What capital won, and how we can win it back

[extended edit of a review in the launch issue of rs21 magazine]

A Unite rep examines arguments put forward by labour researcher Kim Moody – and how they shed light on how bosses have reorganised the workplace to our detriment.

For 30 years now the left has faced tremendous difficulties in coming to terms with changes that capital has made to our lives.

And we won’t effectively deal with those difficulties until we accept the fact that capital did manage to find a solution to the crisis of profitability that tore through it at end of the postwar boom.

For too long we have been in denial, adopting an orthodoxy that paints economic history as nothing more than a never-ending crisis of profitability for capital. This approach prevents us from grasping the world as it is. And it prevents us from grasping the problems militant workers face when trying to come to terms with an employers’ offensive that has been largely successful.

Capital returned to profitability by restructuring industry and working practices. And to understand how it did that we also have to evaluate the response of the labour movement.

These are the basic building blocks for a politically effective analysis of the period covering 1982 to 2008 – one that would actively help socialists develop strategies as employers once again seek to make the working class pay the price for their latest crisis, the financial crash of 2007-08.

Learning from the US example

Kim Moody’s latest book, In Solidarity, is an important contribution to developing such an analysis. It collects a series of essays that reflect upon failed efforts to rebuild the US labour movement in the face of an unremitting offensive from the bosses. Moody argues this defeat was not simply down to external factors. The flawed strategies of union leaders also played a role.

A key essay in the book, “Contextualising Organised Labour in Expansion and in Crisis”, provides a conceptual framework to help us understand how the employers’ offensive has developed over the last 35 years.

Moody details key turning points, tools that governments and employers have used, and lamentable responses from the US labour movement leadership. And he locates the offensive against the working class in the US as part of a wider global battle.

Karl Marx argued that workers are most likely to make economic advances at times when capital is expanding. Moody argues that the US postwar boom was one of those times. He cites the political economist Anwar Shaikh, who points out how expansion in this period was based on growing productivity.

In Marx’s economic model the intensity at which labour is exploited by capital is measured by the rate of surplus value. According to Shaikh’s methodology this ratio in the US rose from 3.8 in 1948 to 4.7 by 1976. Yet thanks to productivity gains the US working class won a rising share of national income during this period, despite being exploited more effectively. The proportion of GDP going to labour rather than capital rose from 68% in 1959 to 74% in 1979.

What’s more the rate of profit actually fell during this period. Now for some on the left, a falling rate of profit is in and of itself a symptom of economic crisis. But this is not the case, as Marxist economist Michael Roberts points out:

If you read Marx’s writings carefully, he does not suggest that a falling rate of profit would be sufficient to cause an economic crisis for capitalism. Most commonly, the rate of profit has to decline to the point that each new unit of investment by the capitalists is no longer matched by a rise in a unit of profit. Then the overall mass of profit begins to fall.

So in the great postwar boom the US had growing productivity, a growing mass of profits, a rising share of the cake for workers – all coexisting with a declining rate of profit.

Different dynamics in the neoliberal period

Moody argues that the period of growth after 1982 was very different from that of the postwar years. This time growth was built on a continued fall in real wages, with increasing productivity arising from the intensification of work.

Whereas profit rates had dropped during the postwar boom, by most measures they rose between 1982 and 1997. Productivity gains outstripped rises in wages. The labour share of GDP in the US had fallen to 70% by 2006. Real wages fell throughout this period and remain below 1973 levels today.

The surplus value bosses extracted from US workers increased by a modest annual rate of 0.6% from 1948 to 1980. From 1980 to 1989 that figure was 1.8% a year – three times faster. Capital’s expansion in the neoliberal period was thus built on a relative and absolute decline in working class conditions.

US government policy helped shape this new terrain, with two macroeconomic developments that undermined labour combativity: relatively low inflation following the 1980 recession, and exceptionally low interest rates that allowed working class households to top up consumption levels by building up debt.

The US economic recovery was also enabled by the collapse of union resistance. In 1979 much of the US union leadership surrendered in the face of employer attacks, recession and restructuring. The defeat of rank-and-file organisation played a crucial role here. Union leaders turned to a “business union” approach and sided with management to restore workplace authority.

United Auto Workers led the retreat. In November 1979 its leadership agreed to major concessions at Chrysler as the company faced difficulties that eventually resulted in a government bailout. Soon union after union was signing up to wage freezes, cuts and worsened working conditions – typically without even putting up a fight.

This surrender set the terms for employers and government across the economy. Moody argues that this collapse started even before the 1980-82 recession took hold – and well before Ronald Reagan infamously fired 15,000 striking air traffic controllers in 1981. He notes a dramatic collapse in rank and file activity, strikes and union membership across the US private sector between 1979 and 1983.

The relative lack of grassroots activity allowed union leaders to bend to management’s agenda. The “survival strategy” of most large unions was based on three tactics:

1. concession bargaining on wages, benefits and working conditions
2. labour-management cooperation or “partnership“, usually associated with the introduction of lean production methods
3. union mergers to manage decline and shore up falling membership figures

The first two tactics were an accommodation with the employers’ new management strategies and practices. The third simply postponed the need to truly come to terms with defeat and declining membership.

Bosses reorganising the workplace

Moody argues that the 1979-82 defeat of organised labour allowed employers to exert more power in the workplace. They set about reorganising work in the 1980s to raise both productivity and profitability. This involved less focus on capital investment and more on reorganising the labour process.

Lean production was one new way of speeding up work. It basically meant “doing more with less” through continual efforts to eliminate “waste”. The technique was introduced in Japan’s car industry but has now spread throughout the private and public sectors. Jane Slaughter from Labor Notes aptly described this as “management by stress.”

The new techniques didn’t just boost productivity. Alongside human resource management, they played an important ideological role in legitimising arguments put forward by management about “partnership” and “viability”.

The intensification of competitive pressures thus creates two problems for the labour movement. First, competition has an asymmetric class impact. When inefficient companies lose out to more effective competitors, the employers as a class emerge stronger as market priorities dictate the terms of survival – often at the expense of workers. But for workers, competition undermines our most vital assets – collectivity and solidarity – leaving our class weaker.

Second, the emphasis on competition puts employers’ concerns ahead of those of workers. Many union leaders have internalised “being competitive” as one of their goals, rather than seeing it as a constraint that undermines effective workplace organisation.

The US example shows how devastating this can be. But we have our own examples of union leaders accepting these arguments at Ellesmere Port, or more recently with disastrous consequences at Grangemouth. There is a serious danger that “common sense” notions of viability take hold among workers when the employers are seeking to cut and reorganise jobs, wages and conditions (see previous articles on this topic).

Breaking the link between wages and productivity

This dramatic reorganisation of work was enabled by the trade union leadership. The restructuring of several major industries undermined the industry-wide bargaining traditions on which rising postwar incomes had been based.

And concession bargaining didn’t just reduce wages. A third of all concessionary agreements reached in 1982 involved changes in working practices designed to increase productivity. By 1983 changes to working practices had been conceded in car plants, steel manufacture, meat packing, tyre making, petrol refineries, airlines and the railways.

Shaikh and Tonak calculate that the rate of surplus value rose by over 9% between 1979 to 1983 – greater than any other five year period in the postwar period. The rate and mass of surplus value both went up throughout the 1980s while fixed capital investments grew modestly. This all fed into a rise in the rate of profit.

But this time rising productivity was coupled with flat or declining real wages. The link between productivity and wage increases had been broken. The old idea that workers improve their productivity and employers give workers a wage rise in return was gone. Industrial agreements from the postwar boom were dismantled.

The secret of both the 1982 recovery and more recent capital expansion following the 2008 crisis is largely to be found in this broken link.

Manufacturing productivity in the US took several leaps in 2009 as employers shed workers and labour costs fell. Workers lucky enough to keep their jobs had to fill in for those sacked by putting in extra hours. Businessweek’s economics editor Peter Coy cited government commentary that this had produced “the largest decrease in [unit labour costs] since 1948”.

Such huge productivity spikes cannot be sustained. But it is clear that capital continues to push for the combination of wage restraint and increased relative surplus value as its ticket out of the latest crisis.

Britain: suppressing wages as the critical factor

Moody argues that all these processes are also at work on a worldwide scale. The late economist Andrew Glyn estimated that labour’s share of income fell in the 17 leading OECD countries from 75% in the mid-1970s to 66% by 2005.

We need to understand how much of this process has been at work in Britain. In the June issue of Labour Research, Özlem Onaran corroborates Moody’s view. She argues that this dynamic – high growth despite falling consumption and a declining wage share – has affected workers in the US, Japan, Turkey and all major EU economies.

Onaran calculates that wage share in Britain fell 8.8% between 1974 and 2008. Wage increases lagged behind productivity, with household debt feeding consumption and growth prior to the crisis.

But there is a significant difference too: growth in Britain has not mirrored the extraordinary rates seen in the US. Britain enjoyed growth rates of 2.9% in the 1960s and 2.4% in the 1970s, as compared to 1.7% between 2000 and 2013.

Why is this? One theory argues that while Britain’s employers had significant success in compressing wages, their measures to boost productivity were less effective.

At first this may seem unlikely. As Ian A notes in the new rs21 magazine, we face extraordinary pressures at work today: outsourcing, performance management, lean production, absence management policies – all part of a wider strategy to atomise workers and boost productivity along similar lines to what bosses achieved in the US.

The figures, however, suggest British employers put a greater emphasis on reducing pay than on boosting productivity.

The liberal economist Joseph Stiglitz calculates that inequality in Britain has grown faster since 1975 than in any other developed country. It rose by 32% between 1960 and 2005, as compared to 23% in the US over the same period. As Michael Roberts puts it:

People in relatively better paid jobs in finance and in the public sector have lost their jobs and those getting jobs since have mainly done so in much lower paid sectors like retail, tourism etc. And we also know that there has been a very large increase in ‘zero hours contracts’, casual labour and self-employment (15% of the workforce now) where incomes are generally lower than paid employment.

So Britain is seeing a rising number of jobs – but in lower paid sectors, and ones that are also less productive.

This raises the question of how deliberate the trend towards lower paid, lower productivity, lower skilled work might be. It this something the British ruling class has blundered into? Or is it part of a wider strategy to boost profitability in Britain?

We need a detailed examination of dynamics in the British economy to help us understand this question. We need to know what the employer strategy is – and how it plays out in the workplace.

Signs of renewal, but can we learn?

Moody provides a devastating account of the failures of US labour leaders. Business unionism helped employers boost profits at the expense of workers. There have been similar attacks across the world, although the results until recently have been less catastrophic for labour in continental Europe.

There are signs of renewal in the labour movement here and in the US. Recent months have seen victories for Chicago teachers and fast food workers. A new layer of rank and file activists and “worker centres” have emerged. There has been modest growth in union density in Britain too – and we should try to learn from recent developments in the US.

Employers will face physical limits to their drive to speed up and intensify labour. Lean production is hooked on getting “more for less”, which makes it likely that these struggles over workplace issues will return. These were commonplace in Britain in the 1960s, with constant shopfloor battles over discipline, conditions and control of the production process.

Socialists need to be involved in workers’ struggles to engage with their ideas and arguments. We can use our understanding of what the bosses are likely to throw at us to seek out opportunities for workplace agitation.

Moody has long argued that the way to reverse labour’s long slide is through a commitment to struggle in the workplace. The involvement and mobilisation of workers is essential to any revival: union mergers and acquisitions won’t cut it.

One aspect of Moody’s argument will be of special interest to revolutionary socialists. He argues that successful rank and file labour movements involved a layer of activists who functioned together and consciously pushed the struggle forward.

In the 1930s this would have been Communists or Trotskyists. Today the left in Britain is weaker and divided, but socialists can still contribute to that goal. We can rebuild our movement by connecting issues in the workplace to the wider political arguments in an increasingly volatile economic situation.

Rank and file workplace militants should read Moody’s book. We need to think about to use his analysis to complement our strategies for rebuilding the labour movement in Britain today. And we have a wider and no less urgent task of developing a similar analysis for the rest of world.