place out of the limelight. Certain campaigns were waged with publicity however. Rayner's scrutiny of the Government Statistical Service in 1981,

Capital & Class comprising the statistical service in each of the major departments, the Central Statistical Office and the Office of Population Censuses and Surveys is one example. In conjunction with the TUC, the civil service unions quite successfully opposed many of the cuts through the `Save Our Statistics' campaign, although in subsequent years much work has been contracted-out . A scrutiny of `administrative and legislative burdens' carried with it farreaching implications for workers' rights in small businesses, the protection of consumers from fraud and planning abuses in the name of cutting red tape : was the focus of a vocal campaign during 1985-6 . But it was the 1987 Civil Service strike that demonstrated most vividly the frustrations of civil and public servants over their low pay and lack of resources to do a proper job. The Campaign for a Better Civil Service caught the imagination of 200,000 administrative staff, although the thirteen week campaign of strikes ended in defeat . A leaflet issued by the unions during the campaign contrasted Margaret Thatcher's words with her government's actions. "1 want law and order.

So do we! But if you mean it, why have you cut Customs staff - the people who fight VAT fraud and help combat Britain's drug problem? I want an efficient benefits system .

We agree! But how can we believe you when you have cut staff to the point where they no longer have the resources to do their jobs properly?' 1 want faultless national security.

Absolutely! So why encourage private contractors at the expense of security, continuity and efficiency? I want vigorous private industry.

We're with you all the way! That's why we opposed your short-sighted closure of MSC Skill Centres, and your cuts in science research budgets. I want value for the taxpayer's nwney.

Yes, Prime Minister! That's exactly what this campaign is about! Short-term cost cutting has led to delays in processing driving licences, in house conveyancing, and in the payment of benefits . Is that what you mean by value for money?" (CPSA, SCPS, NIPSA Bulletin No . 6, 1987) For an operation that touches on almost every aspect of social life the civil service has attracted little attention from the Left . Yet not only has the government applied the same new management techniques to the civil service

Valuefor money as to other public services, it has managed to obtain a good deal of cross-Parliamentary support, something regularly lacking when such techniques are introduced to the health service. Socialists agree that the prevention, relief and cure from anxiety, pain and suffering are rights which should not be subject to market forces, either in terms of supply or of access . Yet despite the setting up of a National Health Service on such principles, its development has in practice meant the extension of charges - for prescriptions and, it is intended, for eye and dental checks - and a (probably inevitable) mediation between the needs felt by individuals and those so diagnosed by professionals . Conservative policy towards the NHS has concerned the management of the supply of health care, not of peoples' needs - which would, in part, involve the elimination of poverty, dangerous domestic and working environments and the provision of more health education. Whereas it was Derek Rayner from Marks and Spencer plc who shook up the Civil Service, it was another retail boss, Roy Griffiths from John Sainsbury plc, who established the equivalent structures in the NHS. As a result of a report under his chairmanship, set in hand from April 1984, the National Health Service was to devolve financial and staff management to units, eg hospitals or specialist divisions. Each unit should have a total budget, with agreed procedures on reallocation of spending, spending limits and monitoring of performance . Unit General Managers were recruited to review service provision, formulate operational programmes and develop management budgets "which involve clinicians and relate workload and service objectives to financial and manpower allocations" (DHSS, 1983 :7). Part of the new management style was to "promote `realistic' public and professional perceptions of what the NHS can and should provide as the best possible service within the resources available." Since 1986 general managers have been subject to Individual Performance Review and receive performance related pay. In the primary health care sector, the government plans to pay general practitioners, dentists and opticians by performance and, in the case of the latter two groups, to provide them with financial incentives to maximise takeup . Doctors will be able to claim fees from the government

39

The National Health Service: management and measurement

Capital & Class for providing advice and regular care and surveillance for the elderly and under-fives . A higher share of their income will come from a payment received for each patient registered . Targets will be set forthe proportion of patients to be vaccinated or screened and who are referred to hospitals for treatment. Doctors in general practice will be able to establish a service providing nursing, chiropody, physiotherapy and counselling, and together with dentists and opticians be allowed to advertise. An embryo structure of surgeries is being set up to compete with one another for patients . In addition to managerial changes, the health service has seen the widespread introduction of performance indicators . While in the government's terminology performance measures are indeed measures, performance indicators are proxy `measures', which do not measure `performance' at all. The National and Local Government Officers Association recognises the value of performance indicators in providing a means of monitoring service but sees a strong temptation for "Health Authorities to see performance indicators as an end in themselves . . . This manifests itself in a number of ways including the overevaluation of economic results without recognising that what appears to be expensive may be a sign of a good service rather than inefficiency" (NALGO National Health Committee, 1987). Of course, the use of indicators to assess the effectiveness of health care is not new. They are particularly necessary perhaps in health care systems funded through budgetary allocation, rather than from payment for specific treatment - the fee-for-service system common in countries where social insurance or private medicine predominates . In socialist planned economies budgeting systems are at all levels coupled with detailed statistics on resource use and service delivery, often underpinned by a range of standards or norms defining the level of service offered (World Health Organisation, 1981). However the definitions recommended by the World Health Organisation in the assessment of health care are more broadly drawn than the British three `E's' of value for money theory : "Efficacy: the benefit or utility to the individual of the service, treatment regimen, drug, preventive or control measure advocated or applied;

Effectiveness: the effect of the activity and the end results,

outcomes or benefits for the population achieved in relation to the stated objectives ; Efficiency: the effects or end results achieved in relation to the effort expended in terms of money, resources and time . " (World Health Organisation, 1971) Performance indicators in the NHS are often measures of activity not of outcomes . A workload measure like , occupied bed day' shows improvements through the practice of `hot bedding', the rapid turnover of hospital bed occupancy. It does not measure the effect of too early discharge or readmittance . Nor does it measure the lack of care outside the hospital, in the community or home . Neither does it measure the added pressures and stresses upon nursing staff who have to cope with a more rapidly changing mix of patients of whom a higher proportion are seriously ill, needing constant attention and heavier physical effort (in lifting and carrying) . Hospital throughput may be maximised whether or not those discharged are satisfactorily treated or dead . As Neil Kinnock has said the "ultimate measure of efficiency must be the health of living patients" (Kinnock, 1988) . Management of the health service is being assessed by the government and its appointed supervisory boards according to its ability to demonstrate improving performance indicators with fewer resources . The government appears to have little interest in trying to monitor whether the service provided has been successful . There is little testing of the NHS's impact upon health needs . When the government deregulated the provision of glasses it made no attempt to find out whether people's eyesight difficulties were improved, or suffered ; nor even if there was greater satisfaction through a better optician service or cheaper spectacles . Even so, by promoting competition in health care provision through the encouragement of the private medical sector and making it easier for people to change their GP the government are answering popular dissatisfaction with the state of the NHS . The challenge for socialists is to answer that common sense logic which argues that competition is a spur to improved performance and increased efficiency . It is also necessary to recognise that whereas no-one expects choice in dealing with trauma -- victims simply want the best acute service available in many areas of health care people can feel better with

Capital & Class different styles of nursing, counselling or types of treatment. If markets are not part of the socialist proposal for (any) public service then the planning system must nonetheless answer the requirement to provide appropriate choice at reasonable cost to society . The last two sections of this article discuss this a little further . Schools: devolved responsibility

Local financial management for schools represents the most far-reaching of government proposals in devolving responsibility . Whereas in the civil and health services managers are given budgets and set targets within their defined responsibility, the Education Reform Act 1988 gives such powers to groups of `ordinary' citizens, the governing bodies of schools. Over a three to four year period local education authorities will devolve budgetary responsibility and power to appoint and dismiss staff to governors of all secondary schools and primary schools with 200 or more pupils . The majority of governors will be elected from amongst the parents of children at the school, with a balance of local authority appointees and staff representatives. Kenneth Baker, the Conservative Secretary of State for Education, introducing these changes, made it clear that he would like to see more governors appointed from business backgrounds . Essentially these measures break the control of local education authorities over schools. Together with other powers being taken by the government, such as the setting of a national curriculum and universal testing and assessment at specified ages, the schooling system in England and Wales is removed from the realm of local planning to become a market for parents' choice of school for their children . A formula for allocating funds to schools will provide the incentive for schools to compete for pupil intake . In theory parents will be able to judge what is a `good school' by the school's performance in terms of pupil examination and testing success and financial management . In practice governing bodies, made up of unpaid volunteers are expected to devolve financial management to the headteacher. The latter, who is mainly concerned with acting as leader of an educational community, would delegate to other senior teaching, office staff and, in the case of larger schools, bursars. Hence the economies of scale obtained by the local education authority in administrative, financial, procurement, building and

equipment maintenance and school meals services would be ended. It is alleged that gains would be achieved by improving information flows: cutting the length of lines of communication and transferring quality control to users. An experiment along these lines has been operating in Cambridgeshire . A pilot scheme was begun by the Conservative controlled County Council in 1985 and two years later was extended to all 46 secondary schools and 11 primary schools. A team of accountants was established to provide headteachers with guidance and budgets set by means of a formula based on the number of pupils, weighted by age. School budgets covered staffing and accommodation, but not capital spending, careers and welfare services, school meals and home-to-school transport. Most savings during the pilot scheme arose from money saved on heating bills, by turning the heating down, and were spent on teachers' wages, books and equipment (Wolmar, 1987). Such restructuring of education service management was advocated by the Audit Commission though it suggested that "establishing a scheme of delegation can be a long-term process taking perhaps 5 to 7 years" (Audit Commission, 1986). Interestingly, just as the government is accelerating the introduction of this recommendation, the Audit Commission itself has recognised it has neglected effectiveness in pursuing the other two Es of economy and efficiency . Audit Commission Controller Howard Davies told a conference that his auditors would be focusing on local authorities' overall management arrangements and performance reviews based on outcome analysis . "Politicians and officers need to be clear about what their real objectives are - couched, if possible, in the form of outcomes . Only within this framework are resources likely to be utilised to best advantage" (Fretwell, 1987 :15) . However since devolved financial management is a measure designed precisely to increase effectiveness this refocusing could imply that the Audit Commission will recommend its wider implementation . We can also but wonder whether some socialist councils could `fail' in their fiduciary duty because measurable outcomes for their objectives are not achievable under capitalism . The implementation of local financial management in schools represents a particular ideological objective: that of introducing market relations into the schooling system . Of the 16,500 comments on the government's proposals on education reform in 1987 two accurately pinpoint the

Capital & Class Conservative's hidden aims .

44

"The Government pretends to claim the reforms are to increase parental choice : in practice choice will be reduced especially for the majority of children . . . The whole process is to centralise decision-making with the Secretary of State at the expense of decisions being made at local level . No evidence is put forward to suggest local authorities, teachers or educational officers and advisers are failing the education system . The desire is to reduce their initiative, power and influence and replace it with appointed boards, centralised power and a business approach to educational institutions run by an equivalent board of directors" (Socialist Educational Association, 1987) . "The whole concept of delegated financial management on the scale proposed cuts across the lines of accountability which the government seems so keen to reinforce through separate proposals on local government finance . The system proposed is one in which schools can effectively go their own way using public funds disbursed by LEAs . LEAs would have no power to direct the uses to which those public resources are put in furtherance of the development of an educational system responsive to the needs of the community in general and of all children . What then becomes of the accountability of the LEA to the ratepayers who fund the system?" (NALGO, 1987) The point that devolved financial management, part and parcel of the whole value for money approach, allows for increased political control of social life by government is taken further in the next section .

Corporate planning in the public services

For all the rhetoric from Tories about enlarging opportunities, the value for money approach to managing public services in fact represents a strengthening of political control . Managers are required to deliver services cost-effectively but without adequate resources and according to priorities established in `corporate plans' or their equivalents . The process has been candidly described by a former Permanent Secretary, an otherwise keen supporter of the FMI : "In Customs and Excise, we rather enjoyed presenting the Treasury, at the time of the annual Public Expenditure Survey bids for resources, with a challenge that I like to think was

the equivalent of having to tackle the north face of the Eiger in mid-winter without an ice-axe and without a single crampon . Our case was unassailable within the doctrines of FMI . Stop being mesmerised by the inputs, we used to say : feel the quality of the outputs in our priority areas . And in any case, look how our unit cost of input is the lowest in Whitehall . . . But somehow inputs still seemed to be an overriding preoccupation in these discussions, and central control and constraints on departmental freedom to manoeuvre had to be maintained regardless of what was sacrificed, because otherwise, it was feared, a public expenditure crisis would be sparked off ." (Fraser, 1988 : p24) 9 Corporate planning is to do with clarifying organisational objectives and then deciding on how these can be most effectively achieved by developing and evaluating a number of alternative strategies . The output of corporate planning is strategy. In the public sector corporate planning is largely to do with deciding upon priorities between an organisation's actual and potential activities . The Agricultural and Food Research Council's corporate plan refers to this under the heading of "balance" . A good example of this type of corporate planning is that of the Natural Environment Research Council's attempt to wrestle with its inadequate budget of ra71 million . "NERC faces a dilemma in its planning for the future : the needs for an increased understanding of the natural environment are many and varied, but these needs cannot be met simply by programmes of applied research - a strong underpinning of basic and strategic research is essential . . . These plans take NERC beyond a reasonable balance between Science Budget and commissioned activities, a position imposed by external circumstances . . . The NERC plans are twofold : to use the limited resources in the most effective way and to make the case for an increase in the Science Budget by demonstrating the serious damage being done to the nation through underprovision" (NERC, 1986) . This is from a relatively independently-minded non-departmental public body ; most are far less explicit . Corporate planning in the Civil Service, nondepartmental public bodies and health authorities is an annual activity with a five-year horizon, tied in with the government's public expenditure planning and the passing of the Finance Bill in April . The process starts in the

Capital & Class summer when the previous year's programme results are monitored and provisional budget indications are given by the sponsoring departments . Government spending plans are thus now integrated with corporate planning and cost centre budgeting. What might appear to be a decentralised system of resource management is in fact a highly centralised system of control, with decisions at every level taken on two criteria: " is the function an essential one for the public sector to undertake? s if so, does it give value for money? In demonstrating the latter the plans include performance and productivity targets, the achievement of which is reported in the annual report . t o Under the Conservative government corporate planning is a tool for forcing `arms length' bodies to choose themselves where to make cuts: more relief of back pain or more cancer research? It is also a process which uncovers organisational aims in conflict with government objectives or priorities. Nevertheless corporate planning or strategic thinking is important if public bodies are to effectively deliver outcomes . For private industry, the firm, particularly a diversified firm with a host of products, needs to establish and choose between strategies to obtain competitive advantage . But the strategic task in the public services is clearly different . Its relevance can be seen from the following exposition from an advocate of `zero based budgeting' for local authorities : "Decision taking within local authorities, as elsewhere, is a four stage process : " assessment of the existing situation in terms of resources available and community needs ; " formulation of a policy or strategy designed to make the best use of resources and to address the needs of the community in the best way - clearly a political decision; " establishment of tactics, in the form of action plans and budgets, to implement the strategic decisions in the short term; " making things happen and achieving results ." (Wise, 1987)

For socialists, strategic planning should involve appraisal of needs and of resources available to meet these, including the power of ideas and popular mobilization. Since people identify their individual and collective needs differently

Value for money such a strategic process is a political one. But it must be done on a more informed basis than who can muster enough votes at a District Labour Party meeting or as a result of a trade-off between bureaucratic or professional baronies . To some extent therefore the mechanisms now in place would, personnel changes granted, allow socialists greater control of many public service bodies . The corporate planning process in the Civil Service is matched by the 10-year strategic plans of Regional Health Authorities and annual ministerial accountability reviews, undertaken by Ministers and senior RHA staff and chairpersons . Health authority plans are checked by DHSS officials as to their "consistency" with government police .' I Even museums and galleries are covered: the Tate Gallery's corporate plan details art display policy, its capacity for research, education and conservation and its ability and aims towards acquisitions . A far-reaching and powerful planning mechanism is in place and under refinement . So far, this brief survey of one aspect of public service management has only touched on the labour movement's responses; for example, the concerns expressed over how resource needs are neglected, the introduction of a `business approach' and the strengthening of central political control. The focus of the movement's campaigns in the public services over, say, the last decade has been, quite correctly, on the deterioration of the quality of service and of the living standards of its workers. Yet the way in which public services are delivered are also important ; as are the types of service provided (or not provided). That importance stems not simply from the intrinsic merits of particular forms of service provision but the place public services play in current politics . It is not however possible to do more than just mention here some of the developments which illustrate the labour movement's responses. One area where discussion has taken place over how services should be provided has been in the context of, mainly Labour, local authorities' attempts to bring services closer to users. Partially this has been seen in terms of centralisation/de-centralisation, participation/democratic control, individual/consumer rights or of redefining `needs' to recognise those of women, the black community, gay men and lesbians or people with disabilities which have not had the attention they deserve .

The challenge: Thatcher's `new prosperity' or socialist values?

Capital & Class But government pressures to cut back on local government spending and its strictures on obtaining value for money, have encouraged local authorities to look to `good management' to husband resources. For their part trade unions, in reacting to the expenditure, cuts and privatisation, have also to some extent realised the importance of taking a view on how services should be managed . Together trade unions and Labour local authorities have sought to defend council services against financial restrictions and in certain cases the Tory campaign to discredit councils as `loony left' . A number of local authorities have sought to decentralise their services to local offices, taking their provision out of city hall . These moves recognise the requirement to tackle social problems holistically, by removing the organisational barriers between local authority departments, taking an overall look and seeking to provide a complementary set of programmes . The local office team approach also aims to avoid misunderstandings and mis-specifications, communication breakdowns and buck-passing by enhancing the accountability of a number of local services to one management chain. By involving local community organisations and representatives in a consultative committee, the work of the local office may be better directed . Such at least is the theory . It may be concluded from the preceding analysis that the aims of decentralising local services have some similarity to those of value for money management proposals for devolving responsibility to enhance accountability . But their starting points differ . Under the value for money programme accountability is to the taxpayer to ensure that money is being spent effectively . Bringing services closer to people, on the other hand, traces accountability to the users of these services and to their needs. The value for money prescriptions of individual responsibility for output and performance sits rather uneasily with the concept of a team approach to delivering local services . The response of trade unions has not necessarily been to value for money accountancy and management techniques themselves, but to a broad range of developments including financial stringency, privatisation and government patronage of business interests. They have challenged the inadequacy of budgets, the resource management system's in-built focus on minimising inputs,

the way performance measures or indicators reflect the underlying philosophy of the empoying body's objectives, the redefinition of those objectives through periodic review by supposedly neutral agencies (such as the Audit Commission or the Cabinet Office Efficiency Unit) and the subversion of public bodies by political packing. IRSF, NALGO, NUCPS and NUPE, for instance, seem to have recognised the importance of demonstrating satisfactory 12 outputs or outcomes . At least one has explicitly questioned the method and purpose of public service delivery . Addressing the challenge posed by performance indicators, the NUCPS advises its stewards : "we want measures of performance to go beyond costs and how services are produced (economy and efficiency) to measure also effectiveness by asking questions such as " what services are produced? " what are they like to use? " who do they reach? " what are their achievements? Be prepared to campaign with other unions and users of services on alternative performance measures and ways of improving services . `Value for money' encourages us to focus upon cost cutting and improving rates of activity . As trade unionists we need to think about what values we place on our services . Values like " the professional delivery and conduct of service ; " equity and accessibility of provision ; " safety ; " levels of services in relation to need or demand ; or " the extent to which quality of life is improved ." (NUCPS/Northern College, 1988) Such guidance draws upon the experience of actual campaigns . For instance the campaigns against privatisation of the British Airports Authority and of the Forestry Commission in 1986-7 covered use values and nonmonetary measures of benefit/cost to society . In the case of airports, the joint trade union campaign identified passenger comfort, safety and security and the likelihood of more night flying as issues which would rally support . The `Keep your forests public' campaign is concerned with freedom of access, recreation, landscaping, conservation of wildlife and broadleaved woodland as well as the more obvious issues of rural employment and timber supplies . On the ground the case for public services is being made in often imaginative ways . Yet though the importance of C&C 36-D

Capital & Class working with users is recognised trade unions tend to concentrate on the number of workers required rather than the type of job their members do or the way work is conducted . `Defending jobs and services' has been a common slogan amongst left-wing local authorities - Manchester's is "Defending Jobs - Improving Services" . As an aim it matches the aspirations of public sector trade unions . However effective specific anti-cuts campaigns have been they have nonetheless failed to convince electors that a Labour government would bring prosperity . In fact a major theme of the Conservative attack on Labour in the 1987 general election was that such a government would be as profligate and ineffectual as the alleged `loony left' councils . Such a connection makes the Left's analysis of the challenge posed by value for money management techniques and the seeking of agreement on what might constitute `good socialist management' topical . The Right does not, of course, limit itself to attacking the competence of socialists in power . In the political debate over the health service and education reform the Conservatives present themselves as champions of choice . Two recent analyses illustrate the contrasting approaches of Labour and Conservative politicians to failures in public service management and the lack of choice available . Margaret Hodge, Labour leader of Islington Council, wrote after Labour's defeat in the General Election : "The problem was that we weren't doing enough to ensure that the services which we were so loudly defending were actually being delivered to our own communities . . . How could we expect people to defend public services when their daily experiences of those services made them seriously question their worth? Simply blaming our inefficiencies on the cuts will not let us off the hook . . . The purpose of community provision is the protection and improvement of individual rights . . . We must become more consumerorientated . Individuals know best what they want, not town hall politicians or trade unionists . . . Quality must take priority, and we should not forget that the role of the socialist state should be as the redistributor of resources rather than simply as the provider . . . I am not advocating the abandonment of the traditional idea of collective provision . But this should not mean bureaucracy and paternalism ." (Hodge, 1987)

Value for money Also in a post-election interview, Margaret Thatcher promised :

bl

"We are going to give a wider choice of public provision for people who are not satisfied (with local council services), so that those who produce the services shall not be able to say 'Look! This is it . Take it or leave it!' . . . As you know, it is not the opposition I want to get rid of, it is central planning and control, the centrally-controlled, socialist society in which your rights come from the government and you do as you are told . . . My worry now is to enlarge . . . opporunity, to make certain that anyone who has the talent, who wants to build up something for themselves, wants to take responsibility, wants to get out of the socialist queue approach, shall be able to do so ." (Thatcher, 1987) She is calling her vision 'the new prosperity' . Whatever the arguments as to where exactly the frontier is to be drawn between public and private provision of services Conservatives appear now agreed that people should have the opportunity to opt out of statedirected collective provision . The value for money philosophy combines this advocacy of 'consumer choice' with the criticism from the Right that lays the blame for failures in state provision upon the lack of market signals for indicating success . To ensure that the punters, as it were, have a consistent yardstick whereby they may judge the value of services (as a proxy for the lack of market signals), all have to be provided in cash terms . To be precise, at exchange values expressed as money . Hence, if it cannot be charged for, either through reason of practicality or political expediency, the service must be operated according to methods which demonstrate socalled value for money . But will it fool the punters? Prescriptions concerning management itself are included within the value for money framework : individual responsibility for individual output, performance monitoring and review, devolved authority for financial planning and expenditure, and strategic planning according to the resources available . Performance review and devolved authority are necessary if schools, or other services, are set up to 'compete' for custom . Through government encouragement, value for money techniques are being applied throughout central state services, including the civil service, non-departmental public bodies

Concluding

remarks

Capital & Class

and the national health service. Even left-wing local authorities may be tempted to see the value for money framework as a tool for achieving `good management' and qualify its implementation by merely seeking to ensure that the objectives (cf. the VFM triangle) are socialist ones together with bringing in `progressive' managers at the top of the hierarchy. Examining the way decentralisation of local authority services has worked in Labour-led authorities could be important to developing a socialist analysis of value for money management . Such an examination however is beyond the scope of this article . In addition the preceding trade union based analysis of how value for money techniques are actually used suggests that it is not enough to substitute `socialist objectives' for `monetarist objectives' . Yet the charge of profligacy and ineffectiveness levelled at socialists in power is widely repeated . And this takes us on to the question of how socialists show that the resources under their control are managed in ways which demonstrate the value of public services . Addressing this issue calls for a focus upon the concept and measurement of value . As the title of the Local Government Information Unit guide on applying value for money techniques to council services - `Whose value? Whose money? - accurately suggests, value is not a neutral term . Marxist tradition provides for distinctions between prices paid for marketed goods and services (exchange value), the value of things - goods and services - to users and the value of work that goes into production . We can see the value for money accountancy as an attempt to `commodify' public services . One consequence of privatisation, indeed, is to make us pay market prices for what the public sector used to do . The politics of value for money are those of value itself and of its ultimate verification by the working class. The debate over value for money is also one of management . Public service management under the Conservatives is market-orientated and commercial minded . It ignores or downplays non-cash measures of efficiency or effectiveness in achieving outcomes . It accepts without question the value put on work by a class structured labour market, weighted further against workers by mass unemployment, poor training and discrimination . To challenge both the value for money accountancy and the method of resource management it prescribes, socialists need to reconsider the social planning

Value for money of services according to objectives and measures which have mass (`common sense'?) acceptance . On the face of it, identifying non-monetary measures of value is daunting . The criticisms of existing performance indicators clearly show the difficulties . Yet in practice trade unions are already grappling with the issue . Success in reclaiming the politics of value for the public services demands vision from socialist leadership and building an alternative by means of joint campaigns of providers and users . Acknowledgement This article owes much to work undertaken on the FMB by the National Union of Civil and Public Servants (formerly the Society of Civil and Public Servants) and in particular to Margaret Boyle and Chris Easterling of its Public Sector Group and to Norma Heaton and Ian Linn (Northern College Research Unit) for many discussions on the issue . Thanks also to those who attended the discussions held by the North West Labour Economic Strategies Group, Mike O'Neil, Allan Manning, Mike Freudenberg, Joe Holly and Frank Ledwith for useful insights and to the C&C referees for comments on my conclusions .

1. Jessop and his colleagues point out that "power has been centralised in the executive branch in Whitehall . . . It has militated against stable, long-term policy-making in many institutions (e .g. local government, education and training, health, nationalized industries) . But it also enables the government continually to reallocate resources through selective adjustment of financial and manpower budgets . . . In parallel with the widespread privatization and deregulation, there has been an unprecedented arrogation of central state powers which has openly short-circuited established mechanisms of participation and/or accountability . . . The aim is thus to construct a robust yet flexible institutional order which precludes political `interference' in business activity and forcibly imposes market criteria on wide areas of state provision." For an analysis of the way the Conservatives have put their friends into positions of public authority see Labour Research Department, 1986 .

Notes

Capital & Class 2. David Wise is a director of Binder Hamlyn Management Consultants. 3. More details and a useful commentary can be found in the manual by Kline and Mallaber, 1986 . 4. Sir George Moseley was Permanent Secretary at the Department of the Environment between 1981 and 1985 . 5. See recommendation (vi) of the Third Report from the Treasury and Civil Service Select Committee in House of Commons, 1982 . 6. Four principles of budgeting have been identified by Margaret Thatcher . They are : a . all managers, from the top right through the management line, should be responsible for setting and reviewing budgets; b . budgets must be linked with the Government's annual review of public spending and turn those plans into action ; c . budgets should include output and performance indicators, and there should be regular evaluation of what has been achieved compared with the objectives that have been set ; d . top managers must organise their own work and that of their Departments so as to make clear the responsibilities for setting priorities, managing resources and reviewing performance . (HM Treasury, 1986 : Foreword) Margaret Thatcher is First Lord of the Treasury . 7. A point also made by the Director of the National Gallery, Neil McGregor: "He says the Office of Arts and Libraries won't discuss what museums and galleries are actually for. If they did then the museums would be able to talk to it rationally about the level of funding needed to fulfil these mutually agreed functions . . . Instead of performance indicators he would much prefer . . . 'function indicators' . . . We can't afford enough warders to keep all the galleries open all the time ." (Davie, 1987) 8. In-patients treated per available bed in the acute sector rose by 20% between 1981 and 1986 . The detrimental side-effects of such success are explained by a consultant at Liverpool's Women's Hospital : "The problem is that this Government is more concerned with business standards than with professional standards . What is efficient financially is not necessarily efficient medically . Medical efficiency requires time and that has been cut down and down . In my department, the number of Consultants has been reduced from four to three but we have nevertheless increased the throughput of patients by 30% . This has led to an increasing number of complaints . Patients feel less satisfied . It has also led to increasing fatigue among Consultants . Patients are staying in hospital for shorter times . For Caesarean sections, they used to stay in hospital for a fortnight and now it is eight days . For hysterectomies, it used to be three weeks, now it is also eight days. But you get patients being readmitted because of complications ." Quoted in the Observer 1 February 1987 . 9. Sir Angus Fraser was Chairman of the Board of Customs and Excise between 1983 and 1987 . 10 . The Management plans for the Board of Customs and

Value for money Excise for 1987-88 set targets such as that each newly registered Value Added Tax trader should be visited between the 15th and 18th month after date of registration, and that there should be a 5% productivity improvement in the processing of Customs freight declarations (Council of Civil Service Unions, 1988 : 22) . All VAT control officers thus become personally responsible for fulfilling the target in respect of the 150 or so traders assigned to them . So far their pay - most are graded Higher Executive Officer - is not linked to performance, but that of Collectors, senior regional operational managers, is performance related . 11 . The expression used by Julie Waldron, DHSS liaison officer with South-West Thames Regional Health Authority, at a Civil Service College Training Course on 'Government's Relations with Sponsored Bodies', 8th July 1986, attended by myself . Corporate planning in the health service involves decisions on, for instance, nurse training, rationalisating the use of acute beds, renal treatment, or the sale of surplus land . Following each ministerial accountability review a letter detailing an action plan is sent to the Regional Health Authority chairperson and this is updated every five years . 12 . In researching this article I contacted a number of union head offices and received replies from ASTMS, IRSF, NALGO and NUT . The National Union of Teachers supports the notion that schools should be able to exercise a degree of control over certain financial resources but is worried that the budgetary information, taken with the results of testing arising from the national curriculum proposals will enable parents to use these as crude but misleading performance indicators of schools . The Association of Scientific, Technical and Managerial Staffs (now the Manufacturing, Science and Finance Union) admits to having no policy detail on new management in higher education or the NHS .

Capital & Class 56 References

Audit Commission (1984) 'Code of local government audit practice for England and Wales' HMSO, para 40 . Audit Commission (1986) 'lbwards better management of secondary education' HMSO, para 41 . Cabinet Office/HM Treasury (1985) 'Non-departmental public bodies: a guide for departments' HMSO CIPFA (1987) 'Getting value for money' Chartered Institute of Public Finance and Accountancy, pp 17-18 Council of Civil Service Unions (1988) The Bulletin February, vol 8, 2 pp 21-26 CPSA, NIPSA, SCPS (1987) Bulletin No . 6, Campaign for a better civil service leaflet Davie, Michael (1987) 'Can culture be cost-effective?' Observer 23 August DHSS (1983) 'NHS management inquiry' Department of Health and Social Security HMSO, p7 Fraser, Angus (1988) Achieving change' paper to seminar 'Future shape of reform in Whitehall' in Council of Civil Service Unions (1988) Fretwell, Louise (1987) 'Councils defending services must show effectiveness' Local Government Chronicle 18 September, p15 Hansard (1982) Parliamentary Debates vol 33 no 23, 3 December HMSO col 316 Hansard (1987) Parliamentary Debates vol 110 no 55,18 February HMSO cols 927-1001 HMSO (1982) 'Efficiency and effectivenes in the Civil Service' HM Government White Paper Cmnd 6816 para 13 HM Treasury (1986) 'Multi-department review of budgeting: executive summary and final central report' HMSO Foreword Hodge, Margaret (1987) 'Tearing up the council tramlines' Tribune 26 September and New Statesman 18 September House of Commons (1982) The third report from the Treasury and Civil Service Select Committee session 1981-82 HC 236 HMSO House of Commons (1987) The thirteenth report of the Committee of Public Accounts session 1986-87 HOC 61 HMSO Jessop, Bob, Bonnett, Kevin, Bromley, Simon, and Ling, Tom (1987) 'Popular capitalism, flexible accumulation and Left strategy' New Left Review 165 September/October, pp 116-119 Kinnock, Neil (1988) 'Bandaging the NHS' New Statesman 15 January Kline, Roger and Mallaber, Judy (1986) 'Whose value? Whose money? How to assess the real value of council services.?'Local Government Information Unit and Birmingham Trade Union Resource Centre.

Value for money Labour Research Department (1986) 'Who runs the quangos?' Labour Research 6, June Luce, Richard (1987) Guardian 10 November Moseley, George (1986) 'Developing the FMI principles : changes in process and culture' Proceedings of a one-day seminar organised by Peat, Marwick and the Royal Institute of Public Administration, RIPA, p26 NALGO (1987) 'Comments on Education Bill' National and Local Government Officers Association 15 September NALGO National Health Committee (1987) 'Performance indicators: a response to the performance indicator group's proposals' 25 September NERC (1986) 'The 1986 NERC Corporate Plan' Natural Environment Research Council, Swindon, pll Nobes, Christopher (1985) 'The Economist pocket accountant' Basil Blackwell, Oxford, p 163 NUCPS/Northern College (1988) 'The financial management initiative and value for . money: Public Sector Group Negotiating Guide' Porter, Michael (1987) 'The state of strategic thinking' Economist 23 May, pp 21-28 SCPS (1983) Annual Report 1982' Society of Civil and Public Servants, pp 49-50 SCPS (1984) Annual Report 1983'p 13 SCPS/Northern College (1987) 'Guide to public expenditure and the Financial Management Initiative' Society of Civil and Public Servants and Northern College Research Unit, p7 Simon, Brian (1987) 'Lessons in elitism' Marxism 4bday vol 31, 9, September, p13 Socialist Educational Association (1987) 'Statement on Education Bill' 19 September Thatcher, Margaret (1987) Interview with Peter Jenkins Independent 14 September Wise, David (1987) 'Value for money in 1987 - the year for zero based budgets?' Local Government Chronicle Supplement 6 February Wolmar, Christian (1987) 'Heads switch off the light and plug into power' Observer 20 December World Health Organisation (1971) 'Statistical indicators for the planning and evaluation of public health programmes' WHO 71?chnical Report series 472 World Health Organisation (1981) Regional Conference for Europe 'Health statistics' and 'Economic research into health service growth' EVRO Reports and Studies 43 and 52, Copenhagen

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Simon Clarke Overaccumulation, class struggle and the regulation approach * The limits of Keynesianism The crash of 1987, with its ominous parallels with that of 1929, led commentators to dust off their history books . Nevertheless comparisons were made only to insist that there were no parallels to be drawn . Bourgeois commentators reassured us that the crash was merely an adjustment of overheated stockmarkers . The Left similarly dissociated the crash from conditions in the real economy, the crash indicating the parasitic and speculative character of financial markets . But can the parallels be dismissed so easily?' For marxists a speculative boom is not simply the result of the `animal spirits' of investors, but is rather a symptom of the overaccumulation and uneven development of capital, as the associated expansion of credit increasingly spills over into unproductive and speculative channels . The consequent crash is correspondingly a symptom of a deeper crisis of overaccumulation . Nevertheless, although the crash of 1987 bears comparison with earlier crashes, it does not necessarily follow that the outcome of this crisis will match that of previous crises . Although there are some striking parallels between 1987 and 1929, there are also very considerable differences3 . The crucial question that any diagnosis of the current crisis must confront is whether these differences are of a fundamental significance . Can

This timely article builds on the recent discussion of French regulation theory in Capital & Class . Aglietta's seminal work is subject to careful critical scrutiny and is shown to have major historical and theoretical limitations . The author calls for a non-structuralist/ functionalist analysis of the present crisis . 59

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the modes of regulation of contemporary capitalism succeed in overcoming the contradictions inherent in the accumulation of capital, to secure a renewal of accumulation without the collapse into depression, and, more ominous, the formation of blocks, and even interimperialist war? The idea that capitalism has developed as a means of resolving crises of overaccumulation without plunging the world economy into deep depression is, of course, the marks of Keynesian analyses . For Keynesian fiscal and monetary expansion provides the growing demand that will absorb the products of surplus capital . However Keynesianism was discredited by the experience of the late 1960s and early 1970s, in which expansionary policies stimulated escalating inflation alongside a squeeze on profits, the collapse of investment, and rising unemployment . This experience led to the distinction between 'Keynesian unemployment', which was the result of a generalised deficiency of demand, and which could be remedied by expansionary macroeconomic policies, and `classical unemployment', which was the result of a structural imbalance between the various branches of production, caused by price and wage rigidities imposed by monopolies, state intervention and trades unions . For the monetarists of the New Right, Keynesian policies exaggerated such structural imbalances as credit expansion sustained unprofitable producers while inflation increased uncertainty and discouraged productive investment . Price stability, a restrictive monetary policy, and the removal of barriers to competition in labour, product and financial markets would restore the conditions under which the market could do its work in rectifying such structural imbalances, as capital and labour-power were reallocated among the various branches of production in accordance with the equal isation of the rate of profit and of wage rates . The recessions of 1974-5 and 1979-82 were the result of the shake-out required to achieve such a rectification, as surplus capacity which had been sustained by inflationary credit expansion and government subsidies, was liquidated to prepare the way for the renewed accumulation that drove forward the boom of the 1980s . The crash of 1987 revealed the limits of the analysis of the New Right . Far from eliminating the tendencies of the overaccumulation and uneven development of capital by reimposing the rule of money and the market, liberalisation stimulated such tendencies to an

Regulation and crisis unprecedented degree, accumulation only being sustained by an explosion of domestic and international credit which was extended not to fund productive investment, but to fund private consumption, unproductive expenditure and its financial speculation . The crash of 1987 therefore brought the question of state intervention to the fore once more . However the question was not raised in the Keynesian context, of a deficiency of demand, but in the context of rectification of the structural imbalance of global accumulation . These structural imbalances were generally explained not by the failure of the market, but primarily by the failure of the US authorities to curb their budget and balance of payments deficits by pursuing appropriately restrictive fiscal policies . The growing crisis of Keynesianism provoked a crisis on the Left which had associated itself closely, if critically, with social democratic Keynesianism . The dominant diagnosis of the crisis during the 1970s saw the crisis in rather mechanical terms, focusing on the crisis of profitability, which was seen variously as the result of working class militancy, labour shortages, or the tendency of the rate of profit to fall . However mass unemployment, and the sustained offensive of employers and the state, permitted an intensification of labour and the restoration of profitability, without overcoming the crisis-ridden tendencies of accumulation . It was clear that a more sophisticated analysis of the overaccumulation and uneven development of capital was required . This analysis has been provided over the past decade by the French Regulation School, building on the work of Michel Aglietta . Aglietta's pioneering book, A Theory of Capitalist Regulation, was very much a product of the crisis of Keynesianism in the 1970s . Keynesian macroeconomic policies presumed that the microeconomic problem of the allocation of resources between branches of production would be resolved by the smooth operation of the market . Aglietta abandoned this naive assumption, drawing on various strands of criticism of the market process, from Marxist critiques of the anarchy of the market, through the Durkheimian account of the market as a system of moral regulation, and the American institutionalists, to deny the adequacy of the market as the means of securing the integration of accumulation . Thus sustained accumulation depends on the development of institutional forms which can maintain the proportionality of the `macrostructure of production and the distribution of total

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income' (Aglietta, p . 355) . The system constituted by such 'modes of regulation' defines a particular `regime of accumulation' . Aglietta's central argument was that post-war capitalism has been marked by a very different `regime of accumulation' from that which had characterised capitalism before 1929, the transition being marked by a shift from a regime of extensive to a regime of intensive accumulation, associated with the development of Fordist methods of production . The different regimes of accumulation define very different modes of integration of capital accumulation, and in particular imply very different forms of overaccumulation and crisis . The crisis of 1929 was essentially a structural crisis of the regime of extensive accumulation, which led to the development of new modes of regulation which laid the foundations for the post-war boom . However the stability of the regime of intensive accumulation was only provisional, depending primarily on the ability of capital to stave off the tendency for the rate of profit to fall . As this tendency reasserted itself from the late 1960s the modes of regulation of the regime of intensive accumulation began to break down . Thus the crisis of the 1970s marked the structural crisis of the Fordist regine of accumulation, from which may emerge a neo-Fordist or post-Fordist regime . The immediate implication of such an analysis is that the crashes of 1873 and 1929 have no relevance to the understanding of the crash of 1987 .

Regimes of accumulation

Aglietta's book is empirically and theoretically very rich, and his analysis complex, at times almost to the point of obscurity and inconsistency . Nevertheless it remains theoretically the most sophisticated formulation of the regulation approach . Subsequent regulationist analyses have tended to use a more or less vulgarised version of Aglietta's model, which was developed primarily in relation to the United States, as an 'ideal type' against which to measure the incomplete development of Fordism in particular countries, against which to measure the depth of the 'crisis of Fordism', and in relation to which to elaborate a variety of comparative and historical typologies of regimes of accumulation and modes of regulation . Despite the fact that such analyses find it difficult to discover any examples of 'Fordism' in its pure form, even in the United States, the regulationists take it for granted

Regulation and crisis that the crisis of the 1920s was a crisis in the regime of extensive accumulation, and that the crisis which has been unfolding since the late 1960s is a `crisis of Fordism' . Meanwhile, although Aglietta's original analysis remains the foundation of the regulation approach, there has been very little discussion of the coherence and historical relevance of his model . In this article I want to develop a critique of that model . 3 The starting point of Aglietta's analysis is a critique of the neo-classical conception of the market, a conception shared by many Marxists . For Aglietta the market is not the anonymous mechanism of the hidden hand, but a social institution, whose regulatory function cannot be presupposed . Thus the operation of the market has to be conceived within the framework of a theory of regulation, which establishes the possibility and limits of social and economic reproduction through an analysis of the complex web of historically specific and socially determined modes of regulation which constitute a regime of accumulation . Within equilibrium theories, both neo-classical and Marxist, the market ensures the proportionality of the various branches of production, and of production and consumption . However this Idealist conception of the market is inadequate primarily because it abstracts from the historical dynamics of accumulation, through which proportionality is constantly disrupted, as capitalists respond to opportunities for surplus profit . Within a particular branch of production new methods of production offer such opportunities . Competition is the social process through which new `production norms' are then generalised within that branch of production . However competition cannot so smoothly regulate the relations between branches and departments of production . In particular, opportunities for surplus profit stimulate new investment and so the more rapid accumulation of capital in the branches of production which produce the means of production (Department I) . The more rapid growth of Department I leads to a subsequent increase in productive capacity in Department II, which produces means of consumption . Accumulation can only be sustained if a harmonious relationship can be maintained between Departments I and II . However this relationship is subject to two constraints . One the one hand, consumption has to grow sufficiently rapidly to absorb the growing product of Department II . On the other hand, rising consumption is the result of rising wages, which can only be reconciled

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with stable profits if productivity rises sufficiently to absorb rising costs . Thus the problem of proportionality focuses on the regulation of the wage relation in its dual aspect, as a cost to capital and as the source of purchasing power . There is no prior reason why the competitive determination of wages and prices should reconcile these two aspects and so permit sustained accumulation . The pivot of a regime of accumulation is accordingly the modes of regulation of the norms of production and consumption . For Aglietta the regime of extensive accumulation was based on competitive regulation, and the barrier to sustained accumulation was primarily the limited consumption power of the mass of the population, which was the result of competitive wage regulation and of the limited commodification of the wage . Nevertheless accumulation was possible on an extensive basis, because there was only a slow growth of productivity . The competitive mode of regulation underlay the typical investment cycle of the regime of extensive accumulation . The discovery of new products or of new methods of production led to a rapid growth in the production of the requisite means of production, without an immediate increase in the production of means of consumption, stimulating a boom . However the boom did not lead to a significant rise in real wages, so the market was unable to absorb the increased mass of means of consumption as the new capacity came into production . The barrier of the limited market appeared to individual capitals in the form of increased competitive pressure and the accumulation of unsold stocks, resulting in competitive wage and price cutting and widespread bankruptcy, driving the economy into a cumulative downward spiral . The resulting crises put considerable strain on the financial system, leading to waves of bank failures, the crisis being resolved only by falling prices, the devaluation of capital, and the destruction of productive capacity until eventually the proportionality of Departments I and H was restored . In the face of such a crisis the limited commodification of working class consumption severely limited the possibility of Keynesian remedies, and the dominance of commodity money limited the possibility of relieving the pressure by credit expansion . The cyclical form of accumulation was further exaggerated by the tendency for real wages to move contra-cyclically, the lag of money wages behind prices as the boom gathered momentum stimulating the more rapid accumulation of capital, but weakening the

Regulation and crisis conditions for its realisation . The extensive regime of accumulation reached its limits with the transition from the production of absolute to relative surplus value, associated with the development of Taylorist and then Fordist methods of production . This led to a more rapid growth in Department I, associated with the increasing organic composition of capital, but was accompanied by the even more rapid growth of productivity in Department II . The cyclical dislocation of the relations between the two Departments, which marked the regime of extensive accumulation, now became a structural feature of the new form of accumulation . This dislocation underlay the crisis of 1929, which marked the breakdown of the regime of extensive accumulation . The regime of intensive accumulation emerged in the wake of the crisis of 1929 through the development of new modes of regulation appropriate to the new forms of mass production and accumulation based on the production of relative surplus values . At the heart of the regime of intensive accumulation lay a new mode of regulation of the wage relation which integrated the wage relation into the regulation of accumulation . This was achieved by the development of 'Fordist' modes of regulation through which rising wages and social expenditure both reconciled workers to the intensification of labour associated with Fordist methods of production and provided the rising mass consumption which absorbed the growing product of Department II . The intensive regime of accumulation does not overcome the tendency to the uneven development of the major branches of production . Indeed the tendency is now internalised, deriving not from the anarchy of the market but from the revolutionising of methods of production which underlies the production of relative surplus value, resulting in the overaccumulation of capital in Department I . However monopolisation makes it possible for capitals to anticipate the ensuing devaluation of capital and destruction of productive capacity in the form of accelerated depreciation, which is absorbed in their selling prices and accommodated by the inflationary expansion of credit, so that overaccumulation leads to creeping inflation rather than to the investment cycle of the extensive regime of accumulation . For Aglietta the intensive regime of accumulation defines new modes of regulation and new forms of crisis . Inflation provides the mechanism through which proportionality is maintained, socialising the impact of the CAC 36-E

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devaluation of capital, so protecting individual capitals from the risk of bankruptcy which precipitated crises in the extensive regime of accumulation, but at the cost of depressing the overall rate of profit . However the depressive impact on the rate of profit is compensated on the one hand by rising productivity and, on the other hand, by the erosion of real wages by rising prices . The limits of the regime of intensive accumulation are defined by the tendency for the rate of profit to fall . This tendency does not lead to a smooth decline in the rate of profit because it disrupts the proportionality of accumulation embodied in the existing modes of regulation . The failure of productivity to rise sufficiently rapidly to compensate for the rising organic composition of capital leads to an intensification of competition and the more rapid adoption of new methods of production, which intensifies the overaccumulation of capital in Department I, and so the rate of devaluation of fixed capital, which in turn stimulates more rapid inflation . For a while the rate of profit may be maintained as inflation erodes the growth of real wages, but at the cost of provoking a class struggle which undermines the Fordist regulation of the wage relation . As workers manage to secure money wage increases to compensate for inflation and to achieve the rising consumption norm the rate of profit falls and accumulation slows down . However, despite rising unemployment, accumulation is sustained as demand is maintained by rising welfare benefits . Meanwhile inflation escalates, disrupting economic calculation, and leading to an increasingly unbalanced credit structure which is ever more vulnerable to financial crises, in which credit is subjected to the `monetary constraint' . In the face of such crises governments cannot stand by, and permit the cumulative decline into depression, but have to act as lenders of last resort, limiting the rise in unemployment by providing credit to stabilise the financial system, so that crises lead not to depression but to stagnation, which is the typical form of crisis of the regime of intensive accumulation . The limits of Fordist accumulation are set by the limited ability of capital to continue to raise productivity sufficiently rapidly to absorb the costs of the rising consumption norms and of depreciation charges . The expansion of credit may continue to relieve the pressure on profits for a time, but only at the expense of accelerating inflation, a fall in investment, a slowing down in the

Regulation and crisis growth of real wages, and rising unemployment . Although the source of the crisis appears at first sight to lie in the growing pressure of wages and taxation on profits, attempts to resolve the crisis of profitability through cuts in wages and public expenditure can at best provide temporary relief, at the cost of further exaggerating the disproportionality of Departments I and II by reducing demand for the means of consumption . The crisis can only be overcome, and accumulation sustained, if capital can find ways of increasing the production of relative surplus value to reconcile the requirements for the production and realisation of surplus value, particularly through the development of neo-Fordist production methods in the public sector, or, as others have suggested, such panaceas as `flexible specialisation', the Japanisation of industrial relations, the microelectronics revolution, or the segmentation of the working class and the globalisation of production . Although Aglietta was sceptical of the possibility of a neo-Fordist regime of accumulation, the concept has gained popularity as a theoretical prop to one or another version of the New Realism . 4 According to such interpretations the development of neo-Fordist production methods has changed the form and focus of the class struggle . Traditional forms of working class organisation and of industrial and political struggle developed in the Fordist age are no longer appropriate to the neo-Fordist era . Correspondingly new forms of organisation and struggle have to be developed which can build on the progressive aspects of neo-Fordism to secure the economic and social advance of the working class . However, while it is important to respond to changes in the forms of capitalist exploitation, and to broaden and deepen the organisation and struggles of the working class, the underlying belief that neo-Fordism, whatever that may mean, provides the basis of a new regime of accumulation, and so of an accommodation with capital, is altogether more doubtful .

Aglietta did not see the regime of accumulation as a means of overcoming the crisis-ridden tendencies of accumulation, but rather as a set of institutional forms which structured the tendency to overaccumulation and crisis . Thus the stabilisation of capitalism secured by the regime of accumulation was only limited and provisional,

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Structuralfunctionalism and the class struggle

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the regime defining new forms of class struggle and new mechanisms by which crises would restore the conditions for sustained accumulation by restoring proportionality . Moreover Aglietta emphasised the 'ideal-typical' status of the concept, which is one `required for the development of a theory of social regulation, and not for a periodisation of concrete history' (Aglietta, p . 71), so that every particular social formation has to be analysed as a combination of the typical forms of the extensive and intensive regimes, although he never addressed the theoretical and methodological problems raised by such an approach (problems which are only too familiar to those who suffered the structuralist debates around the notion of the `articulation of modes of production') . Although Aglietta's original analysis gave an important role to the class struggle in determining the course of wages, the growth of productivity, and the inflationary expansion of credit, the regulation approach has tended to adopt a structural-functionalist model of successive phases of structural integration and structural disintegration, which has been used as the basis of a periodisation of the long waves of capitalist accumulation . In a phase of structural integration sustained accumulation is possible within the framework of appropriate modes of regulation . As accumulation comes up against the limits of profitability within the existing regime of accumulation capital seeks to develop new forms of production to increase the rate of exploitation . However these new forms of production undermine the structural integration of the regime of accumulation, leading to a phase of disintegration in which the foundations are gradually laid for a new regime of accumulation . The proponents of this model, and Lipietz in particular, vehemently deny that it is either voluntarist or functionalist 5 . There is neither a subjective will nor an inevitable logic underlying the emergence of a new regime of accumulation . Thus the phase of disintegration is a phase of class and political struggles which may be long drawn out, involving a lot of trial and error, before, by luck rather than judgement, a stable regime of accumulation emerges . The charge of structural-functionalism is not so easily dismissed . A structural-functionalist theory defines the conditions for social stability, but it does not necessarily presuppose that stability will be achieved or sustained indefinitely, if the structural conditions are not met or break down . While the instutitionalisation of a regime of

Regulation and crisis accumulation may be the purely contingent outcome of the class struggle, it is nevertheless the objective condition for the stabilisation of capitalist class relations, and it is this stability which regulation theory aims to explain . In the relation between structure and struggle it is the class struggle imperatives of the regime of accumulation (c .f . Bonefeld, 1988) . This theoretical weakness is already inherent in the regulationist critique of neo-classical conceptions of the market . The regulationists are correct, but hardly original, in noting that the quantitative relations between things are the fetishised forms of social relations between people, so that the market has to be seen as a form of social regulation . The fundamental weakness of the regulation approach is that it does not take this insight far enough . The crucial question is that of the relationship between these two aspects of commodity relations . For the regulationists it remains the quantitative relations between things which are primary . They criticise the neo-classical answers, but they still ask the same question : how is capitalist reproduction possible? They recognise that economic relationships are socially regulated, but the regulation of social relationships is still subordinate to the functional requirements of the expanded reproduction of capital . Thus the regulation approach stops short at a sociological critique of economics, and fails to develop the Marxist critique of political economy . 6 The institutional forms identified by the regulationists are of fundamental importance to an understanding of the historical development of the capitalist mode of production . However these forms are best understood as institutional forms of class relationships, through which the quantitative determination of relations of production and exchange is subordinate to the struggle over the reproduction of capitalist class relations . `Modes of regulation' are better understood as institutional forms of class struggle, which certainly define the historical character of accumulation, but which do not define qualitatively different `regimes of accumulation' . A crisis of these modes of regulation is correspondingly to be understood not as a crisis of disproportionality, but as a crisis in the forms of capitalist domination . In order to develop this argument it is necessary to examine more closely both the historical applicability and the theoretical coherence of the theory of regimes of accumulation .

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Capital & Class 70 The crisis of the regime of extensive accumulation

Aglietta's characterisation of the contradictions inherent in the regime of extensive accumulation is based essentially on the US boom and crash of the 1920s . For Aglietta the crash was the expression of an unlerconsumption crisis, deriving from a sudden upsurge in the rate of productivity growth in relation to the limited consumption power of the mass of the population, while the severity of the crash and the failure of the authorities to relieve the crisis derived from the dependence of the financial system on gold as the money commodity . Thus the crash expressed a crisis in the regime of intensive accumulation . However there is little quantitative or qualitative evidence that 1929 marked the transition of one regime to another7 . In particular the crucial features of the regime of intensive regulation (the production of relative surplus value, the growth of mass consumption, and the dominance of credit money) were well established features of accumulation throughout the nineteenth century . Working class consumption and extensive accumulation The idea that accumulation before the First World War was based on the production of absolute surplus value appears very strange to anyone familiar with the rudiments of the economic history of capitalism . Although the transformation of methods of production in Department I was very limited before the late ninetheenth century, this was certainly not the case in the dominant branches of production, such as agriculture, textiles, metal manufacture, brewing, food processing and the means of transport, which were precisely the branches whose products entered directly or indirectly into working class consumption . It was the penetration of capital into these branches of production which provided the driving force of the agricultural and industrial revolutions of the eighteenth and nineteenth centuries, and which was inseparably associated with the proletarianisation of the direct producers and the commodification of the wage 8 . Moreover there is no evidence that the low level of wages was a fundamental barrier to the sustained accumulation of capital on the basis of the production of relative surplus value . There is no doubt that the basis of working class consumption in the nineteenth century was more limited

Regulation and crisis than it is today . Real wage rates probably did not increase significantly before the last quarter of the nineteenth century . In the nineteenth century many labourers supplemented their meagre wages with their own subsistence production, and a proportion of the commodities they purchased were the products not of capital, but of petty commodity producers . However the crucial point at issue is not the general level of wages or of working class consumption, but of the dynamic relationship between production and consumption . The limited base of working class consumption corresponded to a limited development of the productive forces . Moreover the relative stagnation of wage rates by no means implied a slow growth in the market for capitalists producing the means of subsistence . Although wage rates did not rise significantly, the massive sectoral shifts towards higher paid employment provided a rapidly growing market for the means of subsistence . Moreover the extent of petty commodity production, far from constituting a drag on capitalist accumulation, presented advanced capitals with opportunities to expand the market not at the expense of their fellow capitalists, and so the rate of profit, but at the expense of petty producers, the only barrier to such expansion being the limited development of the means of transport . Thus the penetration of capital into the production of the means of subsistence, at the expense of petty commodity producers, provided both a growing supply of cheap labour-power and a growing market for the products of capital . Although the expansion of the market was indeed predominantly `extensive' rather than `intensive', it was by no means the case that the barrier to accumulation was low wages or the limited commodification of working class consumption, or that periodic crises were crises of underconsumption . Nor was it the case that the dominance of commodity money limited the ability of monetary authorities to stimulate the growth of the market to sustain accumulation and stave of crisis by the expansion of credit . Gold, credit money and extensive accumulation The existence of the gold standard in the 1920s by no means implied the existence of commodity money . Although gold was a commodity which served as world money, it was not a form of commodity money . The money character of gold derived not from its direct convertibility

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into commodities, on the basis of its own value as a commodity, but to its immediate convertibility into national currencies at fixed exchange rates, a convertibility which was guaranteed politically by the state . Thus gold stood in relation to a particular national currency not as commodity money, but as the representative of all other currencies . It was correspondingly not gold which guaranteed the money character of the national currency, but the generalised commitment of national governments to the convertability of their currencies into gold which guaranteed gold's money character . The gold standard was, from its very beginning, a gold-exchange standard, and gold was correspondingly no less a form of credit money than the national currencies through which alone it could serve as means of international payment . The gold standard certainly limited the ability of national monetary authorities to expand credit . However this was not an indication of the primitive development of the credit system, but was imposed politically on bankers and the state as the only guarantee against the temptation of politicians and bankers to stimulate the inflationary overexpansion of credit . The issue of gold convertibility was a deeply political issue, and essentially a class issue, which played a central role in the struggles between capital and the emerging working class over the form of the state . Currency reform was a central plank of the popular radical platform in Britain in the early nineteenth century, and currency reform meant freeing the currency from the gold fetish in order to relieve unemployment and distress by public works and the expansion of credit . The idea of labour money lay at the heart of the programme of the Owenite socialists in Britain, and of the Saint-Simonians and Proudhonists in France (and it was with the critique of such programmes that Marx returned to his economic studies in the Grundrisse in 1857) . The demand for free banking, and later for bi-metallism, was the clarion call of populism in the United States . The capitalist class fought hard to resist all these proposals to free the issue of the currency from the constraint of gold convertibility . The universal fear of capitalists was that the unrestricted issue of the currency would stimulate inflationary 'overtrading', which could only be corrected by a financial crisis and a depression . The gold standard, far from representing the persistence of antediluvian forms of money, marked the defeat of British popular radicalism in the first half of the nineteenth

Regulation and crisis century, was only generalised in the wake of of the world crisis of 1873, and only finally consolidated with the defeat of populism in the US election of 1896 . Similarly the reconstruction of the gold standard afte the First World War was again a class issue, as the capitalist class drew the lessons of the revolutionary impact of wartime inflation . The gold standard, far from representing a barrier to accumulation, was a device adopted to enbody the political dominance of the money power of capital in the face of popular inflationism . The gold standard by no means prevented the monetary authorities from pursuing more or less active stabilisation policies, nor from acting as lender of last resort . In the last analysis they could, and regularly did, suspend convertibility to sustain expansionary policies, particularly in wartime and in the peripheral regions . The question of whether the authorities should sustain the overaccumulation of capital by the inflationary expansion of credit, or should contain it by pursuing contractionary policies, even at the cost of a financial crisis and depression, has always been a political issue, the resolution of which expresses not the form of money, or the structure of a. regime of accumulation, but the balance of class forces . The pursuit of restrictive policies in the face of the 1929 crash was correspondingly not dictated by the dominance of commodity money, but was a political decision . The suspension of gold convertibility would certainly have allowed the authorities to pursue expansionary credit policies to alleviate the impact of the crisis . However continued adherence to the gold standard was by no means irrational from the viewpoint of the state or of the capitalist class, however much damage deflationary policies caused . On the one hand, as it happened in the 1930s, there was a real fear that the collapse of the gold standard would lead to competitive devaluation, protectionism and the formation of blocks . On the other hand, the ruling class feared the political consequences of inflationism even more than it feared those of depression, and for good reason . The class struggles unleashed by wartime and post-war inflation had been a major factor in precipitating the rise of revolutionary movements . The attempt of the German government to stave off the crisis of 1921 by inflationary means had led to the demonetisation of credit and the devaluation of capital by inflation even more surely than

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Fordism and the regime of intensive accumulation

There is no evidence that the crisis of 1929 was a crisis of a regime of extensive accumulation, marking the transition to a new regime of intensive accumulation, because the elements of the intensive regime were in place long before 1929 . The production of relative surplus value, rising mass consumption, and credit money all dated back to the eighteenth century . Even the specific institutional forms of 'Fordism' (monopolisation, the rise of mass production, industrial relations, and social reform) had been growing up alongside one another since the 1870s . However this is not sufficient to discount the regulationist theory . Even if the theory of the extensive regime of accumulation is rejected, the regulationists might reinterpret the entire history of capitalism to 1945 as the prehistory of Fordism . Thus we must turn to the model of Fordism and the regime of intensive accumulation . We might start by asking the simple question, how long was the `longish period' of Fordism (Lipietz, 1984, p .85)?

How long did `Fordism' last? The institutionalisation of the 'Fordist regime of accumulation' was associated with the monopolisation of industrial capital ; the generalisation of Fordist methods of production ; the institutionalisation of a generalised expectation of rising wages in the annual pay round ; the institutionalisation of regular increases in welfare expenditure ; and the liberalisation of monetary and financial markets, culminating in the adoption of Keynesian macroeconomic policies which set the seal on the regime of accumulation by maintaining full employment which could absorb overaccumulation through inflation . The post-war boom was not initiated by Fordist modes of regulation . The immediate post-war period of reconstruction was marked not by Fordism, but by austerity, by sharp industrial and political class struggles, and by direct state intervention to establish both a high rate of profit and the proportionality of the various branches of production at the national and international levels . The looming post-war recession was staved off not

Regulation and crisis by rising wages but by the Marshall Plan, rearmament and the Korean War . It was not until the early 1950s that the elements of Fordism began to be put into place, and not until the early 1960s that the institutionalisation of Fordist modes of regulation could be considered anywhere near complete . On a global scale the key dates might be identified by the `Americanisation' of European industry under the Marshall Aid programme and the subsequent flood of US direct investment, which generalised Fordist production methods and Americanised industrial relations ; the 'Keynesian' impetus of rearmament and the Korean war boom, which established the inflationary environment which institutionalised monopoly pricing and the annual pay round ; the restoration of European currency convertibility in 1958, which was the culmination of the dismantling of wartime controls ; the endorsement of `incomes policies' by a majority of OECD countries in 1961, which marked the rejection of deflationary responses to inflation and identified the wage relation as the focus of regulation ; and the move to social democratic policies in the mid-1960s, dominated by Johnson's `Great Society' programme, which institutionalised both expectations of rising social expenditure and inflationism on a global scale . We can perhaps say that the elements of the Fordist regime of accumulation were in place by the early 1960s, although in any particular country they were only imperfectly institutionalised . If Fordism were more or less insitutionalised by the early 1960s, its crisis developed as soon as it was in place . In Britain the failure of Keynesian policies to secure stable full employment growth led to the rise of Keynesian interventionism from 1961 . The dash for growth in 1963 soon came up against the balance of payments constraint . Harold Wilson's Fordist hope that Keynesianism plus `rationalisation' would provide the key to prosperity were soon thwarted by the same constraint . The devaluation of 1967 marked the crisis of Fordism not only in Britain, but also on a global scale, as it precipitated a rush into gold and brought the dollar into the speculative front line . The crisis was similarly expressed in the rapid intensification of the class struggle between 1967 and 1971 . In the face of the growing pressure of working class demands accumulation was only sustained by the increasingly inflationary expansion of credit on a global scale, which was maintained as the post-war boom moved into the

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speculative phase that culminated in the crisis of 1974 . The emerging crisis of Keynesianism led to the progressive abandonment of full employment, in favour of price stability, as the primary target of macroeconomic policy, and credit expansion, and wage bargaining from the late 1960s, culminating in the rise of `monetarism' through the the 1970s . If such a thing as the 'Fordist regime of accumulation' ever existed, it was singularly ineffective at securing the `stabi lisa tion in the allocation of the product between production and consumption over a longish period' . Fordism and the post-war boom The regulation approach not only overestimates the stability and duration of 'Fordist' modes of regulation, it also overestimates the contribution of Fordism to the postwar boom even in its heyday, and so the extent to which Fordism can be considered a systematic `regime of accumulation' . The emphases of its intepretation of the post-war period are, to say the least, very selective . While there is no doubt that rising wages helped to sustain accumulation in the post-war period by providing a growing market for the products of capital, it is important not to overestimate the impact of mass consumption . The bulk of wages continue to be spent on food, clothing, fuel and housing . The consumption of the rapidly growing middle class, and increasingly sophisticated military expenditure, were more significant for the ultimate absorption of the product of the most dynamic branches of production than the consumption of the direct producers . While unproductive social expenditure and rapid depreciation absorbed surplus capital, there is no doubt that military expenditure, consumer credit, and unproductive capitalist expenditure were at least as significant in this respect" . While rapid productivity increases maintained profitability in the face of the growing overaccumulation of capital, rising wages and escalating unproductive expenditure, productivity increases in manufacturing were no more spectacular than in other branches of production, and only a part of manufacturing can be characterised as Fordistll . Indeed productivity rose more rapidly in agriculture and parts of transport and distribution than in manufacturing . Moreover, the improving terms of trade of the metropolitan centres of accumulation, based on the massive

Regulation and crisis overaccumulation of capital in primary production between 1951 and the late 1960s, and then during the 1980s, gave profits an added boost . When it comes to the modes of regulation of the postwar regime of accumulation the regulationists are on even shakier ground . It is simply not the case that wages were regulated in the post-war period according to the regulationist model . Although rising productivity, and the improving terms of trade, certainly made it possible for rising real wages to be reconciled with a relatively stable rate of profit, the post-war settlement was based on a generalised expectation of rising living standards, without regard to constraints of profits or productivity, an expectation that was institutionalised in the annual pay round and the `going rate', a rate which was demanded by productive and unproductive workers, by private and public sector workers, by workers in manufacturing, services and agriculture . Thus the structure of pay differentials remain remarkably stable, despite the very different rates of growth of productivity (and employment) in different branches of production . Moreover the evidence for the stability of the rate of growth in money wages, in the face of varying rates of price inflation, which for Aglietta stabilised the macroeconomic relationship between wages and profits, is tenuous to say the least (although stronger for the US, with its tradition of longterm pay bargains, than elsewhere) . It was precisely because the system of wage bargaining did not provide any link between wages increases and the rate of growth of productivity or profits, either at the micro or the macro level, that governments turned to `incomes policies' as profits came under pressure . However, far from confining the rate of growth of wages within the limits of profitability, such policies served only to politicise the wages struggle and intensify class conflict, which in turn played a central role in precipitating the crisis of the Keynesian welfare state . Collective baragaining, monopolistic pricing policies, and easy credit certainly gave accumulation an inflationary bias and helped to prevent overproduction from leading to price wars, mass bankruptcies and depression . However it was the inflationary environments of post-war reconstruction and military Keynesianism which permitted the institutionalisation of inflationary pricing policies, rather than the other way round . There is no doubt that rapid depreciation enabled capital more easily to absorb

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the costs imposed by the overaccumulation of capital . However the condition for such an absorption was not the expansion of credit, but the very high rate of profit, against which depreciation charges were set . Finally, there is no doubt that the overaccumulation of capital was accommodated by the inflationary expansion of credit on a global scale . However Aglietta's identification of inflationary pressures with the financing of depreciation is questionable, since depreciation charges are only one element of the pressure of profitability, and investment finance only a small component of the demand for credit . Thus the inflationary expansion of credit was not inherent in the forms of investment financing and monopoly pricing of the Fordist regime of accumulation, but was rather the result of the adoption of Keynesian expansionary policies on a global scale . These observations should be sufficient to cast doubt on Aglietta's characterisation of the post-war regime of accumulation . The driving force of accumulation was not mass consumption, but profits . The dynamism of the boom derived from the very high profits of the immediate postwar era . The massive increase in the product of manufacturing industry was absorbed more by unproductive expenditure and the growing middle class, associated with monopolisation, bureaucratisation and militarisation, than by rising mass consumption . The uneven development of the branches of production was countered by direct state intervention and accommodated by the rapid growth of international credit . The growing overaccumulation of capital was absorbed initially by the very high rate of profit, and by the intensified exploitation of the mass of the population in the peripheral regions, and subsequently by inflation and a rising savings ratio which sustained a massive expansion of credit . Far from adjusting the rate of growth of wages to the rate of growth of 'productivity', the system of industrial relations enabled workers to maintain their real wages without regard to productivity growth, and so only intensified the pressure on profits . The post-war boom was certainly different from previous booms, but the qualitative difference lay not in the structure of the regime of accumulation, nor in the extent or the forms of overaccumulation, but in the fact that the national and international authorities were willing and able to sustain accumulation, in the face of the growing pressure of overaccumulation, by means of an expansion of credit on an historically unprecedented scale .



Regulation and crisis When Aglietta published his book in 1976 it was not unreasonable to see the Fordist regime of accumulation as a coherent mode of integration of accumulation, and to see the inflationary crisis as a crisis which would have to be resolved within the confines of the Fordist regime . However the crisis of Keynesianism and the rise of monetarism cast doubt on the functionality of inflationism for the sustained accumulation of capital, and correspondingly on the ability of the state-regulated credit system to accommodate the tendency to overaccumulation and crisis . Far from containing the class struggle, expansionary policies intensified the struggle, stimulated the emergence of new forms of struggle, and precipitated a crisis of the state. In retrospect it is clear that Keynesian inflationism was dictated not by the structure of the regime of accumulation, but by the balance of class forces, institutionalised in the systems of industrial relations, electoral politics and the welfare state . The strength of Fordism lay not in its ability to contain the tendency to overaccumulation and crisis, but in its provision of an ideology which held out such a promise, a promise which, however, it was never able to fulfil .

The weakanesses of the regulationist model are not Over simply a matter of detail, but point to fundamental accumulation theoretical errors at the heart of the regulationist and the approach . The source of these errors is the theory of regime of overaccumulation underlying regulation theory . accumulation Although the regulationists have been accused of the heresy of underconsumption (Weeks, 1988), this is a misleading characterisation of Aglietta's work . The focus of Aglietta's theory is the tendency to the overaccumulation of capital in Department I . In the extensive regime of accumulation this tendency gives rise to underconsumption crises for the orthodox Keynesian reason that falling prices precipitate a deflationary wageprice spiral . However in the intensive regime collective bargaining, monopolistic pricing and expansionary credit policies mean that over-accumulation in Department I leads to the devaluation of capital through inflation . The crisis in the intensive regime of accumulation is precipitated not by underconsumption, but by the tendency for the rate of profit to fall . This crisis cannot be resolved by cutting wages, since this would merely precipitate a Keynesian

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deflationary spiral, so the crisis leads to escalating inflation, which can only be resolved by increasing productivity . Thus the source of crises is the tendency to overaccumulation on Department I, while the barrier to their resolution is provided by a Keynesian analaysis of the dynamic relationship between production and realisation . Thus Aglietta's theory is essentially a theory of disproportionality . Nevertheless, underlying this theory is the Keynesian belief, shared by underconsumptionism, that the driving force of, and limit to, accumulation is the growth of the market . It is this belief that underpins Aglietta's analysis of the possibility and limits of the stabilisation of the regime of accumulation . Although the tendency to the overaccumulation of capital in Department I lies at the heart of Aglietta's theory, his analysis of this tendency is surprisingly undeveloped . He introduces the tendency with the vague assertion that `the motive impulses in the transformation of the forces of production, in effect, derive from Department I', adding that 'the increase in the organic composition of capital inscribes this tendency into the structure of social capital' (p .56) . Although he doesn't explicitly develop the analysis further, it seems that the underlying idea is that overaccumulation is the result of the surplus profits in Department I which are available as a result either of the invention of new machines or as a result of increased demand resulting from the rising organic composition of capital . These surplus profits fuel the animal spirits of capitalists in Department I, their `euphoria' (p .358) sustaining their overinvestment even when overproduction appears, as they dispose of their machines on credit . Thus the source of overaccumulation is the prospect of surplus profits provided by the exploitation of temporary market opportunities, and the explanation is Keynesian, overaccumulation deriving from the subjective irrationality of entrepreneurial expectations . Accordingly the tendency to overaccumulation can be eliminated in the regime of intensive accumulation in which the regulation of production and consumption norms maintains the structural relations of proportionality between the main departments, while cyclical disproportionalities are accommodated through credit expansion . Although this sort of theory of overaccumulation is common within Marxism, and the anarchy of the market certainly provides a possible source of overaccumulation and crisis, a Marxist theory must seek to locate the

Regulation and crisis contradictions of capitalism not in the subjective irrationality of capitalists, but in the objective features of the capitalist mode of production . Aglietta fails to do this because he does not take his critique of neo-classical conceptions of the market far enough, exploring only the relations between the major departments of production, without questioning the efficacy of the market in regulating relations within branches of production . Thus Aglietta, like many Marxists, presumes that the market smoothly regulates the generalisation of `production norms' within a particular branch of production, abstracting from the uneven development of the forces of production within branches of production which is the driving force of accumulation, and the source of overaccumulation and crisis . It is not the surplus profits offered by a growing market but competitive pressure, based on the uneven development of the forces of production, which forces individual capitalists to seek constantly to revolutionise the forces of production . However this competitive pressure only makes itself effective through the overaccumulation of capital and the overproduction of commodities . Thus overaccumulation is not a pathological condition, but is the normal form of capitalist accumulation, and both the origin and the result of the dynamism of the capitalist mode of production . The introduction of a new method of production offers the innovating capitalist the opportunity of appropriating a surplus profit . In introducing the new method of production the innovating capitalist will seek to expand productive capacity without regard to the limits of the market, in the perfectly rational anticipation of expanding his market at the expense of his competitors . The resulting overproduction of commodities leads to growing pressure on the profitability of the less advanced capitals, who can respond by introducing the new method of production in their turn, which only intensifies the overaccumulation of capital and the overproduction of commodities ; by intensifying labour, extending the working day and forcing down wages, which intensifies both the overproduction of commodities and the class struggle ; by seeking protection from the state, which politicises capitalist competition ; or by going into liquidation, which threatens to precipitate a deflationary spiral . The tendency to the overaccumulation of capital is not determined by the anarchy of the market, but by the contradictory form of capitalist accumulation, as the C&C 36-F

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pressure of competition leads individual capitals to seek constantly to revolutionise and expand the forces of production without regard to the limits of the market, so that new methods of production are only generalised through the devaluation of capital, the liquidation of productive capacity, the intensification of labour and the `redundancy' of workers . This is the essential form of accumulation in all branches of production, however large or small, however fast or slowly growing may be the market . However the tendency to the overaccumulation of capital is likely to be more pronounced in those branches of production in which new methods of production promise substantial surplus profits, in which new productive capacity takes some time to yield an increase in output, and in which the stimulus to overaccumulation is sustained 12 by the rapid growth of the market . Thus the tendency to the overaccumulation of capital appears at the level of the accumulation process as a whole in the form of the uneven development of the various branches of production, being most pronounced in the most dynamic branches . The fundamental error of Keynesianism, which is carried over into the regulation analysis, is the belief that overaccumulation and underconsumption are two sides of the same coin, so that the expansion of the market will resolve a crisis of overaccumulation . Once the source of overaccumulation is located in the social form of capitalist production, it becomes clear that the expansion of the market relieves the immediate pressure on profits only by reinforcing the stimulus to overaccumulation by sustaining the surplus profits of the more advanced producers and protecting the less advanced from liquidation . The expansion of credit is no more able to resolve an overaccumulation crisis than is the growth of the market which it stimulates . As the overaccumulation of capital comes up against the barrier of the limited market, the rule of the market is imposed on individual capitals in the form of the `monetary constraint' . Credit frees capital from this limit, not simply by augmenting the supply of money, but by monetising capital which would otherwise be immobilised in the form of commodity or productive capital. Moreover credit does not simply redistribute the money available to serve as capital among the capitalist class . The credit-creating powers of the banks enable them to create additional capital, to free accumulation as a whole from the barrier of the market . For Aglietta the possibility

Regulation and crisis of credit expansion makes it possible to stave off an overaccumulation crisis . However Aglietta's otherwise exemplary analysis of credit, like that of the market, rests on a one-sided analysis of the relationship between credit and overaccumulation . In the boom credit appears to have the magical power of suspending altogether the barriers to the accumulation of capital, providing finance for new ventures, sustaining unprofitable capitalists and impoverished petty producers through periods of difficulty . The only limit to accumulation appears to be the availability of credit . The growth of credit sustains profits and ameliorates the class struggle, facilitating the smooth liquidation of backward capitals and the generalisation of more advanced methods of production and so providing a favourable environment within which to mobilise the counter-tendencies to the overaccumulation of capital embodied in the tendency to the equalisation of the rate of profit . However the expansion of credit simultaneously relieves the pressure to achieve such a restructuring by inflating the profits of the more advanced producers, while relieving the less advanced from the pressure of the market, so stimulating the even greater overaccumulation of capital . Thus the expansion of credit, far from accommodating the overaccumulation of capital, tends to intensify it, as it relieves capital from the monetary constraint through which the rule of the market is imposed on individual capitals . While credit expansion may sustain accumulation, and reduce the immediate danger of a deflationary crisis by `socialising' the costs of the devaluation of capital, it does so only by stimulating the increasingly inflationary overaccumulation of capital with the attendant risks of an even more devastating crisis in the future . The rapid growth of the market, a high rate of growth of productivity, and the expansion of credit certainly absorb the expanded product, accommodate the devaluation of capital, and sustain the uneven development of accumulation . However this does not define a virtuous circle of `balanced growth' described by the regulation theorists because exactly the same factors also stimulate the increased overaccumulation of capital . The regulation of credit accordingly cannot overcome the contradictory form of accumulation, it can merely reinforce one or the other pole of the contradiction . It cannot overcome the tendency to overaccumulation and

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Over accumulation crises, class struggle and the state

While the tendency for accumulation to take the form of overaccumulation and crisis is inherent in the capitalist mode of production, the historical development of this tendency is certainly mediated by the institutional forms of the social relations of capitalist production . However these institutional forms are not the `modes of regulation' of a `regime of accumulation', they are the institutional forms of the class struggle . The overaccumulation of capital appears to individual capitalists in the form of growing pressure on profitability . The ability of the capitalist to restore profitability is constrained by the competitive pressure from other capitalists for markets and for credit, on the one hand, and by the resistance of the workers to the introduction of new methods of production, the intensification of labour, the lengthening of the working day and the reduction of wages, on the other . Thus the overaccumulation of capital appears in the form of an intensification of the competitive struggle between capitalists and of the industrial struggle between capitalists and the working class . The outcome of these struggles is conditioned by the historically developed institutional forms of competition, of credit, and of industrial relations, behind which stands the institutional form of the state . However the struggle is not confined within these forms, but is at the same time a struggle to reproduce or transform them, as capitalists and workers confront the existing forms as barriers to their own reproduction . Thus the emergence of a crisis of overaccumulation does not simply lead to the dislocation of the structural integration of the regime of accumulation, more fundamentally it leads to an intensification of the competitive and class struggles which develop in and against the existing institutional forms of capitalist class domination, struggles which necessarily take on a political form and so impose themselves on the state . The state does not stand above these struggles, as the guarantor of the functional integration of the `regime of accumulation', for the state is an aspect of the institutional forms of capitalist class relations, and so is itself the object of struggle . Thus the state does not, and cannot, resolve the contradictions of capital, but reproduces them in a

Regulation and crisis political form ." Nor can the state be reduced to a superstructural expression of the `structural forms' of the monetary relation and the wage relation which are constituted in civil society (Aglietta, p . 27), for the state plays a fundamental role in attempting to confine social reproduction within the alienated forms of the wage relation and the monetary relation, by enforcing the laws of capitalist property and contract, by regulating the reproduction of the working class through the system of social administration, and by maintaining the rule of money and the integrity of the currency . This is why the class struggle necessarily takes on a political form, as the struggle over the forms of capitalist domination necessarily becomes a struggle over the form of the state . This is also the ultimate reason why the institutional forms of capitalist social relations are not `modes of regulation', which institutionalise some kind of social democratic class compromise according to the structural imperatives of a regime of accumulation, but institutional forms of class domination, which express a particular configuration of class struggle . The development of these institutional forms is correspondingly not determined by the functional imperatives of the `regime of accumulation', but by the development of the social and political struggles unleashed by the contradictory tendencies of capital accumulation .

In retrospect it is increasingly clear that rising mass consumption, growing social expenditure, and the inflationary expansion of credit are best seen not as aspects of the regulation of a regime of accumulation, but as related aspects of the institutionalisation of a particular balance of class forces in the post-war period, in which rising wages and rising levels of social expenditure were the price capital paid for the industrial and political integration of the working class in the immediate post-war period . While the rising consumption norm indeed played its part in sustaining the post-war boom, it soon became a barrier to accumulation as the overaccumulation of capital increased the pressure on profits . The inflationary expansion of credit sustained accumulation in the face of such pressure, but inflationism was not an expression of the functional integration of the `regime of accumulation', but rather a result of the inability of capital to overcome the barrier of rising working-class aspirations

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institutionalised in the Keynesian welfare state . Nevertheless inflationism unleashed new political forces, which underlay the crisis of Keynesianism and the rise of monetarism, and enabled capital and the state to move onto the offensive and to restructure the relationship between capital, the state and the working class . The 1970s were indeed marked by `stagflation' . However the balance between stagnation and inflation was not determined by the structure of the `regime of accumulation', but primarily by the balance of class forces, domestically and on a world scale . Meanwhile rising unemployment, and the increasingly aggressive stance of employers and the state as profits and public finances came under pressure, eroded the strength of the working class, and escalating inflation mobilised new political forces which endorsed restrictive anti-inflationary policies and the growing offensive against the organised working class . The past decade has not so much seen a restructuring of the regime of accumulation, based on the development of neo-Fordist forms of production, as a sustained offensive against the working class, aimed primarily at the destruction of the institutional forms of the Keynesian welfare state which underlay the ability of the organised working class to realise a consumption norm based on a generalised expectation of rising living standards . However the assault on the working class has not taken the form of a generalised offensive against the working class as a whole so much as a restructuring of the institutional forms of the state and the system of industrial relations on the basis of a fragmentation of the working class, in the attempt to confine the aspirations of the working class within the limits of capital by confining wages and social expenditure within the limits of profitability . While Keynesianism was the ideological expression of the attempt of capital and the state to respond to the generalised aspirations of the working class in the post-war boom, neoliberalism is the ideological expression of the subordination of working class aspirations to the valorisation of capital . The political stability of monetarism, no less than that of Keynesianism, has depended on the sustained, if uneven, accumulation of capital on a world scale which has enabled the state to isolate and fragment working class resistance, while capital has been able to concede a steady rise in wages to sections of the working class . However the relative industrial peace and political stability in the mid-1980s does not indicate the stability of a 'neo-Fordist'

Regulation and crisis regime of accumulation . The boom of the 1980s has not been based on the development of new forms of production, still less on restrictive credit policies, but primarily on the intensification of labour, fiscal expansionism, and a credit explosion . The devaluation of capital and destruction of productive capacity in the recession of the early 1980s, and the associated offensive against the organised working class, restored profitability, while the massive redistribution of income in favour of the rich, domestically and on a global scale, and the enormous rise in military expenditure, suspended the barrier of the limited market for the more dynamic branches of 14 production . High interest rates accelerated the devaluation of capital and the liquidation of productive capacity in the face of overaccumulation, and have enabled the banks to absorb heavy losses without defaulting, while high unemployment and aggressive management has enabled capital to restore profitability and contain inflationary pressures . However, while restrictive monetary policies have helped to contain inflation, they have by no means contained the tendency to the overaccumulation and uneven development of capital, but have rather served to sustain and intensify overaccumulation by diverting surplus capital into financing the growing mountain of public and consumer debt . The crash of 1987 has dramatically brought home how precarious are the foundations of the apparent success of monetarism, and how illusory the foundations of the New Realism . Although it is impossible to anticipate the future course of accumulation, it is clear that we are moving back into the crisis phase . The crisis may be acute, as between 1929 and 1932, with a financial crash precipitating a deep depression, or it may be long drawn out, as in the period leading from 1873 to the First World War, with alternating phases of recession, stagflation, and even renewed bursts of accumulation . However there is no doubt that we are entering a period in which the overaccumulation of capital will lead to an intensification of class struggle and increased domestic and international political tensions . It is primarily the outcome of the resulting struggles, rather than the structure of a particular regime of accumulation, which will determine the forms in which the crisis unfolds . The possibilities which confront capital in the face of the looming crisis are severely circumscribed . Attempts to resolve the crisis through either inflationary or deflationary

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means carry enormous risks, either course threatening to destabilise the precarious international financial system and trigger a financial collapse, which would in turn threaten to intensify the class struggle and precipitate a political polarisation . For this reason it is likely that capital will continue to make every effort to sustain the boom by reconciling the expansion of debt with the stability of the financial system through international co-operation, just as it did through the late 1920s . Nevertheless such cooperation presupposes the willingness of governments to sacrifice immediate national interests in order to sustain accumulation on a global scale, so is constantly threatened by domestic political pressures which make such sacrifices politically unacceptable . The historical parallels are by no means encouraging, previous phases of global overaccumulation having culminated in the formation of blocks and inter-imperialist war . While such developments are not on the immediate horizon, they could rapidly emerge in the face of a renewed 15 crisis . Moreover there is a real danger that social democracy, far from resisting such tendencies might play the leading role in developing them . Social imperialism remains an attractive way of salvaging the social democratic project, which has always been premised on sustained domestic accumulation, and so the prosperity of domestic productive capital, to maintain full employment and provide rising wages and social expenditure . While capital has sought to overcome the growing barriers to accumulation through global liberalisation, it has been the Left which has prepared the ground for a social imperialist response to the crisis, confronting the international freemasonry of capital not with a socialist internationalism, but with schemes for the regeneration of the `national economy', in the naive expectation that a nationalistic confrontation with the global aspirations of capital will acquire a socialist momentum, rather than degenerating into an offensive against the working class as the attempt to regenerate the national economy by fostering the accumulation of domestic productive capital confronts the barrier of working class aspirations . The anti-imperialism of the Left has similarly had a national rather than a class character, taking the predominant form of antiAmericanism rather than a socialist internationalism . The incipient tendencies to economic nationalism and inter-imperialist rivalry make it more imperative than ever that socialists should resist the temptations of social



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imperialism in the name of a socialist internationalism . However this is easier said than done . If social imperialism is as deeply entrenched as ever, socialist internationalism seems even more utopian today than it did before the First and Second World Wars, when the Second and Third Internationals had some political significance, and maintained a nominal internationalism . Nevertheless, although a call for world revolution is empty utopianism, there are internationalist tendencies in the labour movement, and there are strong internationalist sentiments in the women's movement, the peace movement, the environmental movement, solidarity movements, and the world development movement, which provide a political basis on which to build an internationalist alternative to social imperialism . Even if such an internationalism is not wrapped in the rhetoric of socialism, its political content is far more radical than that of social imperialism, in being based on the subordination of capital not to the illusory community of the nation embodied in the national form of the capitalist state, but to the expression of human needs and aspirations, which alone point the way forward to socialism .

1 This article is a substantially revised version of a paper presented to an International Conference on Regulation Theory in Barcelona in June 1988 . It draws heavily on the analysis in my recently published book, Keynesianism, Monetarism and the Crisis of the State, in which I develop an analysis of the politics and ideology of money and the state through an historical account of the development of the capitalist state form in relation to the changing forms of class struggle associated with the tendency to overaccumulation and crisis . I began writing the book with a view to providing an historically more adequate typology of regimes of accumulation . However it soon became clear that the concept of the regime of accumulation was inadequate in stressing the systematic, as against the contradictory, integration of accumulation, and in stressing the discontinuities, as against the underlying continuity, of the various phases in the accumultion of capital .

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2 In many ways the parallels between the unfolding of the crisis since 1974 and the period following the crash of 1873 are closer than those with the inter-war period . 3 Some commentators have so extended the concept of regulation as to embrace just about anything in the regulation school (c .f. Jessop, 1988) . The focus of this critique is the theories of intensive and extensive regimes of accumulation, and of Fordism and post-Fordism, which are distinctive of the `Paris School' . The obscurity and inconsistency of Aglietta's work makes it difficult for the critic to pin down the object of criticism . For alternative critical expositions see especially Driver (1981) and Dumenil and Levy (1988) . The leading vulgariser of Aglietta is Lipietz . 4 The concept of neo-Fordism is nebulous, to say the least . It is not clear whether the concept refers to a variant of Fordism, in which case its novelty is dubious, or to a new `yuppie' regime of accumulation, in which case its empirical relevance is suspect . The elements of neo-Fordism, like those of Fordism, are hardly new . Indeed in a different context it has been argued that production to order, product differentiation, flexible specialisation and fragmented labour markets, which are the mark of neoFordism, were precisely the characteristics of British manufacturing, established in the second half of the nineteenth century, and only finally liquidated in the crisis of the early 1980s, which explain the failure of British capital to adopt Fordist methods (Elbaum and Lazonick, 1986) . 5 Lipietz's aversion to voluntarism is strange . Although the idea of a super-capitalist conspiracy may be far-fetched, the foundations of the post-war boom were laid by very deliberate strategies of post-war reconstruction, which drew heavily on the lessons learned by the failure of the 1920s . 6 Aglietta has gone furthest in moving from Marxism to sociology (Aglietta and Orlean, 1982), but the French sociologist Bourdieu is a favourite authority of Lipietz . See also Cartelier and de Vroey (1988) . 7 I do not want to go into the quantitative issues here . Data on wages and productivity show marked cyclical variations, so that secular trends are difficult to identify, but there is no evidence that the crisis of the 1920s marks a fundamental break in the trend of these parameters (Brenner, 1988 ; Dumenil and Lel4y, 1988) . Nor do I want to get into the question of a supposed transition from competitive to monopoly pricing in this article because it raises so many side issues (c.f. Dumefiil and Letry, 1988) . Monopolisation in its modern form dates back to the 1870s . However it is not so much the degree of monopoly as the prevalence of cost-plus pricing which is important for Aglietta, in sustaining inflation and limiting competitive price and wage cutting . It is by no means clear that the post-war period has been marked by a fundamental shift from competition to monopoly, nor that the degree of monopoly is a significant factor in the inflationary process, nor that relative prices have become more inflexible .

Regulation and crisis Similarly I do not intend to explore the issue of the relation between domestic and global accumulation . The regulationists insist on taking the national economy as their focus, and see the international economic and political system as an aggregation of national states and national economies, rather than locating the national economy within the framework of global accumulation and the nation state within the framework of the international state system . While I think that this approach is patently absurd, particularly when trying to understand the global cycles of the 1920s and of the post-war period, there is no inherent reason why the regulationist approach could not be reformulated within a global framework . 8 Indeed the concept of the capitalist mode of production presupposes the constant transformation of methods of production and the production of relative surplus value to provide the driving force of accumulation . c .f . Brenner, 1988 . 9 Keynes's famous opposition to the restoration of gold convertibility in his Tract on Monetary Reform was based not on an opposition to the deflationary bias of the gold standard, but to his fear that the return to gold would give free rein to US inflationism . Similarly European resistance to US inflationism in the late 1960s was a primary factor behind the collapse of the goldexchange standard which had been resurrected at Bretton Woods . 10 Rapid depreciation was more the result of tax legislation and high profits than a new-found means of absorbing the devaluation of capital consequent on overaccumulation . 11 How large or small a part depends on the precise definition of Fordism . Some definitions which identify Fordism with a very specific form of the labour process would apply only to a few assembly plants . Definitions which identify it simply with the production of relative surplus value would embrace not only large parts of manufacturing, but also agriculture . 12 Although the long gestation period of fixed investment makes branches of production in Department I particularly prone to overaccumulation, this is only one factor in determining the tendency to overaccumulation (and one shared by agriculture) . Thus there is no a priori reason to single out overaccumulation in Department I . 13 Aglietta would no doubt not disagree with all this - after all he strongly rejects structural-functionalist analyses of the state, insisting that the state is an institutional form of capitalist social relations, and stressing the role of the class struggle in the development of those relations (pp . 26 - 9) . Nevertheless, as noted above, Aglietta's protestations are merely rhetorical, for the fact of the matter is that for the regulationists the outcome of the class struggle, however contingent that outcome might be, is the installation of a regime of accumulation which neutralises the tendency to overaccumulation and crisis for a relatively long period . These two aspects of regulationism can only be reconciled if the stabilisation of accumulation by the 'regime of accumulation' is seen as the objective foundation of collaborative class relations .

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14 This strategy, pursued on a global scale, closely parallels that which underlay the short-lived Brazilian economic miracle from the mid-1960s . The image of the future is not provided by Japan, but by Brazil . The 'internationalisation of capital' need not be a barrier 15 to the formation of blocks in the 1980s, any more than it was at the turn of the century or in the 1930s, for the formation of blocks is not a matter of the ownership of capital, but of relatively closed regional networks of trade and payments, which present barriers to the mobility of the capital, but which are not inconsistent with its internationalisation .

References

Aglietta, Michel (1979) A Theory of Capitalist Regulation . New Left Books, London . Aglietta, Michel, and Orlean, Andre (1982) La Violence de la Monnaie, PUF, Paris . Bonefeld, Werner (1988) 'Reformulation of State Theory', Capital and Class, 33 . Brenner, Robert (1988) 'The Regulation Approach to the History of Capitalism', International Conference on Regulation Theory, Barcelona, June 1988 . Cartelier, Jean and de Vroey, Michel (1988) 'L'Approche de la regulation: un nouveau paradigm?', Barcelona Conference . Clarke, Simon (1988) Keynesianism, Monetarism and the Crisis of the State, Edward Elgar, Aldershot . Driver, Ciaran (1981) Review of Aglietta, 1979, Capital and Class, 15, pp . 150-168 . Dumenil, Gerard and Levy, Dominique (1988), 'Theory and Facts', Barcelona Conference . Elbaum, Bernard and Lazonick, William, eds (1986) The Decline of the British Economy, Clarendon, Oxford . Jessop, Bob (1988) 'Regulation Theory in Retrospect and Prospect', Barcelona Conference . Lipietz, Alain (1984) 'Imperialism or the beast of the apocalypse', Capital and Class, 22 . Lipietz, Alain (1985) The Enchanted World, Verso, London . Lipietz, Alain (1987) Mirages and Miracles, Verso, London . Weeks, John (1988) 'The Contradictions of Capitalist Competition', Barcelona Conference .

John Holloway

The Great Bear, post- Fordism and class struggle : A comment on Bonefeld and Jessop • Werner Bonefeld's article on the "Reformulation of State Theory" in Capital & Class no . 33 is important in at least two respects . It gives a comprehensive introduction to, and critique of, the "Reformulation" theories on the "Fordist" and "neo-Fordist" state, and, in doing so, it implicitly develops elements of a theoretical framework for understanding current changes in capitalism and the capitalist state . Bonefeld's central argument is that in the Reformulation theory, of which Hirsch is the main exponent, "class struggle is reduced to a `but also position' within history and as such separated from objective laws of development" (1987, 101), that the role of class struggle, although mentioned, is subordinated to the "objective laws" of capitalist development . Consequently, by treating the working class "as merely object of history" (1987, 123), the theory ultimately promotes the accommodation of working class struggle to the new face of capitalism . The relation between class struggle and the "objective laws of capitalist development" has always been the central issue of Marxist theory . This is especially so at the moment, when it often seems that the objective laws are having it all their own way and that class struggle has been suppressed . In particular, the issue is central to any

Holloway focusses on the relation between structure and struggle which he sees as the central question raised by Bonefeld's article on the reformulation state theory rejecting Jessop's treatment of the issues as inadequate . It is suggested that the unresolved tension between structure and struggle in relation to the reformulation literature was present already in Hirsch's contribution to the state derivation debate .

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discussion of regulation theory or any of the other theories of Fordism and Post-Fordism which have gained such influence in the last few years . It is not only the work of Hirsch that can be criticised for subordinating class struggle to the objective laws of capitalist development . On the contrary : the tension between structure and struggle is at least a constant and conscious preoccupation in Hirsch's work : in many other contributions to the discussion on the current changes in capitalism, struggle is totally absent . This suppression of struggle from the analysis of current changes has very important political and theoretical implications . The capitalist resolution of the crisis involves a rewriting of history : the inevitability of capitalism must be established, the instabilities and struggles of the past and present hidden from sight (cf . Holloway 1987) . Those who claim to be Marxists, it would seem, can play an important part in this purging of the memory . By a strange twist of theory, the "objective laws of capitalist development", which were previously used to point to the inevitability of capitalist crisis, are now used to support the inevitability of capitalist recovery . The question of the relation between structure and struggle thus goes far beyond a specific critique of the Reformulation debate : it is the central question in any attempt to understand the current development of capitalism and the perspectives for class struggle . Jessop's reply to Bonefeld in Capital & Class no . 34 failed to deal with this central point adequately, making, as it did, an extraordinary equation between class struggle and capital strategies . The aim of this paper is not to solve the problem, but to carry forward the discussion opened by Bonefeld by examining some of the theoretical bases of the reformulation debate and their political implications .

Structure and struggle in the state derivation debate

The central problem of Hirsch's work has always been an unresolved tension between the "objective laws of capitalist development" and class struggle . This tension is present in all his work, from his contribution to the state derivation debate onwards . The state derivation debate, which sought to provide a rigorous framework for the analysis of the capitalist state by deriving the form of the state from the nature of capital, has often been accused of adopting a capital-logic or functionalist approach . While it may fairly be said that

Pbst-Fbrdism and class struggle

some contributions to the debate assumed that the development of the state could be deducted from the "logic of capitalist development", the great merit of Hirsch's article, "The State Apparatus and Social Reproduction : Elements of a Theory of the Bourgeois State" (1974/1978), was that it sought to break away from the capital-logic approach, while continuing to emphasise the importance of grounding the analysis of the state in the nature of capital . A major theme in Hirsch's article was its argument against functionalism, against the functionalism of which Bonefeld accuses him in his discussion of Hirsch's latest work . To this extent, Jessop is correct when he says that "the West German contributors to the reformulation developed the anti-functionalist approach to the state derivation debate" (Jessop 1988, 155) . On closer inspection, however, it can be seen that Hirsch's article was contradictory . This contradiction can be traced in the history of the article . The article was in fact published twice : in a first version published in Braunmuhl et al (1973), and a second, revised version published the following year as part of a book by Hirsch (1974) - the version translated into English in Holloway & Picciotto (1978) . In the first version of the article, Hirsch derives the existence of the state from the lack of social cohesion in a commodity-producing society . In a society based on the division of labour and private property, social cohesion is established primarily through the law of value, behind the backs of the producers) . As the spread of commodity production destroys the social cohesion of feudalism, it is necessary for value to be complemented by the state as the alien embodiment of the social totality : "As the individuals `are neither subsumed under a natural community, nor do they, as conscious members of the community, subordinate the community to themselves, it must confront them, as autonomous subjects, as an equally autonomous, external, fortuitous objective thing . That is precisely the condition for their being able, as autonomous private persons, to exist at the same time in a social connection (Grundrisse, German ed ., 909) . Just as the connection between their labours presents itself as something alien to the individuals, as a thing (money), so it is necessary that the social generality should take on a particular form . Just as exchange value - embodied in money - produces the social unity of production independently of the will of

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the individuals, so the state is necessary to guarantee the general conditions of production and reproduction, which lie outside the individual producers" (Hirsch 1973, 201-202) . After deriving the necessary existence of the state under capitalism in this manner, Hirsch goes on, in an important section of the article, to argue that the development of the state can only be understood in the context of the analysis of capitalist crisis and particularly the mobilisation of the counter-tendencies to the tendency of the rate of profit to fall . This is followed by a discussion of state functions and of the contradictions in the relation between state and capital accumulation . As always with Hirsch, the article is rich in insights, but these need not be discussed here . In the 1974 article, the derivation of the state is sharply revised . The earlier derivation is implicitly rejected as being functionalist . After again underlining the importance of value as the means by which social cohesion is established in a commodity-producing society, Hirsch now points out that the "establishment of capitalist social relations is the condition for the full development and generalisation of commodity production" (1974/1978, 59), and then he goes on to derive the state form not from commodity production and exchange, but from the nature of capitalist social relations : "Because the process of social reproduction and the appropriation of the surplus product by the ruling class is mediated through the unimpeded circulation of commodities based on the principle of equal exchange and through the free disposal by the wage labourer of his own labour power and by the capitalist of the surplus value which he has appropriated and accumulated, the abolition of all barriers which stand in the way (i .e . of the direct relations of force between the owners of the means of production and of private relations of dependence and restraints ('feudalism') in the sphere of commodity circulation) is an essential element in the establishment of the capitalist form of society . The manner in which the social bond is established, in which social labour is distributed and the surplus product appropriated necessarily requires the direct producers to be deprived of control over the physical means of force and that the latter be localised in a social instance raised above the economic reproduction process : the creation of formal bourgeois freedom and equality and the establishment of a state monopoly of force" (1974/1978, 61) .

Post-Fordism and class struggle The importance of this derivation of the state lay in the fact that it grounded the form of the state not in the necessity of establishing some sort of general interest in an anarchic society (as implied in the 1973 article and in many of the other contributions to the state derivation debate), but in the nature of the social relations of domination in capitalist society . This implies a change in the concept of capital . Capital is understood as a social relation, as a relation of domination between capital and labour, as a class relation . Capital is not the economic which determines the political, but the economic and the political are (superficial) forms of a historically specific form of class domination (cf . Holloway/Picciotto 1978 ; Clarke 1988a) . Capital is not external to class struggle, but is the historical form assumed by class struggle . This derivation of the state opened the way to an understanding of the state as a particular form of the capital relation, understood as a relation of class struggle . From this view of capital, it followed that the analysis of the development of the state could not simply be "a question of the logical deduction of abstract laws but of the conceptually informed understanding of an historical process" (Hirsch 1974/1978, 82) : the new derivation provided the basis for a historical non-functionalist analysis of the state (see Holloway and Picciotto 1978 for a fuller discussion) . The problem is that Hirsch never fully followed through the implications of this derivation of the state . The 1974 version of his article revised the most functionalist parts of his earlier argument, and emphasised at several points the importance of historical analysis, but most of the analysis of the relation between state and crisis and much of the analysis of state functions remained unchanged . The result was a highly contradictory article, in which the importance of understanding the state in the context of the concrete development of class struggle is stressed at several points, while class struggle actually plays little or no part in Hirsch's more detailed account of the development of state functions . This contradiction led Sol Picciotto and myself to suggest, in our introduction to the English translation of the state derivation debate, that there was a shift in Hirsch's article "from arguing that accumulation must be seen as a form-determined and crisisridden process of class struggle . . . to suggesting that the relation between accumulation and state activity must be seen as being mediated through class struggle" (Holloway and Picciotto 1978, 28) . The unresolved tension between C&C 36-6

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Capital & Class structure and struggle, so fully analysed by Bonefeld in relation to the Reformulation literature, was present already in Hirsch's contribution to the state derivation debate . The tension between structure and struggle can be seen crucially in the analysis of crisis . One of the most important contributions of Hirsch's article was to establish the centrality of crisis as the key to an understanding of the development of the state . A large part of both versions of the article is taken up with the analysis of the tendency of the rate of profit to fall and of crisis as the mobilisation of the counteracting tendencies . Crisis is presented, not as an economic phenomenon but as a total reorganisation of the social conditions of production, a reorganisation which is achieved, if at all, through a process of social struggle in which the state plays an important part, and through which the state develops . Nevertheless, even at the heart of this analysis of crisis as a process of social struggle, the tension between objective laws and subjective struggles reappears : "the course of capitalist development is not determined mechanically or by some kind of law of nature . Within the framework of its general laws, capitalist development is determined rather by the actions of the acting subjects and classes, the resulting concrete conditions of crisis and their political consequences" (1974/78, 74-75 ; my emphasis) . The tension is expressed by the phrase "in the framework", which implies an external relation between the objectivity of the general laws of capitalist development and the subjectivity of class struggle, a relation in which class struggle is clearly subordinate .

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The purpose of analysing the dualism of Hirsch's contribution to the state derivation debate is not to stir up old debates . The point is that the same dualism is at the heart of his fatalistic analysis of the current development . Social struggles are important, but "it is always capital itself and the structures which it imposes 'objectively', behind the backs of the actors, which set the decisive conditions for class struggles and crisis process' (Hirsch and Roth 1986, 37) . Historical development has given a new meaning to the theoretical frameworks of the 1970s . What could previously be seen as productive ambiguities have now become contradictions with reactionary implications . To

Post-Fordism and class struggle emphasise the objective laws of capitalist development in the early 1970s was to emphasise the inherently unstable nature of capitalism . In the late 1980s, the appeal to "the inescapable lines of tendency and direction established by the real world" (Hall 1985, 15), has become a reformist argument for adaptation to the inevitable restructuring of capitalism . In a world in which it seems that the objective laws of capialist development have crushed the subjective struggles of the working class, it seems that the only option open to Marxists is to choose between lamenting the growth of capitalist violence and repression (Hirsch) or to argue for accommodation to the new "realities" (Hall, Jessop) . Though very different in their origins and inspiration, both of these variations on the theme of postfordism have the same implications : struggle against laws of capitalist development is hopeless . The world is closed, the future is determined . To speak of an external relation between the "objective laws of capitalist development" and class struggle does not make sense . The "laws of capitalist development" are nothing other than the movement of class struggle . The categories of Capital are categories of struggle . Conflict is at the core of the analysis of Capital. It is the form in which one part of the population expoits the other which is the key to the understanding of society (Vol . III, 791), an antagonistic relation of exploitation and resistance . Marx's materialism is not the lifeless determinism suggested by the unfortunate basesuperstructure in the 1859 Preface : it is conflict, conflict focused on production, which is the core of the patterns of development in any class society . It is not the laws of capitalist development but the forms taken by this conflict under capitalism which are the focus of the analysis in Capital. The categories of Capital are categories of antagonism from the very beginning . That is clear from the very first paragraph of Capital. In capitalist society, wealth presents itself to us as a vast collection of commodities, and the commodity is in the first place "a thing outside us" . Right at the outset, we are presented with the most violent antagonism of all : capitalism is the rule of death, of untruth, the denial of our identity . The wealth of society is of course not something outside us : it is the fruit of our work, the only source of its value . In the discussion of value, the violent antagonism of capitalism is developed .

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Capitalism is the rule of things, things produced by us, but which we neither control nor recognise as ours, things which stand against us : the rule of dead labour over living labour . The theory of value can be seen as a theory of the struggle between life and death . The form of value converts the expression of our living labour into dead things, into fetishised commodities which confront us as alien, powerful things . The theme of life and death is central to the whole analysis in Capital: Capital is the unstable and transitory domination of death over life, the domination of the commodity which is the dead form of our labour over the living labour which makes us human and distinguishes us from nature . This theme is constantly reflected in Marx's analysis, in the fundamental contrast between variable and constant capital, in the discussion of the labour process, in the discussion of accumulation, etc . The fundamental critique of bourgeois theory is that it does not see the distinction between life and death, 2 between variable and constant capital . For bourgeois theory, there is no life . For that reason, it cannot understand surplus-value, because the distinction between profit and surplus-value makes sense only in terms of the anatagonism between living labour and dead labour . For bourgeois theory, profit is external to us, a thing outside us . The category of surplus-value prises open the appearance of profit, showing that the source of profit is exploitation, that it is the result of a constant struggle against the working class, the struggle of the alarm clock, of the details of the organisation of the workplace, the struggle of time, of the minutes and the seconds . Profit is not something outside us : on the contrary, it exists because we are inside it . Bourgeois theory presents profit as a thing outside us ; Capital shows us that it is one moment of a relation of domination-and-struggle of which we are part, whether we like it or not . Working class struggle is not the explicit object of the analysis in Capital, but it is implicit in every category . Capital is an analysis of bourgeois society from the perspective of working class struggle, looking at the world through the eyes of the working class . Precisely for that reason, the working class is not the focus of analysis, but all the time it is present as the implicit subject of the analysis, as constant counterpoint, as threat . The growing power of the working class is a constant sub-theme

Pbst-Fordism and class struggle throughout the pages of Capital . The worker begins as a poor individual forced to sell his (the worker is generally assumed in Capital to be male) labour power on the market . Once the sale is completed and the poor man follows Moneybags into the factory at the end of chapter 6, his physiognomy changes and he is transformed from poor man into a worker, from passive victim of misfortune into active producer and protagonist in a relation of exploitation/struggle . In chapter 10, the worker joins forces with other workers to fight for the reduction of the working day . Later, through the developing forms of cooperation, a qualitatively different relation develops between the workers, as parts of the collective worker . Through the analysis of circulation, the working class spreads outwards from the factory to the whole of society . Never the explicit focus of the analysis, the development of the working class and of working class struggle is an inherent part of the development of the analysis of capital . The analysis of capital cannot be separated from the analysis of class struggle, for the simple reason that capital is class struggle, a class struggle in which we inescapably participate . It is the presence of the working class as an antagonistic force inside capital which is the key to understanding the development and the instability of capitalism . All modes of exploitation are unstable, simply because they are based on the domination of the majority of the population by the minority and because the ruling minority is always dependent on the work of the rules majority, but capitalism possesses a particular instability because of its historically unprecedented greed, its werewolf hunger for the labour of the workers . This greed is expressed in the contradiction of relative surplus-value : to increase surplus-value, capital is obliged to expel living labour from the process of production . But without living labour, without us, capital cannot survive : that is the central contradiction of modern capitalism . It is expressed in economic form in the tendency for the rate of profit to fall, but that is simply an economic manifestation of the basic contradiction : the presence of living labour in capital . To make a contrast between the laws of capitalist development and class struggle is to fall into precisely the festishism which is the object of Marx's critique in Capital . The laws (or tendencies) of capitalist development are not the framework within which class struggle takes place (as Hirsch says) : they simply describe the typical rhythms of

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struggle which result from the specific historical form of domination and resistance . These rhythms are very important, but they are not external to class struggle, they are rhythms which are expressed through class struggle, rhythms which can be broken or changed . Like the rhythms of the body, they affect the pace of our activity, but they are not external to it . Crisis, then, is not an external framework imposed on class struggle : it is the crisis of the class relation, the crisis of the rule of capital over labour . Crisis shows the limits of capitalist domination : the established patterns of class relations can no longer contain labour, can no longer suppress life . In crisis, the patterns of rule are torn at the seams : outbursts of future, of possibility, of the Not-Yet appear all over the place . Crisis is the breakdown of domination . To survive, capital must reimpose its authority and restructure its domination . The world must be sewn up again, the future closed off . But that is far from being an automatic process . There is a tendency in much of the literature on fordism and postfordism to elide crisis-asbreakdown and crisis-as-restructuring, and to assume that the transition from one to another is unproblematic, or can be taken for granted . But this is to forget much of the excitement of recent history . Fear of the future and urgent awareness of the need to reimpose discipline, morality and the right to manage is expressed in all forms of bourgeois culture from the early 1970s . To the extent that capital has managed to reimpose a greater measure of stability, it has been through a hard, and bloody, process of struggle, a struggle that is far from over, as Simon Clarke's article in this number of Capital & Class makes clear . To assume that postfordism simply emerges, to consolidate present tendencies into a new pattern of domination, as many of the analyses of fordism and postfordism do, is to take part in the sewing up of the world, the closing of the future which is the essential prerequisite for capitalist rule . To emphasise the openness of capitalist development, to agree with Bonefeld on the importance of respecting the 'heresy of reality", does not simply mean an empty optimism through thick and thin . The black picture painted by Hirsch of current developments is correct in very many respects . The current changes in capitalist domination are radical and generally very negative : there has been a very severe decomposition of the working class internationally . Criticising the fetishisation of current theoretical



Pbst-Fordism and class struggle tendencies should not lead us to deny the importance of the changes taking place . The problem with Hirsch's analysis, and with many other analyses of fordism and postfordism, is not that the picture they paint is inaccurate, but that is a still-life picture, a dead picture, a picture which seals the appearance of bourgeois society rather than prising it open . The present development is far more contradictory, far more alive than these analyses allow .

1. Jessop is quite wrong to suggest that the significance of Hirsch's article lay in opening up space for autonomous political analysis (Jessop 1988, 155) . People working in Politics departments (like Jessop, like Hirsch, like myself) have never had the slightest difficulty in finding space for autonomous political analysis . If we feel we're on the left and still want to be "political scientists", we can always look to Poulantzas to salve our consciences . That, thank goodness, was never Hirsch's contribution . The whole point of the state derivation debate, including Hirsch's article, and the reason why it was revolutionary in its implications, was precisely the opposite : to say that the development of the state cannot be analysed in autonomy from the analysis of capital . This point is stressed repeatedly in Hirsch's article . It is precisely for this reason that much of Hirsch's article is taken up with a discussion of crisis . 2 There is no continuity between Marxism and bourgeois theory . Bourgeois theory, by definition, assumes the continued existence of bourgois society : it can conceive of no other future . Its categories are categories of pre-determination, categories of death . Marxism, on the other hand, is based on the transitory nature of capitalist society . Its categories have no meaning at all unless the future is seen as being open, unless the transition to a different form of society is assumed to be the central problem . Too often, the aim of Marxist state theory has been to provide an alternative political science, alternative answers to the questions provided posed by bourgeois theory . But that cannot be : the result is a confusing and reactionary mish-mash of categories. If this sort of state theory is supposed to be Marxist, then all one can do is quote Negri : "It's obvious that with such people we are talking about different things - it is as if we were both talking of the Great Bear, but for them it means some distant constellation of stars, while for us it means the present reality of a ferocious animal" (Negri 1978/79, 116) .

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104 References

Bonefeld W . (1987), "Reformulation of State Theory", Capital & Class no . 33, pp . 96 - 127 Braunmuhl C . et al. (1973), Probleme einer materialistischen Staatstheorie, Suhrkamp, Frankfurt Clarke (1988a), "Keynesianism, Monetarism, and the Crisis of the State," Edward Elger, Aldershot 1988 Clarke S . (1986), "Overaccumulation, Class Struggle and the Regulation Approach", Capital & Class no . 36 Hall S . (1985), "Realignment for What?" Marxism 7bday, December, pp . 12 - 17 Hirsch J . (1973) "Elemente einer materialistischen Staatstheorie", in Braunmuhl et al (1973) Hirsch J . (1974/78), "The State Apparatus and Social Reproduction: Elements of a Theory of the Bourgeois State", in Holloway and Picciotto (1978) Hirsch J . and Roth R . (1986), Des neue Gesicht des Kapitalismus VSA-Verlag, Hamburg Holloway J . (1987), "The Red Rose of Nissan", Capital & Class no . 32 Holloway J . and Picciotto S . (eds) (1978) State and Capital, Edward Arnold, London Jessop B . (1988), "Regulation Theory, Post-Fordism and the State : More than a Reply to Werner Bonefeld", Capital & Class, no. 34 Marx K .,Grundrisse der Kritik der politischen Okonomie, Frankfurt Marx K ., Capital, Progress Publishers, Moscow, 1965/1971 Negri A . (1978/79), "Capitalist Domination and Working Class Sabotage" in CSE/Red Notes, Working Class Autonomy and the Crisis

Michael Williams

Learning and teaching managerial economics: a critical approach " The increasing vocationalism being imposed upon tertiary education throughout the capitalist world is continually decreasing the opportunity to learn and teach critically . Increasing numbers of economists feel constrained to shift from a political economic to a more business studies orientated approach . This article is meant to provide a resource which will enable the critical political economist to learn or teach Managerial Economics whilst maintaining or even enhancing their critique of bourgeois society . It is assumed that the reader is engaged in learning or teaching Managerial Economics (or some such course), probably has some experience of Marxist discourse and wishes to deploy the latter in critique of the former . Managerial Economics (ME), and the managers who make use of it, tend to take actual business decision-making as rational if not actually naturally given . Microeconomics argues for a coincidence between what is rational for the firm in a competitive environment, and what is socially rational . Critical political economy presumes rather a multiplicity of rationalities, one of which - rationality in accordance with value criteria - is a dominant characteristic of the bourgeois epoch . It is thus sceptical of any coincidence between economic agents' objectives and social objectives - to the extent that these latter are

This is the second in our series of survey articles on topics in economics . Mike Williams argues that based, as it is primarily, on neoclassical thinking, Managerial Economics has no adequate theory of production or the creation of use values . It concentrates instead on aspects of business in which exchange and market valorisation are dominant . The author argues that far from being an aid to the rational use of resources and the satisfaction of consumer wants through more efficient use-value creation, Managerial Economics is directed at the interests of the firm and its capitalist owners and management . These are treated exclusively as "market enforced valuebased interests."

Capital & Class not assumed to be merely some form of aggregation of the former . ME will, then, be examined as a form of discourse about managerial decision-making as an aspect of contemporary society : does that discourse give a true picture of that society? What aspects of that society does it illuminate? And what does it obscure? It will be discovered that ME is in many ways much more revealing than industrial microeconomics about the socio-economic nature of bourgeois society . Whilst the more abstract discipline is encumbered with the baggage of social scientific objectivity, and thence with discussions of ways in which the market-reproduced value form is less than socially optimal (by reference to externalities, public goods, market imperfections and questions of distribution and equity), ME, because of its applied pragmatic orientation, feels free to deploy microeconomic models to enhance managerial decision making purely in pursuit of valorisation and accumulation at the level of the individual firm . The gloves are off! There is no way in which ME can even pretend to transcend the categories of everyday managerial existence in the bourgeois epoch since it claims precisely to enhance the pragmatic usefulness of economics to that existence. Given the dominance of bourgeois forms of consciousness, derived from the value form, the radical economist, whether student or teacher, can hope for no more than to be able to engage in a guerilla war of movement against bourgeois forms of knowledge: to be able, from a basis of a critical grasp of the bourgeois totality, to seek out the contradictions simultaneously in bourgeois reality and the bourgeois modes of conceptualising it, and thence to tease out the deep-seated philosophical bases of the contradictions of the discourse, and to locate it in the totality of the bourgeois epoch. I hope this article will help to arm its readers for such a struggle . What is managerial economics?

There are many competent Managerial Economics texts of which Douglas (1979) will form my main point of reference. It is a branch of applied microeconomics, developed largely from industrial economics, together with some discussion of the determinants of demand, often focussing on Lancaster's `characteristics space'/`attribute approach' (see Douglas 1979 : 86-102 and Lancaster 1971). Industrial economics itself lays claim to being the integration of microeconomic theory in the line from Smith

Survey : Managerial economics through Edgeworth, Jevons, Clark, Knight, Hotelling and Lancaster on the one hand ; and empirical observation, specifically of the case study variety through, in the last half century, economists such as Allen & Sargent, Berle & Means, Mason and Marris on the other (CF Hay & Morris 1979 : 6) . Industrial economics' central 'structure-conductperformance' models are enriched in ME by modelling the notion of conduct beyond profit maximisation . This involves consideration both of secondary objectives necessary to achieve the primary goal, and of other primary objectives than profit-maximisation, as well as of the exact operational meaning of profit-maximisation in the face of different time-horizons, degrees of uncertainty and attitudes towards risk (Douglas 1979 : Ch . 1) . To this end ME is often organised around the strategic decision variables facing managers : pricing, advertising, product development and investment . Discussion of pricing usually starts by a review of the constraints placed on it by market structure, concluding typically that oligopoly and monopolistic competition provide the two models in which there is space for strategic decisions about quantity and price (Hall & Hitch 1939, Sweezy 1939, Stigler G J 1947 ; see also Hay & Morris 1979 : 10-20, for an overview and Douglas 1979 : Ch .9). Some account of the determinants of demand (Douglas 1979 : Chs 3 & 4) leads on to the question of different pricing strategies (ibid: Chs 10-12) and techniques . Whilst it is usually argued that mark-up pricing reflects managerial practice more closely than marginal cost pricing, the discussion of pricing strategies makes it clear that pricing decisions are largely determined by marketing considerations, subject to the constraint of covering costs by some margin determined by contribution to fixed costs and whatever profit constraint is enforced by capital market competition (Douglas 1979 : Ch . 10 .2). Standard microeconomic cost theory is usually outlined, and developed to include the `learning curve' (Douglas 1979 : Ch.6). The conflicts between accounting and economic conceptions of costs are usually elaborated (Douglas 1979 : Ch .7) . Various techniques of cost estimation, as well as cost forecasting usually constitute the main reference to production per se in ME texts (see, for example, Douglas 1979 : Ch .8). An introduction to linear programming may also be included at some stage (Douglas 1979 : Appendix 6B). Discussion of advertising (Douglas 1979 : Ch . 13)

Capital & Class typically starts with the Dorfman-Steiner equation, which postulates that the profit-maximising ratio of advertising expenditure to sales revenue - the ratio of advertising to price elasticities of demand (Dorfman & Steiner 1954), so that money is spent on advertising and/or on price-cutting, depending on the relative responsiveness of demand (and therefore revenues, and ceteris paribus, profits) to these different forms of expenditure. The scope for various advertising strategies under different market structures and demand conditions (elasticities) are also dealt with . The determinants of the advertising elasticity of demand for different kinds of commodities is analysed in terms of the degree to which consumers can be expected to be able to obtain `objective' information on the characteristics and quality of the product, for which purpose commodities are classified into `search' commodities (for which objective information is readily available to the average consumer at low cost), `credence' commodities (for which such information cannot be obtained even after repeated experience of consuming them) and `experience' commodities (for which the experience of consuming them once or a few times provides such information about them). This distinction also affects marketing more generally, including pricing strategies, and plays an important role in the critique to come . Research and development (R&D) is conceptualised primarily (if at all) as but one option for the expenditure of available investment funds - that is as part of the investment decision . Innovation is closely linked with advertising in marketing strategy . Both product and process innovation are typically introduced as competitive strategies, which, in concert with advertising lead to tactics such as product proliferation, differentiation, and manipulation of patents and industry standards. The likely future returns to R&D and innovation are analysed in terms of the difficulties of valuation of its outputs, their likely diffusion rates, and the effects of market structure. The investment decision is conceptualised, in line with industrial economics practice, as a decision about the use of available funds (or credit) for purchase of physical assets, acquisition, expenditure on advertising or on R&D and innovation . The various techniques to incorporate time and the uncertain future - decision rules (internal rate of return, net present value and 'payback' period), stochastic trees and multi-period decision making - are usually introduced here (Douglas 1979 : Ch . 15).

Survey : Managerial economics The `alternative' (managerial and behavioural) theories of the firm, allowing space for divergence between shareholders' and managers' objectives (Douglas 1979 : Ch . 1) may be used to introduce a discussion on managerial control via appropriate incentive and constraint structures . Problems of information and agency are discussed. Sometimes the political and policy environment within which firms must operate may be alluded to, in terms both of the effects on the business environment of different macroeconomic policy regimes, and of different microeconomic policy stances in such areas as consumer protection, competition policy, industrial policy and financial regulation . It is impossible in the space available to spell out in detail the political economic critique of every aspect of ME . The objective rather is to locate ME within bourgeois society, and thence also at the same time, within the particular forms of systematised consciousness by which it grasps that totality . After some methodological considerations the critique will focus initially on one major problem at the heart of ME - the inadequacy of its treatment of agency and uncertainty. The remainder of the paper is then devoted to a critical political economy of the major areas of ME, orientated around its emphasis on all aspects of marketing. Methodological considerations It is inevitable that critiques of orthodoxy will be much more fragmented than that orthodoxy . Consequently no attempt has been made to review all possible schools of critique within the Marxist tradition. Rather a critique has been constructed based upon what might be termed the neo-Hegelian interpretation of Marxist critique of political economy - `critical political economy' 1 for short. Some of the main contradictions of ME arise from its inadequate processes of abstraction and concretisation . There can be no quarrel with the fact that, as an applied form of consciousness, ME seeks to move from the abstract levels of industrial microeconomics by a process of concretisation~ but the validity of these procedures has to be examined . Valid concretisation of logically prior abstract concepts involves transcending them in their more concrete conditions of existence. ME's theoretical practice, however has no systematic notion of ordered determination. Rather than any internal dialectic of conceptual development and

Capital & Class

empirical evidence, managerial economics exacerbates the mere external juxtaposition of empirical evidence (couched in unspecified conceptual terms) and deductions from economic models typical of industrial microeconomics, with its starting point in the lack of `realism' of microeconomic models, (Hay & Morris 1979 : 16) . Such a position can only be meaningful on the assumption that abstractions are unreal and that empirical phenomena are somehow hyper-real . For example: Mathematical models are usually further removed from reality and are used because reality is very difficult to depict visually or verbally or because it involves interrelationships that are extremely complex. (Douglas 1979 : 4) Later in the same paragraph, it is clear that the author has no conception of the `unreality' introduced by collapsing conceptual hierarchy by the uncritical use of mathematical models (op cit: 4-5) . ME's claim to build on the 'structureconduct-performance' models of industrial microeconomics by analysing the effects of performance and conduct on structure leads to an opposite one-sided emphasis on agency . What is missed is the need to tackle the dialectical interaction between performance and structure, mediated by agency . But dialectics has no place in either the pragmatic decision guidance models of ME, or the `flat' mathematical models of microeconomics from which they are derived. The process of abstraction by which ME generates its models is the pragmatic one of ignoring the finer details which are not essential to the purpose at hand (op cit: 4) . A critical approach, on the other hand, must concern itself specifically with the complexity of the interconnections of its theoretical object (bourgeois society) . Identification of some of the `finer details' neglected by ME - satisfaction of need, social costs and benefits of decisions, overall resource allocation, long term factors, ecological concerns, distributional concerns, and so on - indicates the partiality and ideological nature of ME as a sub-discipline . It implicitly has the non-hierarchical and undialectical notion of abstraction, typical of liberal social sciences, and certainly of economics.

Survey: Managerial economics ME is concerned with planning aimed at coping with uncertainty, and more generally with tactics and strategies for overcoming the antinomies of the market for valorisation itself. The element of uncertainty is reduced to the extent that a firm can plan its future environment, and ensure that those plans are implemented. This concerns not only internal organisation, but also attempts to extend the scope of planning by vertical integration and by the negotiation of long term contracts with suppliers and customers. This is not the usual socioeconomic question of planning versus, but rather of planning in theface of the market . ME, of course, never poses the question : in accordance with what systematic (namely, structurally determined) criteria for resource allocation do managers under capitalism manage (that is, plan within the context of the market) - valorisation or production and distribution of useful objects to meet social need? (Microeconomics generally rules such questions out of court by arguing - in other words - that systematic decisions in accordance with value criteria will, under appropriate market conditions, generate resource allocation which is socially optimal in accordance with use-value criteria conveniently defined in terms of the aggregation of individual needs and wants). It becomes apparent in the discussion of uncertainty that a significant lack in the shift from microeconomics to ME is any adequate account of subjectivity. Microeconomics in general analyses the optimal behaviour of passive managers (amongst other `rational economic persons'), optimising subject to the given structure of economic constraints . Conversely, Managerial Economics is crucially about active management - pushing out and trying to transcend these constraints in the face of uncertainty (see Hay & Morris 1979 : 20-25, 29-31) . However, ME lacks the concepts for an adequate account of subjectivity, that is of the dialectic of agency and structure . Instead, in as much as it addresses the question of agency . ME purports to be about the (implicitly freelywilled) decision-making of entrepreneurs - but then indicates precisely the structure of determinants of even this most freely subjective of bourgeois persons . Faced with the tensions of untheorised subjectivity, and concomitantly the implications of attempts to reduce managerial uncertainty, ME has to deal with dynamics and market processes. Comparative static neo-classical models are amplified by reference to the central role of

Uncertainty, subjectivity and the entrepreneur

111

Capital & Class entrepreneurship and innovation (along the lines of neoAustrians such as Hayek, Machlup and Mises:3 for an overview see Kirzner 1973 : Ch .2) . The neo-Austrians are typically concerned not only with the market process and entrepreneurship in abstracto, but also more concretely with precisely those aspects of management conduct least well treated in the conventional ME texts (and almost completely absent from microeconomics texts) : the process of accumulating and up-dating information, innovation, quality competition and marketing efforts. Entrepreneurs are perceived as agents who continually learn (better than rivals) from their experiences, including their experiences of how best to learn from experience, not only the best means (specifically process innovation) but also the best ends (specifically product innovation), as subsequently ratified by the market .' An engagement with the neo-Austrian system involves the critique of its starting point in the abstract, given individual, by locating such `homo agens' (Mises 1949) or more specifically `rational economic person' - as a social construct of bourgeois society. The point is not to reject the reality of such agents (see Williams (ed) 1988 : Ch .6 and Reuten & Williams 1989 : Chs 6-7) but rather to demonstrate their derivation as `competition subjects' from the appropriate starting point of an account of the bourgeois epoch - the value-form .The critique of ME, then, involves the location of the subject `manager' as the contradictory unity of competition subject, citizen and person, just as bourgeois society is the contradictory unity of civil society, the state and the private sphere . The essentially undialectical one-sidedness of ME is reproduced in the neoAustrian's key concept of the entrepreneurial-competitive process, as becomes clear in their argument that whilst Schumpeter's entrepreneurial activity is crucially disequilibrating from an initial equilibrium, theirs is essentially an equilibrating process (towards a `new' equilibrium implicit in the new situation which has come into being from the entrepreneurial activity). A little reflection on this account (cf., for example, Kirzner 1973 : 75-84 & 125-31) makes it evident that it depends upon reducing an essentially dialectical process between agency (entrepreneur) and structure to a kind of steady state pseudo-dynamism . Whilst the neo-classical conception of competition as an end (equilibrium) state over-emphasises the structural determination of conduct and performance, the neo-Austrian conception of competition as process

Survey: Managerial economics tends to ditch all structural determination of innovative behaviour, in favour of the free entrepreneurial agent. There are further systematic gaps and inadvertent revelations in ME's discourse. It necessarily neglects questions of social efficiency, let alone equity, being concerned only with effective management in terms of the firm's objectives . Of particular interest to the critic is the identification of the contradictions between best management practice for the firm and social efficiency even on value criteria . Relatedly, the contradictions of the notion of market reproduced regulation as the most efficient socializer - taken as read by ME - are obviously objects of political economic critique . At bottom it is the demonstration of the efficiency of resource allocation in terms of satisfying sovereign consumers' revealed preferences upon which the ideological legitimation of market capitalism by microeconomic theory rests. ME reveals dramatically how the perfect competition model upon which this is based not only abstracts from crucial determining features of its theoretical object (bourgeois society) but also that (Competition), in the broad sense in which business men understand it, largely consists in destroying competition in the narrow, economist's sense (Robinson 1954). ME generally accepts that the only markets which systematically fulfill the condition for the perfect competition upon which the legitimation of market capitalism by reference to its allocative efficiency rests, are in fact stock markets. And in this case it is clear neither that agents have equal access to such markets (as implied by the neo-Austrians' argument that availability of finance is never a constraint on the exercise of entrepreneurship), nor, relatedly that resource allocation as between firms and sectors mediated by stock markets is allocatively efficient even on value criteria, let alone in terms of any plausible concept of social need . Whilst the neo-Austrians find other legitimation for the businessman's kind of competition (in terms of `X' and dynamic efficiency), their abstract starting point in the isolated free individual makes them systematically blind to the socially undesirable effects of the market regulated value-form .

Managerial economics as bourgeois selfrevelation

Capital & Class Managing the State

It is not uninteresting that the management of some 50% of resource allocation in the typical capitalist economy - that undertaken by the state, is given very short shrift in most ME texts. Whilst some (for example, Mixon & Uri 1985 : Chs 14 & 15) do discuss the economy/state relationship, the way in which they do so reveals the antagonism between economy and polity in bourgeois society, which is thus reflected in ME . For the managerial economist state legislation is generally perceived as a set of constraints to be circumvented, and as imposing a set of costs to be minimised. The only exceptions to this are state activity orientated towards assisting in the real subordination of labour, by, for example curtailing trade union power, and the optimisation of benefit from industrial and international trade policies . It is extremely revealing that, under the guise of discussing the structure of incentives and sanctions to `efficiency', ME perceives the opportunities for enterprise and entrepreneurial activity to be confined (at least implicitly) to the market sector, where there is, it is alleged, a more direct relation between such desirable dispositions and systematic structures of incentive and sanction . It seems that only that enterprise and entrepreneurship directed at material gain - specifically in the shape of enhanced return to capital - is to be socially valued . The truism that whatever the objective of the enterprise this can best be accomplished by using resources efficiently is repeatedly put forward as the justification for importing market sector decision rules into the public and `non-profit making' sectors. For example . . . an altruistic health organisation with a given budget's . . . objective will be to provide the maximum health service within the constraint upon funds. (Gough & Hill 1979 : 1) This reduction obscures not only the pragmatic problems of measuring and evaluating the outputs of such organisations, but also, and more fundamentally the specificity of the use-values they produce and the logic of their adequate provision in accordance with social need . In other words it collapses the specificity of all forms of useful object into use-value, and all forms of use-value into the commodity form in which use-value and value are contradictorily conjoined . Of course, in this ME does indeed

Survey: Managerial economics reflect the systemic imperatives of bourgeois society: the dominant mode of social evaluation is indeed contribution to successful valorisation . Even the neo-Austrians, notwithstanding some protestations to the contrary, effectively confine entrepreneurial activity to the market sector : this latter extreme (when 'all market activity has ceased') corresponds to the case of the fully socialized economy with all resources controlled by the state, in which the market process and all entrepreneurial and competitive activity are by definition absent (Kirzner 1973 : 107) . Not only is the state sector considered to be necessarily inimicable to entrepreneurship, but it is posited as the only alternative to market regulated resource allocation (thus neglecting voluntary organisations, cooperatives and so on). Since 'non-business' organisations are characterised as not involving profits, it would appear that they cannot, per definition, involve enterprise, nor superior insight and judgement. The other side of the coin is that the inefficiencies of bureaucracy are generally ascribed only to the state sector .b And this is so notwithstanding the theoretical origins of many of the 'economics of bureaucracy' arguments in the principal-agent problem first brought to light in the 'alternative' theories of the firm . Once again, this bias reflects the antinomies of bourgeois reality, for which the main problem with state sector bureaucracies is that they do not typically produce an output which is commensurable, and certainly not one which is commensurated, via the value form . In the absence of compatible input and output measurement and evaluation, efficiency in accordance with the systemically imposed value criteria is not so much proven to be low as, on valuecriteria, demonstrably unascertainable . It is precisely because efficiency in the performance of the state's objectives involves resource allocation in accordance with a complex of use-value, as well as value criteria, and political, administrative and social mechanisms of resource allocation, that state sector management is the runt of the litter . ? Not only is it too difficult, but to stress it would open a Pandora's Box of issues as to the centrality and social efficacy of the dominance of the value-form .

Capital & Class Production, productivity and cost ME neglects production, most tests offering a simple microeconomic account of the theory and estimation of cost functions. It could be argued that this is a simple pragmatic division of labour between, say, production technology and ME . However, ME makes it clear that to the extent that use-value considerations are not directly related to valorisation, they generate inefficiencies in value terms and therefore competitive disadvantage for individual firms. Of course, a perception of use-value on the part of the consumer has to be generated for the successful realisation of the value of a commodity, but the relation of this to scientifically ascertainable social usefulness is tenuous to say the least. It is also clear that managerial planning of production necessarily concerns itself with (technologically determined) use-value relationships between input and output . Nevertheless, ME does not deal in any detail with these kinds of decisions, but rather reflects the social determinants of economic behaviour in subsuming them under value-calculations of costs and revenues . The process of concretisation of the abstract microeconomic models of cost determination for the purposes of ME (referred to above) are specifically invalid. In isoquant models, a notion of technical efficiency (being on the negatively sloped portion of an isoquant) is introduced prior to that of economic efficiency (being on the highest isoquant subject to the feasible iso-cost line). But these two moments are not successfully articulated at the more concrete level appropriate to ME . In practice technical and economic efficiency are transcended in value efficiency as the dominant social determinant of managerial decision making . ME, however merely assumes the prices of inputs are known (see Douglas 1979 : Appendix 6A). One consequence is the dichotomy between the short run (involving moves along the isoquant - a mysterious process of substitution without technique change) and the long run expansion path to ever higher isoquants by optimal variations in labour and capital inputs (again, mysteriously, for a given state of technology) . The commodity fetishism of bourgeois society is similarly reflected luminously in the neo-Austrians reduction of production to exchange : 'pure' entrepreneurship involves a decision to buy in one

Survey: Managerial economics market (for the crucial producer-entrepreneur, the factor market) with intention of (re)selling at a higher price in a second market (centrally an output market) . (Kirzner 1973 : 198) . Where there is more than one price for the 'same' thing (with bundle of necessary inputs treated, for this discussion, as the 'same' as the output they make possible), it is clear that discordant plans have been made . (Kirzner 1973 : 222) The neglect of production in ME reflects the emphasis on pricing, promotion and marketing which grounds the (both valorisation and the production of an apparently useful object) to one secondary to the key capitalist process - buying something cheap (crucially, labour-power) which can be used to produce something which can be sold dear . Of course, the neo-Austrians would retort that their normative evaluation of the market depends on its efficacy (relative to any other institution) as a coordinating process, rather than as an optimal efficient state of affairs (see, for example, Kirzner 1973 : Ch .6) . But then the political economic critique of the antinomies of the value-form, valorisation and capitalist accumulation has to examine to what end such coordination is systemically directed . The apparently innocent parenthetical remark can be seen to have downgraded the whole process of production (both valorisation and the production of an apparently useful technical efficiency in production . This is why investment in plant and machinery and R&D (as well as that in marketing) is conceived paradigmatically as a question of laying out money now in order to generate (greater) income later (see Hay & Morris 1979 : Ch . 13 .2) . The critical view is that such systemic behaviour is not compatible with the efficient production and distribution of useful objects and services in accordance with social need . Relatedly, the central conflict of interest, between managers and workers derived from the contradictions of the capital relation is virtually ignored by ME, although other aspects of Management Studies, particularly those concerned with management of the labour process and with industrial relations, cannot do so . In microeconomic theories of production, labour inputs (and thence labour costs) are always characterised as variable in the short run . Whilst the firm is at the mercy of external capital which can withdraw at short notice, it must itself take the capital input as fixed in the short run . Labour is then, in turn, at the mercy of the firm, which

Capital & Class takes it and its income as variable in the short run (except to the extent that this powerlessness is mediated by the hardwon, precarious social and legal constraints enforced by trade union action and/or labour contract legislation - the effects of which are, of course, 'for the firm just costs to be minimised) .8 The terminology of ME texts when discussing productivity is determinedly one-sided in reducing capital and labour to similar factors of production, and trying to attribute productivity to physical capital : Labour productivity is typically measured as units of output per labour unit, and hence it takes the credit for increases in the productivity of capital factors such as machines and equipment . Labour productivity figures are therefore an amalgam of labour and capital productivity, and it may be quite difficult to separate the effects of each (Douglas 1979 : 337) . It is difficult to give meaning to the notion of the productivity of capital, which is most abstractedly a circulating and valorising quantity of money, and more concretely is a complete circuit passing through the different mutations of money and commodities reproduced in the capital relation between capitalists and labour . It is of course true that the productivity of labour, in both value and use-value terms, may be enhanced by improving the `capital' equipment with which it works, but it is ironic in the extreme to conceive of labour as `taking the credit' for improvements in the productivity of capital . The ME formulation conflates the crucial distinctions between property income sources - to the owners of which accrue revenues proportional to the value of the property advanced, and the labour income source - to the bearer of which revenues accrue in accordance with a contractually fixed labour time expended . Microeconomic production theory, and ME's estimation of costs etc based upon it also manifests the lack, despite the central concern of ME with pragmatic decision making rules for economic subjects (managers), of any explicit conception of subjectivity . Here this is manifest in its absence of any concept of precommensuration - the process whereby managerial planning proceeds on the basis of the expected prices of inputs (as well as of outputs) to make decisions about input ratios that will enable valorisation (see Williams (ed) 1988 : Ch .3, and Reuten & Williams 1989 : Ch .1) . Even for the

Survey : Managerial economics active entrepreneur this taking cognisance of the market enforced value form is not a matter of free choice but of necessity, enforced by the operation of output and capital market competition . The ME techniques of cost estimation and forecasting can thus be conceptualised as the most concrete (and contingent) conditions of existence of precommensuration, by which the imposition by market forces of the value-form on production processes is reproduced . Marketing I: Pricing In attempting to transcend the constraints of market forces, marketing strategy attempts to shape an aspect of the subjectivity of consumers, thus effectively giving the lie to the doctrine of the consumer as sovereign agent, which is the key to the ideological legitimation of the social efficacy of resource allocation and distribution thrown up by maximisation of net worth under competitive conditions . The absurdity of alleged consumer sovereignty is revealed by the fact that capitalist firms can and do meet revealed preferences not only by producing and distributing what consumers want at a price they are prepared to pay, but also by manipulating the preferences that consumers come to reveal . There is in ME no grasp of the essential interconnectedness of the various determinants of price. Rather, moving away from the level of competitive models in which managers have nothing to do, ME examines separately the various determinants of costs and then of the mark-up on them . There is no overarching concept (such as pre-commensuration (see above), whereby the repetitive and relatively stable nature of market transactions enables managers to make decisions which are more often than not rational in terms of the imperatives of valorisation and accumulation) to theorise the dialectic of agency and structure at work in these kinds of decisions - to link the resource allocation decision within the firm to the market regulated value-form outside it . With reference to the long-running marginalism versus mark-up controversy, if p = Average Variable Cost + x``%AVC = AVC + a Contribution Margin it can easily be shown that a profit maximising mark-up will generate a price and quantity such that Marginal Cost = Marginal Revenue (see, for example, Douglas 1979 : 413-417) . Then for a (locally) constant AVC,

Capital & Class p = AVC + (-1/(e + 1))AVC (where e is the price elasticity of demand), so that the optimal mark-up varies with inelasticity . Thus it is clear that the marginalist models and the profit maximising assumption are useful as an (albeit implicit) account of the dominance of the value form, valorisation and accumulation over resource allocation decisions in the market sector . `Rational economic man' is not merely an abstract abstraction, but a moment of bourgeois society. The most concrete level - the managers going about their business of fixing prices - can be grasped as the grounding of the more abstract moments - market-reproduced valorisation . It is therefore neither here nor there whether such agents overtly use marginal concepts or not, or even whether it is in any sense practicable to do so : in applying the `mark-up' they will take into account cost factors and marketing objectives concerned with producing, not a better mouse-trap, priced within the reach of consumers who need such a thing, and produced by adequately rewarded and autonomous workers, but with maintaining valorisation . Mark-up pricing is also inflationary . This ensures that a capitalist firm's real contribution margin (contribution to fixed costs plus profits) remains undiminished by inflation, at the expense of giving another twist to the inflationary spiral (at the same time negating the effective demand and real income effects of any wage/salary increase won by workers) . Such deleterious macroeconomic effects of managerial behaviour are bound to be ignored given the necessarily pragmatic and partial concerns of most ME texts (see Douglas 1979 : 423) . Pricing decisions, then, are the concrete constituting of the commodity as the contradictory unity of value and use-value. The discussion of price elasticity and pricing in most ME texts is very revealing (for example, Douglas 1979 : Ch . 4, especially pp 143ff) of the concrete reproduction of the contradiction between value and use-value criteria. Necessities (usually defined in terms of income elasticities, 0, such that 100) are suggested as those commodities from which the firm may often usefully extract extra revenue by putting up the price. Economic price discrimination operates according to the value criterion whereby those groups of customers most `locked into' the product will, if they can be segmented off from the rest of the market, be charged a higher price. These are typically the consumers for whom a product is more necessary or urgent.

Survey: Managerial economics Luxury customers are thence likely, ceteris paribus, to be charged less, 9 though even ME sometimes feels uneasy about : emergency situations where the need will soon pass, (which) also indicate the profit-maximising price as best strategy for the EPV (Expected Present Value) maximising firm (although this practice may be regarded as 'profiteering'(!)) (Douglas

1979)

.

Relatedly (see below) advertising is typically targeted in the first instance on decreasing price elasticity in order to enable such a price increase . Whether this requires more or less accurate information to be made available to the consumer (one social legitimation of advertising being that it is merely informative) is clearly a question of tactics not principle! Many practices advocated, such as product-line pricing in relation to estimated inelasticity, specifically that generated by sale of a complementary 'base' product at a low price, make a nonsense of the much vaunted consumer sovereignty . Similar deliberate deceit seems to be at work in this recommendation for pricing substitutes : Potential customers may be attracted to the store by price information and once in the store may be convinced of the virtues of more expensive products in the line . Consequently, it may enhance total contribution to price the bottom-of-line product somewhat lower than would be suggested by price elasticity considerations . (Douglas 1979 : 429) Even if we take existing price elasticity to reflect genuine human social need (and to do so would be to neglect the creation and manipulation of preferences which has generated an ever widening gulf between the satisfaction of scientifically characterised social and human need and the actual use-value demands of commodity consumers), such a tactic is clearly aimed at increasing consumption of commodities for which the consumer had no prior demand . Indeed, sales may be achieved merely by persuading the consumer of the mere 'promise of the commodity' (Haug 1971) : It (a firm keen to establish the better-value of its products) might . . . set the price below rival's prices for the similar (bottom of the range) item, expecting this 'better-value' image to be associated with its brand name and therefore shift outward the demand curves for all other products in the line,

Capital & Class leading to increased sales of these products as well. (Douglas 1979 : 430)

This has little to do with the satisfaction of real social need. Even an argument for increasing the mark-up at the luxury end of the line further reveals the humbug in the positive bourgeois economics assertion that not to accept the arguments of microeconomics involves paternalism - what could be more paternalistic than the argument that higher income groups `derive more utility from quality' than lower income groups (Douglas 1979: 430)? The tactic of deliberately pricing to infer quality makes even clearer the concrete condition of existence of the value/use-value contradiction in the 'promise of the commodity' . Once again it is the higher income consumer who can afford to increase the probability that actual quality may live up to this promise by buying the most expensive . It may be true that 'when one's self-esteem and ego is at stake, the marketing people do not expect the consumer to respond with caution and cost-consciousness' (Douglas 1979: 432), but it is only the well-off who can afford to cost consciousness for quality assurance in this way . .This applies to more life-imperative qualities such as health, nutrition, safety etc., as well as those relevant only to selfesteem and ego (though one might be forgiven for surmising that the maintenance of these was more of a problem for the less well off already!) . 'Price skimming' may be advocated in order to try and establish a high price/high quality perception in the consumer's mind whilst they are still ignorant about the actual quality of a new product, so that profits can be 'skimmed' on the basis of consumer ignorance . 'Search' commodities (for which true information is readily available) are typically excluded from this tactic! : the price-quality association may be positive for new products, since there may be little alternative information on quality available to consumers, but the attributes of the product must be of the 'experience' or 'credence' type, rather than the 'search' type that are easily ascertainable by consumers (Douglas 1979 : 459) . 'Penetration pricing', on the other hand, involving lowering of prices is only recommended for 'search' commodities . What is more it may only be a temporary phenomenon, giving way to a higher mark-up once the market has been successfully penetrated, and low-price

Survey: Managerial economics competitors without any cost advantage have been pushed out . Promotional pricing once again reveals the reliance of everyday managerial behaviour on the deliberately exploited ignorance of consumers . For example: price competition should be expected to be a more desirable (on value criteria at any rate!) competitive strategy, as compared to advertising, for example, if consumers can easily evaluate the attributes (or relative quality) of the products (Douglas 1979 : 439) . Or in other words, provided we can keep the consumer in the dark, we need not compete on prices, and if necessary advertising campaigns can be deployed to confuse the consumer! The technique of `price positioning' in established markets, in terms of the estimated value of the attributes and quality of a specific version of a commodity in relation to the norm, indicates the formal, one-sided sense in which mass production/consumption has been an egalitarian process: What has become widely available are cheaper, and therefore inferior products - often (cf Haug 1971) to the extent that all that is being offered is the promise of a level of satisfaction and a life-style actually obtainable (if at all) only from the `full quality' product, which is usually beyond the reach of all but the very rich . In order that pricing to achieve sales maximisation with a profit constraint actually generates long-run profit maximisation (valorisation), it relies in part on what anyone but an economist would call deliberate manipulation of the consumer aimed at hooking them onto a basic product at low price in order to set up a future demand for necessary or desirable ancillary products with a greater mark-up. This strategy is also deployed in order to limit entry, thus maintaining the chasm between (even the merely value)efficient resource allocation brought about by competition and actual behaviour of capitalist oligopolies . Entry limit pricing is, of course, a strategy in its own right, explicitly aimed at inhibiting competitive pressures . It in particular undermines Baumol's (1982) notion that `contestable markets', can ensure that the socially desirable results of perfect competition can be reaped in real-life, typically oligopolistic situations . Such strategies explicitly attempt to inhibit contestability by inflating the expected sunk costs of new entrants . Indeed strategies to deter the entry even of lower cost firms (by bluffing them into believing that existing firms will maintain output so that

Capital & Class

the market would be over-supplied and no one would make a profit) are also advocated (see Douglas 1979 : 378-9) . Marketing II.- Advertising

Where price competition depends on the elasticity of potential demand - whether to raise revenue by price decrease if demand is price elastic, or by price increase if it is price inelastic - non-price competition aims to decrease the elasticity of existing demand . In those markets in which competition is imperfect (and thence the microeconomic ideological legitimation of market capitalism is weakest) the main function of advertising is to maintain the imperfection of competition, and thence to disadvantage the consumer . Monopolistic competitors and oligopolists gain control over the price level as a result of the differentiation of their product: advertising and promotional expenditures are likely to increase this differentiation and hence increase the control these firmshave over their market price, as well as increase the price that might be obtained for any given output level (Douglas 1979 : 518) . What is more, non-price competition (in general detrimental to any scientifically grasped conception of the consumer's needs) is more likely to prevail under oligopoly than the consumer-favouring price competition, as the former is more difficult for rivals to identify and match, and has longer lead times than the latter . There will thus be an incentive to continually mount new promotional campaigns so as not to be caught napping (Douglas 1979 : 528) . The managerial economics of advertising are even more damaging to the notion of consumer sovereignty than that of pricing strategies, and for much the same reasons. ME remains at the facile level of modelling advertising's effects on demand elasticities, without examining the question of the socially desirable level and type of advertising expenditures which occupies much of the microeconomic literature in the field . This is, of course, not surprising : the dominance of the value form entails the systematic neglect of aspects of socialisation based upon use-value concepts, let alone any theorisation of a 'system of needs' . The orthodox Marxist critique of advertising is stated clearly by Baran:

Survey : Managerial economics It stems from its promoting a continual enlargement of the economy's unproductive sector, from it constituting one of the most powerful devices for the propagation of artificial obsolesence and irrational differentiation of consumer goods . (Baran 1959 : 59 ; cited in Kirzner 1973 : 171) This traditional critique still has teeth in terms of the massive resources devoted to marketing in a world in which basic social and human needs are so clearly not being satisfied, and in which key resources are so obviously finite . What is more, even on value-criteria, such expenditures may be wasteful in the sense that 'competitive advertising is like being on a treadmill - if you slow down you get left behind' (Douglas 1979 : 518) . Whilst these may not be true opportunity costs of advertising expenditures, since virtually none of the resources so deployed would be re-allocated to the benefit of the poor and starving if advertising expenditure were to be curtailed, the critique of advertising is but one moment of the critique of the socio-economic system which not only generates the massive allocation of resources to these socially unproductive ends, but also ensures that, were they to be released, without any other systematic change, they are indeed unlikely to find themselves being allocated to the relief of poverty . In critical terminology, active marketing (advertising and product innovation) involves the concrete grounding of the reproduction of the value form : use values cannot be realised without assuming the value form ; values cannot be realised without generating or identifying a use-value demand backed by willingness and ability to pay . Marketing expenditure is thus a concrete form of existence of the value/use-value contradiction . This become very clear in the arguments of the neo-Austrians : where the application of additional resources has made a commodity more eagerly sought after by consumers, it may not be possible to ascertain objectively whether the additional resources have 'really improved' the product or whether they have 'educated' the consumer to prefer the 'same' product . It follows that no distinction can, as a matter of science, be made between 'production costs' and 'selling costs' (Kirzner 1973 : 24 ; cf Haug 1971) . This breath-taking rejection of the insights of the sciences of nutrition, shelter and so on, and the psychology of relaxation, leisure etc reflects, of course, the dominance

Capital & Class

of the value-form in a system in which so-called consumer sovereignty has been divorced from any conception of human need beyond what the individual reveals by what they are able and willing to purchase at the going market price - however persuaded by active advertising or the io passive socialisation of existence. Both for ME and for the practice which it reflects it is only what the potential purchaser considers to be the case that is of concern: Both categories of costs (production and selling) are incurred by the entrepreneur as he attempts to offer opportunities which market participants consider more attractive than those available elsewhere (Kirzner 1973 : 136) . What is more, this is a functional and desirable aspect of entrepreneurial behaviour: He (the entrepreneur) must alert the consumer to the availability of the product, and sometimes he must even alert the consumer to the desirability of an already known product (ibid) . The market-reproduced dominance of the value-form could not, in different words, be more clearly stated : the market determines - in fact, originates - the attributes of what is to be produced . This `revealed preference' doctrine is usually legitimated by distaste for 'paternalism' and reference to the need for objectivity, meaning the abstraction from the values of the observer/theorist . However, the whole neo-Austrian edifice is derived from the imposition of the (value-laden) assumption that the only criteria that matter are those of preferences revealed by willingness to pay. More abstractly, this presumption derives from the philosophical starting point of neoliberalism - that the basic value is the liberty of the individual subject, atomistically conceived. Advertising (and marketing more generally) are perceived as changing both perceptions of a commodity (and thence the product rays and efficiency frontier of the attribute space diagram) and preferences for commodity attributes themselves (thus shifting indifference curves in such a diagram) (see Douglas 1979 : 98-100). This combination of perception and preference manipulation comes close to the concept of the `promise of the commodity' of radical critics such as Haug (1971) . To be effective on value-criteria, advertising needs only to promise the commodity has certain attributes, and ensure

Survey: Managerial economics that they are perceived as useful by the consumer (and therefore will generally only do so). That this is indeed the case is supported by the argument (for example in Douglas 1979 : 517-8) that advertising is indicated in the case of those commodities about which factual information is not easily ascertainable by the consumer (so-called `experience' and `credence' commodities) . The cynical might wish to postulate that marketing expenditure and effort is also deployed to shift so-called `search' commodities (about which consumer information is readily ascertainable) towards the `experience' and even `credence' end of the spectrum, by ascribing to them intangible attributes and thus reducing the need for valorisation-undermining price competition, by mystifying and obfuscating the published and popularised results of scientific and consumer research into the useful attributes of different products . What is clear from the ME literature is that persuasive advertising is specifically excluded for `search' commodities on the grounds that consumers can too easily know the true qualities of the product. Conversely, it is strongly recommended for `experience' and, especially, `credence' commodities, precisely because factual information is more difficult for the consumer to ascertain. One might be tempted to see this as a cynical manipulation of ignorance; certainly it appears as an everyday manifestation of the value/use-value contradiction. Given that it is only the promise of the commodity that counts : improving the consumer's perception, or image, of one product in the line, as well as increasing the sales of that product, may also have positive spill-over effects for sales of all other products carrying the firm's brand name . (Douglas 1979 : 429) Since it is obviously the `perception', the `image' and the `brand name' which count (on value criteria), the application of microeconomics to managerial decision making does indeed reveal the reproduction of the contradiction between value and use-value in the pragmatic behaviour of economic agents . Of course, in addition, compared with `social need' criteria the doctrine of revealed preference itself is inadequate in being purely individualistic and taking for granted the ability to pay. Whilst profits and advertising appear to be correlated, in practice the latter is probably a result rather than a cause of the former (Hay & Morris 1979 : Ch . 12 .4) - an attempt to defend `monopoly' profits, and an investment outlet for

Capital & Class over-accumulated surplus. So what drives firms to advertise may have more to do with reproducing the valueform culture than enhancing their own immediate profitability. The myth of market mediation of the contradiction between value and use-values is revealed in the main uses of advertising intended to subvert the very competition which is the alleged ground of the value/usevalues harmony (and relatedly of consumer sovereignty) by raising entry costs, facilitating takeovers (of smaller firms unable to match the larger's advertising effort - see Douglas 1979 : 534-5), planning the future, creating new demand, building up `irrational' brand loyalty, reducing price variations and flooding `characteristics space' . The mystification of consumers' needs in pursuit of valorisation is evident in the greater `advertisability' (advertising elasticity of demand) attributed in the literature to commodities the basis for the demand of which is luxury, mystique, irrationality, fashion, or, in particular, closeness to basic socio-psychological drives concerned with sexuality, appearance, hygiene etc. (Hay & Morris 1979 : Ch . 12 .2 ; Cf Haug 1971) . Marketing III. Innovation The ideological legitimation of competitive innovation lies in the assertion that it generates new forms of consumption, and brings existing forms within the reach of the mass of people . The availability, at an affordable price, of the personal computer on which this is being typed can certainly be traced to a whole complex of entrepreneurial innovations in both production and marketing, which might not have occurred in the absence of a market capitalist environment. Whether this is an appropriate use of society's resources in the face ' of foregone opportunities in the form of widespread poverty entailing the lack of availability of the necessities of life to a significant proportion of the population of even the advanced capitalist countries, is another question . Doubt has already been cast on the extent to which the apparent availability of many new consumption possibilities offers on a mass scale more than the mere `promise' of the commodity. It is clear from the influential work of Porter (see, for example, his 1985 ; see also Douglas 1979 : 544-5 & 550-7) that the promotional strategy of `conning' the consumers of `experience' and `credence' commodities is to be carried

Survey. Managerial economics over into product quality decisions, so that these same unfortunate `sovereign' consumers are to be subjected to intensive differentiation efforts in order to persuade them to choose between essentially similar use-values, or even better, to consume several under the misapprehension that they are different! Porter (1985) argues convincingly that, by judicious choice of a competitive strategy, constituted by the manipulation of price, promotion, (perceived) product quality and distribution, firms can maintain and sustain a competitive advantage relatively immune from the threat of entry competition even with, and indeed largely because of significant profit advantage. Neglect of its wider social import is particularly lacking in ME discussions of innovation . Because of problems of the `external' benefits of R&D, both market and state sector expenditure on it and innovation may be expected to be socially sub-optimal, even on value criteria . It is this manifestation of the contradiction between rate of innovation and of diffusion which is an object of state management via patent laws and industrial policy . The attempt to establish a system of private property in knowledge in this way is a specifically value-form attempt to resolve the problem. Like other concrete attempts to manage some form of existence for the contradictions of capitalism, management of innovation, whether by the firm or the state, must itself manifest, in some form, these abstract contradictions, deriving fundamentally from the value/use-value contradiction. For Schumpeter, the neo-Austrians and Marxists innovation is the essence of entrepreneurial activity . It is, after the initial historical period of absolute surplus value accumulation, the prime mode of competitive accumulation, concerned to increase relative surplus value accumulation . `Creative destruction' via economic obsolesence may counter the tendency for the rate of profit to fall by the economic destruction of over-accumulated capital. On the other hand 'over-innovation' generated by competitive reproduction may impart inflationary pressures by continually decreasing economic life-time of fixed capital below that allowed for in its amortisation (see Reuten & Williams 1989 : Ch .5). It may also generate continual (sometimes built in) obsolescence of consumer commodities to the detriment of the extent to which identifiable social human needs are satisfied by commodity consumption. The economic incentives to innovate, it is sometimes argued, generate over-innovation of a shortCAC 36-I

Capital & Class term incremental nature - another manifestation of the contradictory tendencies of capitalist accumulation . Process innovation which is motivated at least in part by the requirements of real subordination of labour is almost totally neglected in ME literature on innovation . 11 Innovation in sales, distribution and marketing is treated on a par with that in product and process, manifesting concretely the dominance of the value-form . Work in this field can provide empirical fuel for critique . For example, it is evident (if not unsurprising) that firms typically refuse to exploit often apparently socially useful innovations, because they are not `commercial' (51% in USA in 1950s - Hay and Morris 1979 : Ch . 13). Of course this is not surprising in the context of market capitalism dominated by the value-form, but it reveals the underlying contradiction between value and use-value as surely does the existence of unsold bread on the supermarket shelves or ploughed in uneconomic crops on the one hand, and under-nourishment on the other. Competitive innovation - successful dynamic capitalist accumulation - is reproduced not by the perfect competition which is the sole conceptual demonstration of the harmony between valorisation and resource allocation in accordance with (even individualistically conceived) use-value criteria, but rather by the imperfect competition (oligopoly and monpolistic competition) which precisely negate such a demonstration of harmony, and entail the socio-economic power to enforce value over usevalue criteria. Such large firms enjoy greater technological opportunity, a less uncertain future (in which to reap the returns to R&D expenditure) and economies of scale. Innovation may also be motivated directly by the attempt to reduce the impact of competitive pressure by swamping ,characteristics space' with superficially differentiated products, by entry limiting expenditure and the attempted monopolisation of knowledge (inhibition of diffusion) . That the value/use-value relationship is a dialectical one is indicated by the ambiguities running through accounts of the `differentiation strategy'. Such a strategy is most appropriate where the consumer is at an informational disadvantage (in the markets for `experience' and `credence' commodities), but the essential objective is said to be to raise the value of the product to the consumer by more than the cost of production and selling (Douglas 1979 : 550-1) . This can only succeed because the sole operative `value of the product to the consumer' in

Survey : Managerial economics bourgeois society is what they are able and willing (in this case specifically in their ignorance) to pay, rather than any externally validated measure of social human usefulness . It is then clear that the differentiation strategy hinges on innovation in (persuasive) marketing as well as production motivated by the objective of raising the 'promise of the commodity' in the perception of the consumer, quite regardless of its effect one way or the other on the commodities socially useful attributes (Douglas 1979 : 556) . Once again ME gives a clear indication of the reproduction of the fundamental contradictions of the bourgeois epoch in the everyday behaviour of managers : differentiation may be real or imagined, need only be in the eyes of the beholder and so on (Douglas 1979 : 552) . `The producers task is to engineer the taste in such a way as to enlarge the firm's market share' (ibid) . In the light of the oft repeated assertion that the differentiation generated under all but perfectly competitive conditions is legitimated as a revelation of consumer preferences, one wonders whether the author maintained a straight face whilst writing the following `lack of information may be one of the bases of consumers' differentiating between the products of rival suppliers' (Douglas 1979 : 352) . Presumably, since utility is generated by perception, however inaccurate, ignorance, if not bliss, is at least under capitalism irrelevant! Meanwhile it is only those fortunate consumers of ,search' commodities who have not yet been mystified sufficiently, who may, as a last resort, have to be dealt with by a cost-leadership (competing to produce at lower cost) strategy - although, if it is successful so that the firm practicing it generates a sustainable cost advantage it is not clear to what extent the consumer will benefit from these lower costs rather than them merely enhancing the firms promotional and product quality expenditure and profits. In use-value terms, even the cost-leadership strategy has its drawbacks and waste-generating aspects since it is often associated with a `product proliferation' policy (Douglas 1979 : 549(, aimed at swamping characteristics space with only superficially differentiated products . Investment options and profits Both the work following from Chamberlin's monopolistic competition model, and the neo-Austrian

Capital & Class concept of entrepreneurship fundamental to ME, tend to make redundant the concept of `industry' as anything other than a pragmatic descriptive category . This conceptual development could be argued to reflect the reality of the dominance of the value-form, so that usevalue criteria (and it is by such criteria that industries are delimited) are indeed of secondary importance to the abstract logic of the capitalist economy . Thus vertical and `diagonal' integration (diversification) are significant options for the expenditure of investible funds. Relatedly, the traditional power-base for defence of working-class interests has been the specifically industry-based craft unions . The decline of the category `industry', reflecting generally the evermore complete insinuation of purely value-criteria into every crevice of the economy, and specifically the inter-sectoral mobility of capital, constitutes the dilution of this defensive power base and the incorporation of evermore mobile, de-skilled workers into the capitalist economy. But for ME - as for the economy which it serves - all that matters is valorisation : the purely quantitative expansion of value. The investment decision, then, encompasses not only expansion of capacity capable of yielding more or better use-values but also marketing and acquisition options. The treatment of the investment decision in ME texts indeed reveals money fetishism at work in that the purchase of plant, machinery and stocks is usually envisaged primarily as being a mechanism for exchanging money today for a flow of more money in the future . Value-criteria are thus indifferent as between investment in physical capital, R&D and innovation, marketing or acquisition (see Douglas 1979 : 569ff; and Hay and Morris 1979 : Ch .13.2). This is yet another example giving the lie to the microeconomic orthodoxy that valorisation reproduced by commodity- and capital-market competition necessitates activity which tends to satisfy social demand . What is more, in dynamic terms acquisition is the concretisation of the imperatives of valorisation via concentration and centralisation reproduced by capital market competition . At the same time it further sunders competition from the use-value advantages claimed for it, since the objectives are to gain market power, and thence freedom from `consumer sovereignty' . What is enforced by competition in capital markets is the satisfaction of myopic shareholders' short term profit demands, rather than long term social need . To the extent that there are use-value relevant

Survey: Managerial economics economies of scale, and thence genuine synergism (`2 + 2 = 5'), from mergers, then another contradiction of market reproduced valorisation arises : concentration to reap economies of scale versus the endowment of market power which may attenuate the passing-on of those economies in ways which are of use-value benefits to consumers . Indeed the evidence shows that merged firms make little effort to reap synergistic benefits . Diversification via conglomerate merger provides a vehicle of growth of the firm, without at the same time any necessity to provide increased (or improved) use-value production - for example in the face of overproduction/accumulation . It is also damaging to the harmony between value and use-value imperatives, allegedly mediated by competition, since it is a mode of entry deterrence, by swamping `characteristics space' without even the effort of R&D! The very possibility of stock market `bargains' upon which the rationality of takeover and merger (in the absence of synergism) rests indicates that capital markets are very imperfect even on value-criteria. In sum then firms appear as specific blocs of capital, each engaged in the business of capital accumulation . These blocs of capital are the loci of the production process . Capital, in the sense in which we are using the term, is not interested in production as such, but in the possibilities of accumulation . Which market to be in is a tactical question, diversification is not aberrant behaviour (Aaronovitch 1977 : 82 ; cited in Sawyer 1981 : 151) . 12

has The conception of profits at work in ME straightforwardly normative aspects, often echoing the neo-Austrian literature : seeking profit is a thoroughly honorable activity . . . Profit should be seen as the reward for enterprise, the reward for risking capital, and the reward for superior insight and judgement concerning market conditions (Douglas 1979 : 2) . The neo-Austrians unequivocally see entrepreneurship as the universal human capacity underlying pure profits (although they admit that the ability to realise these opportunities is closely related to the ownership of capital - and must do so unless they wish to merely substitute neoclassical economics dominance by perfect commodity markets by an assumption of perfect capital markets (see, for example, Kirzner 1973 : Ch .6) . Pure profits (after deducting the quasi rents to ownership of factors and

Capital & Class

interest), then are conceived as the reward to entrepreneurship, which is the propensity to identify and seize opportunities for profits! A fairly selfjustifying process. Analytically, ME conceives profits primarily as financial ratios of a flow to a stock - which captures the money fetishism of bourgeois society. It neglects, however the crucial difference between such property income and labour as the income source of last resort . (This goes along with ME's neglect of production - and thence of labour as the sole necessary factor of valorisation) . The critical alternative to these views is to see them as partial truths, which neglect the prime moment of profits as the internalised external determinant of resource allocation, and the source of profitability as lying in surplus value, produced by the universal human capacity to labour, reproduced outside the capitalist market (see, for example, Reuten and Williams 1989 : Chs 1 & 6; and Williams (ed) 1988 : Ch .5). Controlling the manager

The pursuit of profits by managers is the concretisation of valorisation . Whilst microeconomics, beyond the introductory level, makes much of the possibility of alternative arguments in the objective functions of management, if not shareholders, ME texts emphasise the convergence of systematic application of rules-of-thumb in pursuit of sales revenue maximisation etc ., in the shortrun, on long-run net-value maximisation, in the face of imperfect information and uncertainty (see, for example, Douglas 1979 : Ch.10.1). This approach points up the market enforced emphasis on external management, so that internal management is only economically analysed, if at all, by the economic theories of bureaucracy, which, whilst pointing up the contradictions within a firm, once again reduce subjectivity to the mono-dimensional rational 13 economic man. It becomes clear from the above critiques of the main decisions facing managers, and of their optimal resolution that there is an underlying conflict of interest between managers and consumers, rather than the competitive market regulated harmony postulated by microeconomic theory . This conflict is the most direct manifestation of the contradictions between valorisation and use-value criteria. The analysis of the market regulation of firms activities also reveals the contradiction between managers and

Survey: Managerial economics 135

shareholders . This conflict of interests is an aspect of the use-value/value criteria contradiction which persists even when the former are those relevant to the latter . Managers are necessarily concerned with managing use-values whether it be of inputs required technically to produce an output, or of the output in order that it be sold . Shareholders, on the other hand are locked into the money fetishism of pure value calculations - their 'bottom-line' interests are only in successful valorisation, not in how it is achieved . It is of interest that the abstract category ,entrepreneur' has an ambiguous location within the firm, spanning the manager/shareholder divide (see, for example, Marshall & McCormick 1986 : Ch .3) . Notwithstanding any tension with shareholders, managers are rewarded for successful valorisation, not for the satisfaction of consumers needs and wants (even in the purely individualistic terms of consumer demand), except in as far as this is necessary for the former . It is then clear from a critical reading of ME texts that it is not the use-value interests of the consumer in lower prices, but the market enforced value-based interests of the firm that determine active managerial behaviour which is aimed not, in the first instance, at satisfying sovereign consumer demand at minimum cost, but rather at deploying not only pricing and output decisions, but marketing, advertising, cosmetic innovation, diversification and merger in pursuit of valorisation, typically at the expense of use-value criteria . The aim is to shift demand schedules and alter elasticities, not merely to maximise subject to them, as implied by the equation of MR and MC upon which the alleged social efficiency of market resource allocation rests - and then, of course, to pass on the costs of all this plus a profit mark-up onto the consumer. Thence needs get satisfied only for those who can afford to pay not only the costs of production and distribution, but also those of reproducing the commodity form and valorisation - the expenditures on cosmetic innovation, entry limitation, marketing and so on (cf Haug 1971). This article has benefited from comments by Shaun Hargreaves-Heap.

Summary

Capital & Class 136 Notes

1. For an account of this notion of critical political economy see Reuten and Williams, 1989 (forthcoming) : Part I . Williams (ed) 1988 contains a collection of papers dealing with various aspects of this approach 2. Marx's classic statement of the nature of valid abstraction and concretisation, and their dialectic is still the best place to start (Marx 1953 : 100-108) 3. Kirzner 1973 provides a concise overview of the key concept of 'entrepreneurship' 4. It should not be thought that the insights of the neoAustrians have remained entirely unacknowledged by the neoclassical orthodoxy . Indeed, they have been frequently incorporated into it . Schumpeter, whose 'creative destruction' has entered industrial economics orthodoxy, came out of the Austrian school (although the neo-Austrians tend to disown him). The increasingly sophisticated attempts to model uncertainty have clearly been prompted by the neo-Austrians, as have the discussions of restrictions on competition (culminating most recently in Baumol's 'contestable market' models) . Indeed it is attractive to view the neo-Austrians as putting their intellectual activity where their ideological mouth is, and being entrepreneurial in the discovery of new insights into the processes of market-regulated capitalism, which are then subsequently systematized in the models of the neo-classical Robbinsian economizers! However, certainly modern exponents such as Kirzner 1973 would not be happy with such a static division of intellectual labour, and would argue that the real essence of the Austrian concept of entrepreneurship is incompatible with any kind of comparative static neo-classical model however elaborated . 5. Marshall & McCormick (1986 : Chs 16 & 17) unusually does contain some comments on the specificity of, not only public sector management, but also the management of workers' cooperatives . 6. An honourable exception is Jackson 1982 : Chs 3 & 4 7. The literature on managing and controlling the 'public' sector - when it does not reduce to a polemic in favour of privatisation - is more revealing, in its discussion of performance indicators, value-for-money audits and so on, about the necessary determination of state-sector allocative decisions by a complex of 'use-value' criteria (see, for example, Butt & Palmer 1985 ; Redwood & hatch 1982). Whilst the arguments presented here form a conceptual basis upon which such questions as : 'What do socialists want state-sector (and indeed other) managers to do within a capitalist mixed economy?' 'What structure of pressures, constraints and incentives might achieve this, and how, via popular, trade union, parliamentary etc . modifications of and interventions in market mechanisms might such a structure be brought about?' And 'What would be the objectives, constraint/incentive structures and mechanisms for reproducing them in a democratic socialist society?' can be asked ; it is beyond the scope of this article to address them directly .

Survey: Managerial economics 8. At the level of managerial practice the picture may be complicated by different strategies for managing the labour process - in particular these days post-Fordist or 'Nissanist' strategies which involve lifetime commitments between companies and key workers - in exchange for absolute loyalty, unpaid overtime and subject, of course to the commercial viability of the firm! For a discussion of 'Nissanism' see Holloway 1987 9. Of course it is also true that prices may be adjusted down for low income segments if this generates increased revenues by enabling more of them to buy, and high income itself may be a cause of the high price inelasticity which attracts a higher (first degree) discriminate price - eg peak hours business use of utilities . On the other hand the other side of this coin is that what is offered at a lower price during an inconvenient period is going to mean higher costs in some form or other for the less well off who can only afford this second-rate commodity. 10 . An unwitting exemplification of the total neglect of nutritional science in favour of so-called consumer sovereignty is the use by Douglas (1979 : 7ff) of a combination of hamburgers and milk shakes for a students lunch every day as his example for discussing indifferent analysis! 11 . It is interesting that the management literature on managing innovation, on the other hand frequently refers to stricter control over the shop floor as an advantage of a particular new process 12 . See Howard 1983 for a discussion of profits in economic theory 13 . It would seem that modern management literature has started to analyse 'internal management', and actually indicates the need to treat the subjectivity of managers (and other personnel) as more complex than the rational economic agents imported from the market sector. The point for critical political economy is to examine the internalisation of external value criteria, which it does via the concept of pre-commensuration

(T = Managerial Economics Text ; P = Basis of Political economic critique) Alchian A A 1950 Uncertainty, evolution and economic theory, Journal of Political Economy 58, June 1950 : 211-21 Aaronovitch s 1977 P The firm and concentration, in Green F & P Nore (eds) : Economics: an anti-text. London, Macmillan, 1977 Baran 1959 P Reflections on underconsumption, in Abramovitz et al (eds) The Allocation of Economic Resources Stanford University Press, 1959 : 59 Baumol W J 1982 Contestable Markets : an uprising in the theory of industry structure, American Economic Review 72 : 1-15 Butt H & B Palmer 1985 ValueforMoney in the Public Sector: the decision maker's guide. Oxford, Basil Blackwell, 1986

References and selected bibliography

Capital & Class Chamberlin E H (ed) 1954 Monopoly and Competition and their Regulation. London, Oxford University Press Chiplin B & B Sturgess 1981 Economics of Advertising. Sussex, Holt, Rinehart & Winston, 1981 (2nd edn) Douglas E J (1979) T Managerial Economics: analysis and strategy. New Jersey, Prentice-Hall, 1987 (3rd edn) Freeman C 1982 The Economics of Industrial Innovation. London, Frances Pinter, 1982 (2nd edn) Gough, J & S Hill 1979 T Fundamentals of Managerial Economics London, Macmillan, 1985 Hall R E & C J Hitch 1939 Price theory and business behaviour, Oxford Economic Papers no .2, May 1939 : 12-45 Haug W F 1971 P Kritik der Warenasthetik. Frankfurt am, Suhrkamp . Trans . Bock, R: Critique of Commodity Aesthetics: appearance, sexuality and advertising in capitalist society. Cambridge, Polity Press, 1986 Hay D A & D J Morris 1979 Industrial Economics: theory and evidence. Oxford University Press, 1980 Holloway J 1987 P The Red Rose of Nissan, Capital and Class 32, Summer 1987 : 142-164 Horowitz D (ed) 1968 P Marx and Modern Economic& London, McGibbon & Kee, 1968 Howard M 1983 P Profits in Economic Theory. London, Macmillan, 1983 Jackson P M 1982 The Political Economy ofBureaucracy. Oxford, Philip Allan, 1982 Kamien M I & Schwartz N L 1982 Market Structure and Innovation. Cambridge University Press, 1984 Kirzner I M 1973 Competition and Entreupreneurship. Chicago, Phoenix, 1978 Lancaster K 1971 Consumer Demand. a new approach . New York, Columbia University Press, 1971 Mises L 1949 Human Action. New Haven, Yale University Press Marshall G P & B J McCormick 1986 T Economics of Managerial Decision-making. New York, Basil Blackwell, 1987 Marx K 1953 P Grundrisse: foundations of the critique ofpolitical economy (rough draft). London, Penguin, 1973 Mixon J W, Jr. & N D Uri 1985 T Managerial Economics New York, Macmillan, 1985 Peppers L C & D G Bails 1987 T Managerial Economics: theory and applicationsfor decision making. New Jersey, PrenticeHall, 1987 Porter M E 1985 Competitive Advantage: creating and sustaining superior performance. New York, The Free Press, 1985 Redwood J & J Hatch 1982 Controlling Public Industries . Oxford, Basil Blackwell, 1982 Reuten G & M Williams 1989 P Valueform and the State : the tendencies of accumulation and the determination of economic policy in capitalist society. London, Routledge, 1989 (forthcoming)

Survey: Managerial economics Robinson J 1954 P The impossibility of competition, in Chamberlin, E H (ed) 1954 : 245-6 Sawyer M C 1981 The Economics of Industries and Firms London, Croom Helm, 1981 Sloan P 1973 P Marx and the Orthodox Economists. Oxford, Basil Blackwell, 1973 Stigler G J 1947 The kinky oligopoly curve and rigid prices, Journal of Iblitical Economy 55 1947 : 432-49 Sweezy PM 1939 Demand under Conditions of Oligopoly, Journal of Political Economy 47, 1939 : 568-73 Williams M (ed) 1988 P Value, Social Form and the State. London, Macmillan, 1988

Rethinking

MARXISM

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Rethinking MARXISM is a quarterly journal of Marxian thought that will begin publication in January 1988. First year's issues to include Samir Amin, "Accumulation on a World Scale: 30 Years Later"/Cornel West, "Rethinkin Marxism: A Third World Pers Live"/Stephen Resnick & Richard WOl `; "What is Communism?"/Jack Amariglio, "Foucault: Marxism and Post-Marxism" /Rosalyn Baxandall, "Elizabeth Gurley Flynn: A Sexual/Political Life" . . . and many other articles . Subscription rates. Individuals $24/lyear, $45/2 years; Students $18/1 year; Institutions $40/1 year, $75/2 years (please add $4 for all foreign subscriptions) . Mate check or money order pay" to ReAinkmg MARXISM, Pkase address all mquaies and orders to Rsfhinkfng MARXISM, P.O. Box 715, Amherst, MA 01004-0715 .

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Harry McShane 1891-1988 Harry McShane died this year after eighty years in the socialist movement . I first met him when he was already 80 but even then he was president of his Amalgamated Engineering Union branch (which he had joined as the old Amalgamated Society of Engineers), their delegate to the Glasgow Trades Council and working in the Irish Solidarity Campaign . The revival of the Irish struggle led Harry back to the streets : to speaking at street meetings in Central Glasgow and in the East End, and marching on demonstrations where we were outnumbered 3 to 1 by Orangemen . I remember his speech from the floor at a massive Bernadette Devlin meeting when Orangemen ringed the hall and he was still the best agitator as he had been all his life . He joined the Independent Labour Party when he was an apprentice engineer in 1908 and left the newly formed British Socialist Party in 1911, he became a follower of John Maclean and was one of the few who stayed in Maclean's Tramps Trust and began unemployed agitation . He then joined the Communist Party in 1923 to continue that agitation throughout the early twenties and then the thirties as the Scottish leader of the unemployed, leading the Hunger Marches from Glasgow or in 1936 from Edinburgh . He left the Communist Party in 1953 when it had become clear to him that the Communist Party of the British Road to Socialism was less radical than the

Independent Labour Party he had left in 1911 . In his sixties he read Raya Dunayevskaya's Marxism and Freedom and read Hegel and Lenin's Philosophical Notebooks for the first time. He became a member of Raya's Marxist Humanist Group . He would never join any of the Trotskyist groups in Britain becuase he didn't trust the leaders. Harry was a lieutenant of the socialist movement, what Gramsci calls a good sense thinker, the socialist leader who translates marxist philosophy into action . His sense of the importance of political agitation among the working class came from his own own background as one of the first catholics to gain an engineering apprenticeship . He was a shop steward during the 1919 strike but he always believed that anti-war agitation was crucial. The only period of his life he didn't like to talk about was the period he worked for the Communist Party during and after the Second World War when he earned the reputation as a party hatchet man . Harry hated sectarianism . He worked with everyone he felt he could trust in the socialist and labour movements . At the end of his life, after the death of his brother Willie, a local Govan activist, he lived in a Church of Scotland home to which his long standing friends Kay Carmichael and Neil Carmichael had introduced him. Joan Smith



Ron n ie Marg u lies and Ergin Yildizoglu Austerity packages and beyond : Turkey since 1980 • Turkey had to undertake $7 .2 billion of foreign debt repayments last year . The Central Bank started at the beginning of the year to collect the necessary foreign exchange in preparation for the first substantial payments due in May . The result was a severe shortage of US dollars on the market, which pushed the free market exchange rate of the dollar 20% above the official rate . Banks began to charge a 30% commission on transfers or simply refused to undertake foreign transactions . It would have been more profitable for them simply to sell their dollars on the free market! Importers were up in arms . The shortage of dollars was due also to the rate of inflation - around 60% - which made Turkish Lira (TL) holdings unattractive . Savers moved into foreign currencies. Bank deposits stagnated and even fell in absolute terms, in spite of high rates of interest . In early February, the government unveiled a new set of measures . Interest rates on one-year time deposits were allowed to rise to 65% . The cost of borrowing shot up to 135% . Businessmen's organisations protested bitterly, the Aegean Chamber of Industry discussed a boycott . In the meantime, banks started to get tough with their bad debtors . With lending rates at 135% and most companies needing to borrow simply to stay afloat, total bad debts, estimated to have reached TL3,500 billion,

This article outlines in some detail the austerity package put into implementation in Turkey in 1980 and the subsequent attempts to restructure the Turkish economy . It is argued that while the 1980 measures largely succeeded in removing the immediate obstacles to capital accumulation, 141 particularly by breaking working class resistance and slashing real wages, no fundamental restructuring was achieved .

Capital & Class 142

continue to grow steadily . When one bank sent the bailiffs round to a shipping company with outstanding debts of TL21 billion, industry could be seen holding its breath in apprehension . The government is clearly lost for a coherent economic strategy . The foreign debt has now climbed past the $40 billion mark . For the past four years they have borrowed $4-5 billion each year and repaid the same amount yearly . In 1987 the foreign trade deficit stood at $4 billion . In order to undertake prompt debt servicing (which it needs to do in order to keep the wheels of external financing turning) and to fight inflation, the government borrows internally, sucking funds out of the system . This, however, has two effects : it pushes rates of interest up and chokes effective demand . Both these make life extremely difficult for industry : investment has already come down and output is in danger of doing so . And yet, raising exports, also crucial in order to overcome the foreign exchange bottleneck, requires new investments given that capacity utilisation ratios are now very high . Government borrowing is also ultimately inflationary, as it forces the government into printing money, pushing the money supply up . As long as inflation remains as high as it is - with the value of the TL constantly sliding against all major currencies - the much-heralded inflow of foreign investment is unlikely to rise above the present trickle (see Table 8 below) . Finally, the period of peace and quiet on the industrial front which enabled employers to reduce real wages and impose strict labour discipline appear now to be reaching its end . Profit margins have started to fall . In short, economically the government is stuck between a rock and a hard place . And yet, in November 1987 it was re-elected with an impregnable parliamentary majority . In a referendum last September it managed to hold on to the same percentage of the popular vote which had returned it to power . In what follows, we shall look at the past eight years of the Turkish economy, starting with prime minister Turgut Ozal's celebrated austerity package of 1980 . We shall attempt to explain both the background to the present economic crisis and the reasons for their re-election in spite of it .



Turkey The austerity programme of January 1980 represents a landmark in Turkish socio-economic history . This is neither because it was the first programme of its kind implemented in Turkey, nor because its basic elements were fundamentally different from previous stabilization programmes . This was, in fact, Turkey's third major austerity programme in the post-war period - the first two having been implemented in 1958 and 1970 . Both previous programmes shared a great deal with each other and with that of 1980 . The problems they were designed to overcome were similar, and so were the proposed solutions . The problems were chronic balance of payments deficits, foreign debt servicing problems, galloping inflation, falling production and investment . The solutions were devaluation, an end to deficit financing, tight monetary policies, and others . The three programmes share a further common feature : they were all followed, within a year or two, by military coups . And here the similarity ends . The 1980 programme differs from the others fundamentally in the sense that while the first two were attempts simply to unblock the bottlenecks in the process of capital accumulation, this represented an attempt to change the existing forms and means of intervention for the unblocking of bottlenecks . Because of this, the changes envisaged by the 1980 programme went beyond simple alterations to economic policy - successful implementation necessitated political and legislative changes . The military takeover of September 1980 gave the original architect of the programme, Turgut Ozal, the chance to put it into practice without the restrictions, checks and balances of parliamentary democracy . Ozal was first put in charge of the economy by the military and then won the general elections of November 1983 to become prime minister . The programme is now eight years Id, and Ozal has been in charge of its implementation for most of that period .

The crisis The year 1979 was possibly the worst suffered by the Turkish economy in the post-war period . In this year, all macroeconomic indicators pointed to a severe economic crisis . The rate of inflation reached 64% in 1979, having

Prelude to austerity : 1980 as a turning point

The stabilisation programme of January 1980

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climbed steadily from 30% in 1974 to 53% in 1978 . The foreign debt stood at $13 billion and had to be rescheduled in 1978, with debt-servicing becoming an unbearable burden . The foreign trade deficit stood at $2 .8 billion, having come down from a massive $4 billion in 1977, essentially as a result of the inability to pay for imports . The population lived through a year when a whole number of the basic necessities of life, from liquid fuel to light bulbs, were only available on the black market .

144

Foreign Debt 1978-807 ($ billion) 7tzble 1.

Medium- and Long-term Short-term Total

1978

1979

1980

1981

6,618 7,176 13,794

10,048 3,556 13,604

12,693 2,480 15,173

13,408 2,111 15,519

Source: Central Bank.

The high import dependence of Turkish manufacturing industry meant that the severe foreign exchange bottleneck had an immediate impact on domestic production . Capacity utilisation in manufacturing industry reached an all time low of 45%, having been around 70% four years previously . Total production in this sector had increased by 36% in 1970 and 27% in 1973 - it registered a decline of 9 .8% in 1978 and grew by a mere 5% in 1979 . Gross value added in industry as a whole declined by 5 .6% in the same year . Throughout the year, fuel shortages led to regular - and sometimes unexpected - power cuts, turning the process of production into a nightmare, not to mention the misery caused to ordinary households . Fixed capital investment in the private sector also took a dive in this period, not entirely surprisingly . Having increased by 12 % in 1976, it declined by 6 .8 % in 1978 and a further 9 .8% in 1979 . The problems appeared insurmountable, and not just economically . The ruling class' inability to produce was accompanied by an increasingly apparent inability to rule . While businessmen and managers lost control in the factories and workplaces, the government and security

Turkey

forces lost control in the streets . From the mid-1970s, an increasingly militant and organised working class movement became a major obstacle to the success of the government's crisis management policies . Real daily wages fell from an average of TL 27 .07 in 1977 to TL 20 .54 in 1979, and further to TL 15 .34 in 1980 . This final figure represented a level lower than that of 1963, the year in which trade unions were first established . In their effort to stem the downward slide of wage rates, trade unions embarked upon a number of bitter struggles . Strikes became more numerous, longer and sometimes violent . 7h,ble 2.

1976 1977 1978 1979 1980

Industrial Relations (1976-1980) Strikes

Strikers

Days Lost

58 59 87 126 220

7,240 15,628 6,748 21,011 84,832

325,830 1,397,124 426,127 1,147,721 7,708,750

Source : Marguiles and Yildizoglu, 1984, p.18.

At the same time, as an increasingly confident fascist movement saw the possibility of a bid for power and escalated street violence, the large left-wing movement opposed it in kind . The result was a terrifying level of bloodshed and violence, about which forces of the state appeared to be able to do very little . Indeed, political polarisation found its reflection within the security forces, greatly reducing their efficacy . All this was accompanied by the growth of several secessionist Kurdish nationalist organisations in the southeastern provinces . The atmosphere of chaos in the country at large was fully reflected in parliament, where the main parties failed to elect a new president after hundreds of rounds of voting over 10 months in 179-80 . Through this period parliament ceased to function as a legislative body, with inter-party wranglings completely paralysing its proper workings . In October 1979, Bulent Ecevit's social democratic Republican People's Party resigned from government and cac

s6-J

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Capital & Class 146

was replaced by Suleyman Demirel's conservative Justice Party . In combatting `anarchy' the Demirel government gave full reign to the military which had had a hand in this since the declaration of martial law in December the previous year . In the economic sphere Demirel brought in one of his trusted advisers, Turgut Ozal, to design a programme of economic reforms . The austerity programme - 24 January 1980 At the time, Ozal was chairman of one of the country's leading employers organisations, the Metal Employers Union (MESS) . Demirel appointed him undersecretary to the prime ministry and head of the State Planning Organisation (DPT) . This was, in fact, Ozal's second stint at the DPT, having been its undersecretary in 1967-71 when he also owed his appointment to Demirel . Between 1971 and 1979, Ozal worked at the World Bank in Washington, then in the private sector back in Turkey and finally at MESS . Ozal, neither an economist nor a financier but an electrical engineer by training and a technocrat by profession, took under two months to prepare an austerity programme . The programme appeared in the official gazette on 25 January 1980 . On 24 January 1980, introducing his economic package, Ozal summarised the country's economic landscape as follows, "An unprecedented level of inflation above 100% ; shrinking foreign currency earnings ; a growing black market ; falling production ; a rapidly rising rate of unemployment ; shortages ; falling rates of investment ; an increasingly unequal distribution of income . It is, in short, a dark picture ." (Colasan, 1984, p .313) . In overcoming these problems, argued Ozal, the following needed to be done : 1) Co-ordination and coherence must be introduced in national economic decision making ; 2) In the economic management of the country, great weight must be given to general macro level measures, while detailed intervention must be avoided in order to allow the economy to develop through the natural laws of the market ; 3) The double-price system must be abolished in order to eliminate black-marketeering ; 4) State-owned enterprises must be made productive

Turkey and they must no longer be subsidised by the state ; 5) A realistic foreign exchange rate policy must be pursued in order to balance foreign trade and raise foreign currency earnings . The overvalued exchange rate has rewarded importers and punished exporters ; 6) Special measures must be taken to promote exports ; 7) Private enterprise must be encouraged to the maximum ; 8) The working day must be lengthened ; 9) It must be accepted that monetary policies are the crucial tool in the fight against inflation ; 10) Given that the rate of investment is unlikely to be increased in the short and medium term, this must be compensated by an inflow of foreign capital ; 11) Domestic demand needs to be reduced in order to increase exports . This must be achieved not only through monetary measures but also through linking wages to the rate of inflation ; 12) Tax revenues must be increased by a reform of the tax system . (Colasan, 1984, p . 314-315) . Along these lines, the January programme was designed to curb inflation, improve the balance of payments, increase the national product and, generally, liberalise the economy . The concrete measures which constituted the programme may be summed up under six major headings : a) The liberalisation of foreign trade, b) The liberalisation of price mechanisms, c) The liberalisation of foreign investment regulations, d) Income distribution measures, e) Administrative measures and f) Legislative measures . Aims and originality of the programme In the short term, the programme essentially aimed at removing the immediate obstacles to the existing process of capital accumulation . In other words, existing industrial capacity, crippled and largely idle, needed to be put to work . This meant that the burning problem of the availability of imported inputs into industry (raw materials, energy, semi-finished products) had to be solved . This required a rapid increase in foreign currency earnings which would clear the way for increased imports . Devaluation, abolitionof stamp and import duties, and export promotion measures were all designed for this purpose . In addition, a semblance of stability needed to be

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introduced for production to resume . This required a lower rate of inflation or, at least, public confidence in the government's determination to reduce inflation . A whole set of measures - elimination of subsidies, indexation of wages, tight monetary control - were designed to achieve this end . In the longer term, the programme aimed at a substantial re-structuring of the economy, transforming it from one based on import substitution to an exportoriented one . Market mechanisms were to be freed from the constrains of state intervention and the economy opened up to competition both internally and internationally . To this end, legislation was introduced to encourage foreign investment, import and export regimes were liberalised, privatization was put on the agenda . Fundamentally, the programme represented an attempt to change an economic structure ravaged by crisis and a model of capital accumulation no longer functioning. The model was one where the domestic market constituted the key variable in production and economic policy . Given the huge scale of the agricultural sector in terms both of production and population ( and also given that agrarian production was based overwhelmingly on small but highlycommercialised landowning producers), industrialisation was based on consumer goods production geared to the apparently endless demand generated by the countryside which, in its turn, met industry's hunger for foreign currency through exports . The model of capital accumulation in existence since the late 1960s was established, to a great extent, through direct investment by multinational companies . With its intensive technology and particular labour process geared to the production of relative surplus value, this model proved difficult to achieve stability in the particular Turkish conditions where essentially the production of wage goods took place outside the industrial sector, in the huge low-productivity petty commodity producing sector. Hence the production of absolute surplus value could not be effectively linked with the production of relative surplus value . Despite the application of intensive techniques in the labour process, accumulation remained highly dependent on the extensive production of surplus value . The application of technology played an important role in the acquisition of differential profits and in the centralisation of internationally linked domestic capital . In fact, this process of industrialisation went hand in hand

Turkey with the emergence of large holding companies linked with the banks and insurance companies . Consequently, the ruling class was effectively divided vertically between internationally-linked holding companies and domestic small and medium (generally provincial) capital . In these conditions, the state's role, economically, was to foster the growth of the domestic market (high state support prices for agricultural products, low levels of taxation in the countryside, provision of subsidised inputs for agricultural production) and to support domestic industry in supplying for this market (subsidised inputs produced by public sector enterprises, provision of cheap oil and power) - accordingly, the state was under permanent pressure to pursue expansionary monetary policies . The credit stock permanently expanded with negative real rates of interest . Consequently, inflation and an overvalued exchange rate for the Lira emerged as builtin tendencies of the model . Politically the state's role was determined, on the one hand, by the necessity of unifying the vertically-divided bourgeoisie into a coherent power bloc, and on the other hand, by the necessity to keep wages and labour discipline under strict control . The political/institutional framework of this model of capital accumulation took the form of political parties with programmes apparently aimed at representing all sections of society from the internationallylinked industrial bourgeoisie to the agrarian classes as well as the working class, but, in fact, oriented on securing the legitimacy of the ruling power bloc through a populistdevelopmentalist rhetoric . Hence, populism in the conservative as well as social democratic parties became a major characteristic of the political scene . The importance of control over the labour market and labour discipline gave rise to the tendential characteristics of the state aimed at exerting control over the political and cultural processes which might contribute to the rise of labour opposition and to the subjective development of the working class . Correspondingly, the establishment of political parties based on class interests was prohibited, anti-establishment activities severely punished, trade union activity kept under restriction . The integration of this model into the world economy took the form of exporting agricultural and primary goods in order to meet imports of semi-finished and capital goods and energy . The deficit was met through foreign borrowing . This form of integration functioned perfectly

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Capital & Class 150

well as long as the production of surplus value remained at a level adequate to meet the servicing of the foreign debt . Here too, the coincidence of the interest of the agricultural exporter with that of the industrial importer strengthened the logic behind populist politics . Periods of working class struggle put a spanner in the works in two ways : the rise in real wages and the forced relaxation of labour discipline led to a fall in productivity and capacity utilisation, bringing down the total surplus value produced and appropriated . The economy then faced a vicious circle : falling surplus value hindered debt servicing, this made new borrowing increasingly difficult, the import of vital industrial inputs was blocked, industrial production faltered, surplus value production declined further . To counter the declining production of surplus value, money in circulation and credits were allowed to soar . The money supply index (1970 = 100) increased from 430 in 1976 to 807 in 1978 and 2,757 in 1981 . Similarly, the index of Central Bank credits (1970 = 100) increased from 314 in 1974 to 664 in 1976, 1,653 in 1978 and 4,477 in 1980 . In the same period, the price index increased from 214 in 1974 to 2,394 in 1981 . The shortage of industrial inputs became the major cause of low capacity utilisation .

Chart 1

Turkey Growth rates of industrial production declined from 7 .8% in 1976 to 3 % in 1978 and then sank to 1 .2% in 1980 . Profit rates declined sharply' . (See Chart 1) . As in 1970, the central problem with this model of accummulation was perceived by the bourgeoisie to be the generation of chronic balance of payments deficits . As Ozal put it in a report presented to Demirel during the preparation of the 1980 programme, "In the past century the most important bottleneck in Turkey's development has been the balance of payments ." Given this vision, the programme's aim was, in essence, to recreate an economy geared to the world rather than the domestic market . This necessitated a fundamental change in the relationship between industry/agriculture/state policies and between these and the world economy . The important measures contained in the programme were all designed to withdraw money from the domestic market and re-allocate these funds to the promotion of exports . Thus, domestic demand was to be curtailed, discouraging production for the home market, while at the same time providing the government with the resources to divert into export promotion . The massive price increases for the products of public sector enterprises ; the reduction of support prices for agriculture and the elimination of subsidies on agricultural inputs, (with, most notably, the price of artificial fertilizers raised fourfold) ; incomes policy ; tight credit policies ; and the termination of deficit financing were all measures of this kind . They all also afforded the added advantage of being measures of an anti-inflatory nature . Apart from the contraction of the domestic market and the promotion of exports, other measures aimed at prizing open the balance of payments bottleneck included those designed to inspire confidence in international financial and capital markets . Thus, fixed exchange rate policy which had led to the overvaluation of the Lira was abandoned, to be replaced by a policy of periodic small adjustments allowing a realistic rate to prevail ; legislation regulating the entry of foreign capital was greatly liberalised; import barriers were reduced and simplified ; and the determination to undertake prompt debt-servicing was publicly stressed . Unlike its predecessors, the 1980 programme also envisaged the establishment of a set of administrative mechanisms to carry through the new policies and to give them permanence . This is perhaps what separates this

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Capital & Class 152

programme most from the others : its design incorporated a strong awareness that it would face serious opposition, particularly from the 'etatist' bureaucracy . It therefore attempted to create the organs, within the state mechanism, to undertake its implementation . Problems of implementation - The coup: One of the first to know of the austerity programme's contents was Charles Woodward, head of the IMF delegation in Turkey at the time . The news was telexed back to Washington where it was jubilantly received . A week after the programme was made public, Ozal, accompanied by the general directors of the Treasury and Central Bank, went on a visit which took him to Germany (where he met with the minister of finance), the US (where he met with the presidents of the IMF and the World Bank), London (where he held talks with international banks) and Paris (where he negotiated at the OECD) . Everywhere, Ozal pushed for the rescheduling of Turkey's foreign debt and for fresh foreign loans . In April, a $1 .1 billion loan was obtained from the OECD . The OECD also agreed to reschedule Turkey's $2 .9 billion debt which had already once been rescheduled in 1978 and 1979 . In mid-June, a new three-year stand-by arrangement worth $1 .6 billion was signed with the IMF . Later in the month, Japan agreed to reschedule Turkey'a $85 million debt, while the EEC released $336 million in aid over five years. In October, agreement was reached on the rescheduling of a x350 million debt to the US . The following month, the World Bank extended a $162 million loan to Turkey . (Schick and Tonak, 1987, p . 351 ; Sommez, 1982, p . 298 ff) . Having gained the IMF's and the World Bank's stamp of approval for its new economic regime, Turkey was thus able to obtain a net foreign aid inflow of over $1 .5 billion in 1980, thereby substantially unblocking its foreign trade bottleneck . The renewed inflow of foreign currency gave the economy some breathing space, upon which the programme's medium and long-term measures found some time to come into play . The reception of the programme within the country, however, was far from jubilant . The measures directly threatened too many class interests : agrarian producers, small and medium businesses with no actual or potential

Turkey international linkages, home market-oriented industry and the urban working class all stood to lose from the programme's success . In directly attacking the three sacred cows of Turkish economic wisdom - protectionism, state support of the agricultural sector and the Law to Protect the Turkish Currency - the programme also attracted the hostility of the bureaucractic and academic establishments . It was thus unavoidable that the programme immediately ran up against powerful opposition both in parliament and in the bureaucracy . The two main opposition parties, the social democrats and the Islamic fundamentalists, combined in several instances to block legislation concerning various aspects of the programme's implementation .Demirel's government party itself was split over the desirability of some of the measures, particularly those concerning the agricultural constituency . At the same time, the first nine months of 1980 witnessed the largest strike wave in Turkish history . It was widely understood and argued by commentators of all political shades that the programme had no chance of implementation under the existing `democratic' political system . The following argument, which appeared in one national daily in February 1980, was commonly accepted : `Either the government will give in to political pressure and make concessions from the programme, thus damaging its chances of success ; or it will attempt to apply the programme as it is and, as a result, be removed from government through the normal democratic processes . A third alternative is that certain powers, domestic and international, will put their weight behind the programme and use every possible means for its full implementation . What kind of political regime this last alternative calls for is something we should all worry about .' (Ulagay, 1983, p . 17) . In September the worst of these worries was realised : the military took power, suspended parliament and banned all political parties and workers' organisations . The fiveman National Security Council announced that it would pursue the ex-government's economic policies . Ozal was appointed deputy prime minister in charge of economic afairs . On the second anniversary of the programme Ozal declared "If not for the military intervention, we would never have reaped the rewards of our programme" (Ulagay, 1983, p 18 .) By eliminating all forms of organised social opposition and democratic decision making

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154

processes, the military gave Ozal the opportunity of implementing his programme with impunity .

Successes and The 1980 austerity programme was designed to solve failures of the short and long term problems facing the process of the capital accumulation in Turkey . In the short term programme : bottlenecks had to be eliminated, in the longer term structural impediments needed to be removed . We need to evaluate the success or otherwise of the programme in these terms . Its unblocking the immediate path of capital accummulation, there can be no doubt that the programme was substantially successful . The most immediate problem, that of foreign currency, was solved through extensive foreign borrowing (which international approval of the programme made possible) and an impressive rise in exports . A second immediate success was scored in rapidly bringing the rate of inflation down : from 107 ;2% in 1980, to 36 .8% in 1981 . to 25 .2% in 1982 . Thirdly, and crucially from the point of view of big businesses, real wages were brought down and labour discipline was restored . The abolition of trade unions and the purge of militant shop stewards from workplaces had an immediate effect on productivity . As a result of these improvements, industry was once again able and willing to produce . Both total production and capacity utilization ratios in manufacturing increased notably after 1980 . 7hble 3 .

1980 1981 1982 1983 1984 1985 1986 1987 Source :

Foreign Trade 1980-87 ($ billion) Exports

Imports

Deficit

2 .9 4 .7 5 .7 5 .7 7 .1 8 .0 7 .5 10 .2

7 .9 8 .9 8 .8 9 .2 10 .8 11 .3 11 .1 14 .2

5 .0 4 .2 3 .1 3 .5 3 .7 3 .3 3 .6 4 .0

TUSIAD, 1986, p .83 ; DIE .



Turkey

Profit margins also increased in the leading industrial enterprises (see also Chart 1) In an immediate sense, therefore, the programme succeeded in getting the wheels of the economy turning again . While parts of the programme went against the interests of certain sections of the ruling class, the resumption of the process of capital accumulation was a priority for the ruling class as a whole . The unblocking of foreign trade, the unproblematic provision of imported energy, the reduction of bureaucratic red-tape, the achievement of international creditworthiness and, most crucially, the lowering of real wages and restoration of labour discipline were urgent requirementsd of all sections of capital . Thus, in spite of the unpopularity of certain of its measures, Ozal's government gained the unwavering support of the business community . To this day, smaller conservative and right-wing parties have failed to gain significant support within this constituency . This, to a great extent, explains Ozal's return to power in the 1987 general election . As far as the programme's longer term aid - restructuring of the economy - is concerned, however, it is very dubious that any fundamental change has been

Tble 4. Index of Real Wages : 1975-1987 (1968 : 100) 1975

117 .1

1982

64 .9

1976

135 .3

1983

1977

131 .2

1984

67 .6 64 .8

1978

110 .8

1985

57 .8

1979

88 .5

1986

55 .4

1980

73 .0

1987

54 .1

1981

68 .8

Source : Istanbul Chamber of Industry, 1988, p .18 .

Tble 5. Productivity (Gross value added per employee in the top 500 industrial enterprises) (TL 000) 1982

1,824 .8

1984

3,142 .9

Source : Istanbul Chamber of Industry, 1987, p. 159 .

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Capital & Class 156

Table 6 . Capacity Utilization in private sector manufacturing

industry (%) 1979 1980 1981 1982 1983 1984 1985 1986

45 51 62 67 70 72 72 .7 72 .7

Sources: TUSIAD, 1984, p . 37 ; TUSIAD, 1987, p .42 .

Table 7. Profit Sales in the top 500 industrial enterprises

1981 1983

7 .97 8 .30

Source: Istanbul Chamber of Industry, 1987, p . 158 .

Table 8. Net foreign investment 1980-1986

($ million) 1959-79 1980 1981 1982 1983 1984 1985 1986 Source : TUSIAD.

228 62 38 78 76 242 234 364

Turkey achieved . The fundamental characteristics of the model of accumulation remained unchanged . Only control and discipline in the labour process has intensified and the direction of the flow of commodities and money capital partly reshaped . The most important area of doubt, from the point of view of the programme's own perspectives, is the extent to which the economy has become irreversibly exportoriented . In spite of the striking expension achieved in the volume of exports since 1981, the total figures conceal a number of problems . Firstly, the composition of exports has remained discouraging . While agricultural and mining products now account for less than 20% of the total, an overwhelming proportion of manufacturing exports still consist of textiles, processed agricultural products, forestry and leather products . Secondly, the export boom of the 1980s is largely based on two factors : the provision of extensive export incentives by the government and the massive growth of the Iranian and Iraqui markets .In 1986, as a result of the gradual phasing out of export incentives and the contraction of the Iranian and Iraqui markets, exports fell well below target . Attempts to penetrate the European and North American markets have so far proved largely unsuccessful . Thirdly, the extensive export promotion measures have encouraged fictitious exports2 . Recent students by the State Planning Organisation indicate that fictitious exports may account for up to 15-20% of apparent total exports . Fourthly, the constant deterioration in Turkey's external terms of trade suggest that the rapid increase in exports has meant a massive transfer from the domestic to the world economy (the amount may be estimated to be roughly equal to the export incentives given to Turkish exporters) . In other words, the export boom has not been based on structural change and increasing industrial capacity but on transfers out of the economy aimed at securing the foreign exchange necessary for the running of import-dependent industry . Agricultural producers, the working class and small and medium provincial capital have all had to bow before the interests of large industrial concerns . In short, the permanence of the export boom is debatable, unless industrial productive capacity, which reached its limits in 1987-88, and industrial productivity are significantly increased . Fixed capital investments in the private sector, the

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Capital & Class 158

best indicator of the health of the economy, have not grown substantially since 1980 . As a percentage of GNP, fixed capital investments stood at 20 .4% in 1979 . The figure has remained around 19% since then, being 19 .4% in 1985 . There can be no doubt that last year, with the cost of borrowing at 135 per cent, investment continued to decline . In 1987 Turkey borrowed over $4 billion internationally and the foreign debt rose above $40 billion . In 1988, a similar amount of new borrowing was planned . Thus, again in spite of increased exports, the economy continues to fail meeting the demand it generates for foreign exchange . It has survived over the past seven years by borrowing both for domestic purposes and in order to meet its debt-servicing requirements . Most alarmingly, it has borrowed increasingly on a short-term basis . Should the danger of defaulting on debt repayments ever be perceived as imminent, and new loans dry up as a result, the whole structure would be plunged back into a serious crisis . The inflow of foreign capital, to which the programme attaches great importance as a catalyst for change, has been particularly disappointing . There has certainly been a marked increase in foreign investment since 1980, but the amounts involved are still small . Clearly, the international community has yet to be convinced of the lasting impact of Ozal's policies . (See table 8) . The hope that entry into the European Economic Community may increase the inflow of foreign capital and the volume of foreign trade is unlikely to be realised in the short term . Turkey applied for full membership of the EEC in April 1987 and has been pushing hard for acceptance, but no one expects Turkey's membership to be approved much before 10 to 15 years . Finally, one of the fundamental factors which allowed Ozal to perform his "economic miracle", the slashing of real wages and imposition of strict labour discipline essentially through non-economic means, is likely soon to stop being operative . A strike which lasted for three months at the very beginning of 1986 at Netas, a joint venture between Northern Telecom and The Turkish government, was the first sign of serious workers' resistence since 1980 . In 1987 as a whole, the number of strikers exceeded that in the year before the coup . While Ozal's re-election at the end of the year had a demoralising effect on the movement, it is clear that the past eight years'

Turkey passivity and acquiesence is rapidly disappearing . In the first half of 1988, workers in petrochemical complexes, tyre and cement factories, the Hilton hotel and local government took industrial action . In the public sector, where strike action is outlawed, protest has been registered through such symbolic action as growing beards, as was the case with Izmir municipal bus drivers . A one-day works canteen boycott called by the trade unions was solid throughout the country . The fact that throughout 1988 the leadership of Turkis, the moderate trade union confederation, has been talking about a general strike is an indicator of the pressure they have come under from their rank and file membership . This is in part due to the fact that most of the half-a-million members of DISK (the Confederation of Progressive Trade Unions, banned since 1980) have now joined Turk-Is affiliated unions, bringing with them a tradition of greater militancy and considerable experience of industrial struggle gained in the 1970s . There can be no doubt that the working class begun the process of building up its confidence, morale and combativity . The continuing class recomposition of the proleteriat is likely to invalidate the fundamental assumption upon which the success of Ozal's programme was based . Expressed in terms of "political stability' and `business confidence", the assumption was that with the establishment of the military regime the Turkish economy regained its capacity to produce surplus value and can be expected to do so for the foreseeable future . It was on the basis of this assumption that Turkey's international creditworthiness increased .It was indeed true that the working class was pacified and workplace disciplined reestablished in 1980 . Two direct consequences of this were increased productivity and higher capacity utilisation ratios in industry . Both are now under threat .

The health of the economy has deteriorated visibly since 1986 . The annual rate of inflation increased from 27 .5% in 1986 to 78 .4% in August 1988 . It is not expected to slow down noticeably in the short term . In fact, 100% is the rate of inflation upon which the business community currently bases its calculations, There is also now a deepening recession in a number of major markets, particularly construction, textiles, consumer durables, automotive . Thee was a 30% increase,

159

Postcript : The current situation

Capital & Class 160

in real terms, in the value of defaulted promissory notes in the first six months of 1988 . Industrial production declined dramatically in the second quarter of 1988 and, in the same period, capacity utilisation fell for the first time since 1984 . The major complaint of industrialists and wholesalers - alongside the high cost of borrowing and galloping inflation - is a severe liquidity shortage . Seemingly paradoxical, this arises from the effects of the slowing rate of surplus value production in the economy as a whole . Taking profit rates in the top 500 industrial companies as an approximate indicator of the pace of surplus value production, the slowdown is notable . The average profitsto-sales ratio fell from 10 .3% in 1985 to 8 .4% in 1986 . Similarly, the average profits-to-net assets ratio was down from 10% in 1985 to 8% in 1986 . This paradoxical situation has produced two different approaches to inflation . Industrialists complain from costpush inflation and point the finger at high interest rates and the rising prices of imported industrial inputs . The government, for its part, appears convinced that the problem lies with the money supply, the growth cf which outpaces that of production . This, in fact, is another way of saying that the volume of surplus value in circulation has shrunk, the value of money has declined, more money is thus needed to reach the same commodities and prices are pushed up as a result . Complaints about the liquidity shortage and increasing costs reflect the other side of the coin : as the volume of surplus value in circulation shrinks, this appears to the individual capitalist as a reduction in effective demand and a shortage of funds because money has become more difficult to get due to rising interest rates . One characteristic of the Turkish economy is the predominance of oligopolistic structures in almost all major sectors . This exacerbates inflationary pressures and the recessionary atmosphere . Increasing costs of production in these companies are easily passed on to prices . Yet the shrinking volume of surplus value in circulation - which appears on the surface as a contraction of effective demand - does not allow the realisation of profits at those new price levels. The smalller volume of surplus value in circulation has a further inflationary effect, transmitted via budget deficits . A large poart of foreign credits in the past 4-5 years were used to expand public sector investment, particularly

Turkey 161

on motorways, power plans and similar infrastructural projects . These will lead to the production of external economies rather than immediate surplus value . The contraction of surplus value production has left the government without the necessary funds to finance the debt . Consequently, domestic borrowing has increasingly been geared to servicing the foreign debt . This has not only pushed interest rates up, but also increased the money in curculation since 1986 . The consolidation budget deficit which declined slightly in 1986 increased by 84% in 1987 and 88% in the first half of 1988 . Domestic borrowing increased by 41% in 1987 . In the meantime, money in circulation increased by 48 % in 1986, 54% in 1987 and 61 % in the first six months of 1988 . The Turkish ruling class has no choice but to intensify its attacks on the working class . As the latter continues to recover from the effects of the defeat in 1980, it seems inevitable that the forthcoming period will see an upturn in the class struggle . The working class is still today on the defensive . How long and how successfully it remains so will ultimately determine the success and longevity of Turguts Ozal's government and programme .

The calculation of profit rates is based on the estimation of capital stock in the Turkish industry by TUSIAD researchers (TUSAID : 1984) . The following formulum was used : (VA-W)/(K+k+w) . VA : Value added, W : wages+salaries, K : capital stock, k : raw materials, energy etc ., . Stock appreciation and effects of interest rates were ignored . (Sources : Statistical Year Books of Turkey 1981 and 1985) . Ziya Onis and Suleyman Mucur's (1987) study on Inflation in Turkey also produced similar results on the profits rates in the same period (Page 31 : data on wage/value added, input/wages, prices/cost, and page 38 : shares of wages, inputs and profits in the final product .) C&C 36-K

Appendix :

Capital & Class

162 Notes

1 . The calculation of profit rates here is based on TUSIAD estimates of capital stock in industry (TUSIAD : 1984) . The following formula was used : (VA-W)/(K + k + w) . VA : value added, W : wages + salaries, K : capital stock, k : raw materials, energy, etc . Stock appreciation and the effects of interest rates were ignored . 2 . In order to benefit from the tax rebates, cheap credit and bonus payments given to exporters, companies have arranged deals whereby empty crates have been 'exported' to bogus overseas buyers . The Turkish press have dubbed this 'fictitious exports' .

References

Ahmad, Feroz . (1981), "Military Intervention and the Crisis in Turkey", inMerip Reports, no 93 . Colasan, Emin . (1984), 24 Ocak - Bir Donemin Perde Arkasi (24 January - The Anatomy of a Period), Instanbul : Milliyet Yayinlari . (1984), 12 Eylul - Ozal Ekonomisinin Perde Arkasi (12 September - The Anatomy of the Ozal Economy), Istanbul : Milliet Yayinlari . DIE (Devlet Instatistik Enstitusu - State Institute of Statistics) . Various publications . Ankara. Istanbul Chamber of Industry (1987), Turkiye'nin 500 Buyuk Sanayi Kurulusu (Turkey's Top 500 Industrial Enterprises) . ISO Dergisi, No . 260, Istanbul . - (1988), Satinalma Cruces Paritesi Yontemi ve Turkiyedeki Uygulamalar (Purchasing Power Parity Methods and their Use in Turkey) . Istanbul . Margulies, R . and Yildizoglu, E . (1984), "Trade Unions and Turkey's Working Class", in Merip Reports, No 121 . Sonmez, Mustafa . (1982), Turkiye Ekonomisinde Bunalim (Crisis in the Turkish Economy), vol 2, Istanbul : Belge Yayinlari . - (1984), Ozal Ekonomisi ve Isci Haklari (The Ozal Economy and Workers' Rights) . Istanbul: Belge Yayinlari . Schick, I .C . and Tonak, E .A . (1987), "The International Dimension : Trade, Aid and DEbt' in Turkey in Transition : New Perspectives, eds . I .C . Schick and E .A . Tonak, New York : Oxford University Press . TUSIAD . (1980), The Turkish Economy - 1980, Istanbul : TUSIAD . - (1984), The Turkish Economy 84, Istanbul : TUSIAD . - (1986), The Turkish Economy 86, Istanbul : TUSIAD . - (1987), The Turkish Economy 1987,Istanbul : TUSIAD . Ulagay, Osman . (1983), 24 Ocak Deneymini (The 24 January Experience), Istanbul : Hil Yayin .