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Kevin R. Cox, “Globalization, the Class Relation and Democracy,” Department of Geography, The Ohio State University, August 9, 2005 at: http://geog-www.sbs.ohiostate.edu/faculty/kcox/Cox2.pdf This paper was also published in GeoJournal 60 (2004), 31-41 . GLOBALIZATION, THE CLASS RELATION AND DEMOCRACY by Kevin R. Cox Department of Geography The Ohio State University Columbus OH 43210-1361
[email protected] Context Close to the heart of the debate about globalization is the concern that it has altered the balance of class forces in the advanced industrial societies. In turn this alteration has been to the detriment of those thought to be advantaged by democracy: i.e., that vast majority that obtains its living not from returns on property in their various forms but from wages. Globalization, it is asserted, has made it harder for the vast majority of the population to impose their will regarding redistribution through the democratic process. Capital has gained in power relative to labor.
The most obvious way in which this is supposed to have happened is through the ability that capital has acquired to shift its money around. This, it is argued, has allowed it to elude, or resist in situ through the threat of relocation, the demands of workers for enhanced wages, improved benefits and the like. Rather workers in different countries have been placed in a position of competing against each other for the investment favors 1
of the multinationals. Furthermore, as they are forced into a competition one with another for inward investment, so the subsequent pressures lend impetus to institutional changes whose effect, either intended or otherwise, is to limit public accountability. Investors, it is claimed, ant the elimination of red tape. This can best be ensured by limiting public access to the activities of the various commissions established to provide (e.g.) the necessary infrastructure, to review the different forms of incentives that will be offered. Privatization has similar, if less acknowledged, effects. Typically touted as a response to globalization it serves to place issues that were once suitable for public debate beyond it. Reasons of ‘commercial confidentiality’ provide a barrier to public access which could not be justified when provision was by the state and funded by the taxpayer instead of (increasingly) ‘private’ individuals.
These arguments raise at least two issues which deserve more extended scrutiny. The first is whether or not globalization is the problem. Most people say it is. And perhaps to some degree it is. But there is more than a mild suspicion among some that arguments about globalization are more in reference to the appearance of things as opposed to the underlying, structuring forces, forces that are rooted in the capital accumulation process; and furthermore, it is not the only appearance that we should be concerned with, though it has provided a convenient umbrella for interpreting the others such as privatization, the assault on the welfare state, and marketization. Globalization, in short, may be more ideology than reality. To explore that we need to look at the forces driving it. This in turn means that we have to focus on the accumulation process.
The second point is that there is incorporated into these arguments a major assumption; one that is certainly common in mainstream social science but which for historical materialists should be subject to critical examination. This is the belief that democracy makes a significant difference to a so-called ‘balance of class forces’; that it can shift it to the advantage of labor and to the disadvantage of capital. My view is that democracy does make a difference to the distribution of the product, but only within labor as a whole and within capital as a whole. Rather the ‘balance’ that we should be concerned with is that between the accumulation fund for capital and labor’s consumption fund, and this is
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something that is achieved independent of what is legislated, and by forces beyond the control of anyone, and certainly independently of any so-called ‘balance of class forces’. And while it might certainly seem that labor has ‘gained’ as in capital’s Golden Age and the expansion of the welfare state, this cannot be so in the relative sense that is implied by the notion of a shifting balance of class forces.
What should be central to an understanding of globalization and the supposedly changing fortunes of democracy, therefore, is something that has tended to remain occluded in these discussions: the accumulation process. It needs to be made clear at the beginning, however, that I assign a particular meaning to that process. Accumulation is a class relation. Capital accumulates by virtue of the labor of the working class. And by taking away a fraction of the worker’s product in the form of profit leaving her only with values sufficient to reproduce her labor power, capital reproduces the working class. This does not mean to say that the working class’s life chances do not improve. What we understand to be an acceptable standard of living does indeed change over time. But if they do so improve, it cannot be at the expense of the accumulation fund for capital. To the extent that it is, it can only be very, very short term, for a reduction in profitability will generate changes in investment behavior which serve to discipline the pretensions of the working class. And all this without mentioning geography in general and globalization in particular!
The paper is divided into two parts. In the first part I examine the various claims that have been made about the relations between the globalization of capital and the changing fortunes of labor in the advanced capitalist societies. I look at this first from the standpoint of industrial capital and then from that of finance capital. I then critically discuss these arguments proposing that the process we should examine is not globalization but accumulation, and that in so doing, we should not assume a separation of industrial and finance capital, useful as those categories can be.
In the second part of the paper, and having decided that the problem is not globalization but the accumulation process, I focus more centrally on the notion of a contradiction
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between capital and democracy. I argue that they are contradictory in the sense that the gains that labor makes by virtue of the vote cannot be and have not been at the expense of capital. But labor’s apprehensions of a contradiction depend on the rate of accumulation. When growth is buoyant and concessions easily made by capital the contradiction sinks from view. But over the last thirty years it has entered consciousness once again as income growth has slowed down and unemployment has increased. This is a reflection of a decline in the rate of accumulation so that capital’s fortunes too have been adversely affected. Where democracy matters is the way in which it has led to a ‘statification’1 of the accumulation process. This means that the attempt to create the conditions for renewed accumulation, in this case, the imposition of a neo-liberal agenda, has to find ground for political acceptability. In this, globalization discourse has played an important role, through its claims that while there can be no return to the social democratic model of the ‘fifties and ‘sixties, it presents opportunities for finding a new pathway to national growth and increased revenues for all.
Approaches to Understanding the Politics of Globalization In discussions of the politics of globalization, two stories are told: one focuses on the role of industrial capital and the other on finance capital. Both stories are broadly similar. In both cases, of course, their respective globalizations are claimed to have had important effects on the relative bargaining power of capital and labor in the advanced capitalist countries, or, otherwise put, on the balance of political forces between them. Similarly, in the two cases, globalization is seen as the result of essentially contingent conditions, though some might argue for its inevitability rooted in some version of technological determinism: the role of change in the technologies of transportation and communication is the obvious example here. And finally, to the extent that these theses have been critiqued, the critique tends to have been on their own terms: challenging assumptions of relative mobility, of the destinations of FDI and so on.
1
The term was originally coined by Joachim Hirsch (1983: 79) and refers to the extension of regulation by the state. 4
I think that in all respects these arguments are incorrect or misplaced. If indeed wages and employment have shown decreased rates of growth over the last twenty to thirty years, then the ultimate cause of this is not globalization but something else to which globalization has been one response, and only one response. That ‘something else’ is the long term rate of accumulation. This focus on accumulation suggests furthermore that we should not be talking about the separate roles of industrial and finance capital. Finance capital is industrial capital’s offspring, born of its contradictions, playing a role in capital’s social division of labor, but always subordinate to industrial capital and its fortunes.
1. Industrial Capital Centered Explanations One of the earliest attempts to grasp what was believed to be a changing balance of advantage between labor and capital and to relate it to globalization emphasized the role of industrial capital. If there was one feature of the changing global space economy that was foregrounded in these arguments it was the growth of industrial employment in what had been defined as less developed countries. This was seen to depend in part on autonomous growth initiatives, particularly in the Far East; and also on the investments of multinational corporations. For many this heralded the emergence of a new international division of labor in which employment in certain lines was shifting, and would continue to shift, from the more developed to the less developed countries. Moreover, this new geographic division of labor was not just in terms of particular goods and services. It also included a reworking of the division of labor in a technical sense. The branch plants of multinationals were not necessarily clones oriented to third world markets. Rather they were often established to produce parts for assembly into finished products in North America and Western Europe: silicon chips for the computer industries or components for automobiles. For to the extent that certain aspects of the labor process could be deskilled, then there were advantages to relocating them to low wage areas of the world. Not that the branch plant option was a necessary one. Out sourcing to firms in less developed areas became an alternative strategy.
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Clearly there were preconditions for this. One was the deskilling of various labor processes or parts thereof. Another was the development of cheaper and / or more rapid modes of transportation and communication. The advent of the container, air cargo and electronic communication lent complementary impetuses to the integration of far flung supplier networks. Recognition of the importance of these then led to a focus on the nature of the processes producing them; a logic of deskilling inscribed in the capitalist development process along with a logic of abolishing space with time, for example. This in turn suggested that there could be no end to the transfer of productive activities from the more developed to the less developed world. For some, at least, the hollowing out of first world economies was in sight.
Recognition of these tendencies in the global space economy, real or not, entailed a distinct politics. This had both local and national manifestations. The ability to shift production to lower cost locations elsewhere was a condition for the ‘worker giveback’: the renegotiation of wage / benefit packages under the threat of plant closure / employment reduction as the firm shifted capacity to the maquiladoras or, for example, outsourced to China or as its competitors did. There were also bottom up pressures for more widespread institutional change. These changes included the localization of the bargaining relation between labor unions and employers and the numerical flexibilization of the workforce, the most significant expression of which was the rise of part time employment and the loss of benefits to a growing proportion of the workforce. Finally, increasing unemployment, plant closures resulted in an intensified competition for inward investment on the part of local governments and the so-called ‘whipsawing’ of localities by firms as what they were prepared to concede and offer was bid up.
Nationally, globalization was linked to the disintegration of fordism as the mode of regulation of national economies in the developed world. Fordism depended on a virtuous circle of consumption and production. But the rise of NICs and offshore production platforms in low wage zones and export of the goods so produced undercut wages in the advanced industrial economies and placed this in jeopardy. Falling demand, moreover, had effects on other industries dealing in non-tradeables; and as unemployment rose and
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tax revenues fell so the welfare state came under increasing pressure. New state strategies then increased tendencies to the disintegration of fordism by eroding the floor that state income supplements had put underneath consumption.
In turn, these changes are believed to have encouraged a shift to an export model of growth and this has further served to depress domestic demand and wages. As Albo recently wrote: “The world economy in the 1990s, everyone now seems to agree, accommodates only one model of development: export-oriented production based on flexible labor markets, lower real and social wages, less environmental regulation and freer trade” (1996). This is the model that Albo has called ‘competitive austerity’. It is one in which all states feel a compulsion to hold wages down so as to widen external markets. But the effect of this is to create a universal tendency to weaken demand which is contradictory from capital’s long term standpoint. And one might add that as firms become more dependent on export markets, so fordist policies with their emphasis on the domestic market lose their allure for them.
Much of this argument, many of the more specific claims, are now regarded as quite seriously in question. A major point of critical attack has been on the assumption of a new found capital mobility. One of the more useful points made by Hirst and Thompson in their book Globalization in Question (1996) was the degree to which multinationals are still dependent, both in terms of assets and markets on their home bases. Given the uneven nature of de-skilling this was to be expected. Similarly changes in transportation cost are irrelevant to non-tradeables and also to new managerial regimes of just-in-time. There are also issues of the transaction costs that arise when investment across international boundaries is contemplated. It was therefore not surprising to find that the vast proportion of portfolio investment is within national boundaries.2
2
The standard reference here is Feldstein and Horioka (1980). This is now quite old, but as Epstein pointed out recently (1996: 213-214) there is no reason to believe that the relationship that they identified has changed much since then. 7
There is also the point that most of the ‘globalization’ that has occurred has been between the more developed countries: the so-called Triad countries of North America, Western Europe and Japan. This serves to put the notion that workers are increasingly vulnerable to competition from low wage reservoirs in less developed countries in a rather different light. It suggests, moreover, that much of the restructuring that has occurred has been within rather than between countries as, for example, industrial investment, often foreign owned, has shifted away from major metropolitan areas to small towns and to the cheaper labor of areas where traditional industries have been in serious decline. The attractions of low cost labor reservoirs in less developed countries, therefore, may have been seriously exaggerated.
Finally, there is the fact that to the extent that there has been globalization its effects on the working class are more complex than the oversimplified claims of a race to the bottom popular in some circles. Some branches of the division of labor have indeed been affected adversely. But others, particularly the more knowledge- and skills-intensive activities, have gained from the increased demand for their products, particularly from the NICs: demand for airplanes, water and sewer systems, railroad equipment, machine tools and the like. And this has been reflected in the changing economic geography of the more developed countries.
Nevertheless, the related theses of the globalization of industrial capital, the conditions for that globalization in technological change, and its adverse implications for the working class in toto remain common ones. They are reflected, inter alia, in the widely accepted idea of a new politics of scale or what has come to be called ‘glocalization’: the notion, that is, that globalization has been the precondition for the reorganization of the state’s scalar division of labor (Jessop 1994, 1999; Swyngedouw 1997a, 1997b); and to calls for new regulatory fixes at international levels (for example, Hirst and Thompson 1996). And there is no sign that the academic growth industry built around them, is slowing down.
2. Finance Capital-Centered Explanations
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There is a second approach to the politics of globalization. Its particular takeoff point is not new international divisions of labor, and a (supposedly related) increasing foreign direct investment and trade. Rather it is the widely acknowledged and hard to contradict hypermobility, on a global scale, of short term finance:
the currency trading, the
purchase and sale of bonds, public and private and dealing in other securities. It is this new internationalization of finance capital which ‘sucks in finance from all over the globe and invests it all over the globe’, ‘searching for quick profits, usually in speculative activities’ (Patnaik 2001) that some argue has resulted in a slowdown in investment, shifting the balance of advantage not just between finance and industrial capital, therefore, but also between capital as a whole and labor.
The contrast, as with arguments about the globalization of industrial capital and the collapse of fordism is with the period of the postwar boom or what has sometimes been called the ‘Golden Age of Capitalism’. This was the heyday of the Bretton Woods agreement: a period in which national financial systems were indeed ‘national’ and were insulated from international financial flows; exchange rates were fixed but adjustable; and there were conscious attempts to direct credit along productive rather than speculative avenues. All this ended, it is claimed, during the ‘seventies subsequent to the rise of the Eurodollar market, the large amounts of oil money that banks in North America and Western Europe found at their disposal after the oil shock, and according to some, changes in communications, particularly satellite communication and the possibilities of computer networks. The result of the subsequent internationalization of short term finance has been to put severe limits on macro-economic policy and so to slow down investment and hence growth and demand for labor.
Short term finance, it is argued, is highly risk averse. Attempts by governments to stimulate growth through a loosening of monetary policy or through increased spending generate concerns about inflation and adverse currency change which turn out to have the character of self-fulfilling prophecies.3 Investors sell their assets denominated in the 3
Deficit spending in order to stimulate investment may or may not be self-liquidating, depending on the boost to economic activity that results. To the extent that it is not self9
currency of a particular country in the expectation that it will lose value. As a result of their actions, it indeed does. And as it falls so import prices increase setting up inflationary pressures that the government has to respond to by taking demand out of the economy. Indeed, some have argued that the anxiety about inflation has resulted in deflationary tendencies – already clearly apparent in Japan. These tendencies in turn tend to stifle investment and hence the demand for labor since money holders defer purchases in the expectations that prices will fall in future. And to the extent that real wages get caught up in the deflationary spiral this undercuts demand still further
This line of reasoning has its own problems, however. For a start there is a danger of exaggerating the significance of international financial flows. From one standpoint the figures are impressive. Cross-border bank lending grew from 6 percent of world GDP in 1972 to 37 percent in 1991; cross-border transactions in bonds and equities grew from less than 10 percent of GDP in 1980 to 80 percent of GDP for Japan, 160 percent for the United States and 200 percent for Germany (Glyn 1997/98). But even so, and taking a highly open financial market like that of the United Kingdom, this still does not translate into a dominantly foreign pattern of ownership; in fact less than a quarter of the value of British corporate securities are owned abroad.
A second issue is that one worries about the emphasis on internationalization. For sure there are speculative gains to be made from exploiting interest rate differentials between countries and from currency trading. But the ability to make speculative profits by no means depends on currency convertibility. Speculative activity is equally at home exploiting differences between nominal and ‘real’ values in assets for which the trade is, or can be, purely domestic: real estate is notorious in this regard but the recent stock market bubble in the US indicates that this is not the only sphere of domestic activity for finance capital.
liquidating taxes have to be increased to pay for it and this risks wage cost push inflation as workers seek to recoup what they are losing in the form of an increased tax burden. Monetary slackness to accommodate these demands is then attractive to governments since the resultant inflation can erode the real value of their debts. 10
3. ‘Globalization’: A Reinterpretation My view is quite contrary to these assertions, though I would not want to dismiss them tout court. I would certainly not dismiss the realities of the New International Division of Labor or the internationalization of short term finance. Rather it is the causalities that I believe are confused. There is also the fact that the role of the internationalization of capital in inducing reductions in the respective rates of growth of employment and incomes has been rather exaggerated. The decisive fact about the global economy over the last thirty years is not globalization. Rather it is what Robert Brenner (1998a) has called ‘the long downturn’. What he means by that is a period that has been characterized by sharply lower rates of increase across a wide set of indicators: growth in capital stock, growth in employment, in productivity and in real wages. This is in contrast to the preceding twenty to twenty five years or what has become known among many as ‘the Golden Age of capitalism’ when the world enjoyed relatively high annual rates of increase in real investment, productivity and incomes. This is the point of departure for understanding a wide variety of changes in business and political practice that we have come to take for granted and which have been explained by reference to ‘globalization’.
An initial reaction to the slowdown was Keynesian demand management: putting more spending power into national economies. But in a context of underlying weakness in profitability, for whatever reason, production failed to respond accordingly and the result was the stagflation of the mid to late ‘seventies. Attempts to control the inflation part through prices and incomes policies failed. This in turn paved the way for the convertibility of currencies – something for which admittedly the groundwork had been laid as a result of the collapse of Bretton Woods and the growth of the Eurodollar market – so as to provide an external, rather than internal, discipline over monetary values. This was indeed accompanied by a shift to monetarism as the macroeconomic policy and the displacement of Keynesian demand management policies: controlling inflation through controlling the money supply. But the dominant aspect of policy change was
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convertibility, since this meant that monetary policy would be hostage to the signals sent by international currency and bond markets.4
While governments strove to cope with inflation, individual firms mounted their own strategies of regaining the profitability levels of the Golden Age. Admittedly some of this falls neatly under the heading of ‘globalization’: export drives, the decanting of production to sites in less developed countries. But at the same time much of this ‘globalization’ was within the more developed world: a matter, for example, of German firms establishing branch plants in small towns in the US South or Japanese firms colonizing the relatively cheap labor of South Wales and Northeast England as springboards into the increasingly integrated West European market. As Hirst and Thompson (1996) have pointed out, the degree to which globalization has been a diffusion from the more developed to the less developed has been somewhat exaggerated. In consequence much of what is defined as ‘globalization’ has actually involved redistribution within the Triad countries, with a consequent softening of its political implications, and certainly placing ideas of ‘a race to the bottom’ in a different perspective.
But even if one does indeed allow a rather generous definition of ‘globalization’ it is by no means the case that these strategies were exhaustive. There was, for example, the shift to flexibility, both numerical and functional, paving the way for claims about a new production regime of flexible specialization. Governments likewise strove to find ways out of their fiscal crisis. One of the directions in which they turned was towards privatization. This promised large windfalls to offset public borrowing and a reduction in public payrolls. Another was marketization: the attempt to cheapen by opening
4
This, it should be underlined, and as Notermans (1997) has pointed out, was a political move. There was certainly nothing natural or even quasi-natural about it. It absolved governments of the politically fraught and increasingly difficult business of controlling inflation through prices and incomes controls while also creating a space within which various restructuring policies could be implemented with a view to regaining profitability and national growth. For henceforth policies could be explained by reference to events beyond their control: in short, to ‘globalization’. 12
governments services up to competitive tender. In Western Europe there was also denationalization.
This analysis sheds a rather different light on the role of finance capital. First, to the extent that there was a shift to the search for speculative gains through arbitrage activities, this now seems to be product rather than cause of the long downturn. As Brenner (1998b) has written: “The rise of finance capital and of neoliberalism should be seen much more as results than as causes of the international economic crisis – even if they have significantly exacerbated that crisis. In turn the international crisis finds its deep roots in a secular crisis of profitability that has resulted from ongoing overcapacity and overproduction in international manufacturing.” Moreover, it needs to be recalled what the original significance of the Eurodollar market was. Far from lubricating finance capital in its speculative form, it was meant to help grease the way for American direct investment in Europe. In other words, easing barriers to convertibility (in that instance the attempts of the US government to restrict dollar outflows) was seen as creating more favorable conditions for industrial capital. But in turn, and quite inadvertently, this provided propitious circumstances for that more speculative finance capital which has attracted attention as a force for limiting accumulation. For while increasing convertibility paved the way for the collapse of fixed exchange rates, the latter meant increased currency risk for producers, exporters and importers. This led to the creation of futures contracts in currencies which then took on a life of their own.
The second thing to note about finance capital is that in the various responses to the long downturn its role has by no means been entirely negative. It probably has lowered demand as fighting inflation has displaced full employment as a national policy goal. But it has also facilitated a redeployment of capital and labor by sending firms to the wall and creating a space, literally and metaphorically, for the emergence and development of new growth industries. The larger point about finance capital, however, and to return us to lines of argument outlined at the end of the last section, is that ultimately it has to be subordinated to industrial capital. In consequence its fortunes have in the end to turn on the revival of the latter’s profitability. Prices cannot get ahead of values without being
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brought down to earth, as of course we are now seeing in the collapse of stock markets around the world. Likewise, as Notermans (1997) has pointed out, as inflation is tamed by subjecting prices to the external discipline of either the Gold Standard or the international exchange of currencies against one another, so it gives way to what is perhaps more pernicious still: deflation. And once that sets in, so the rule of capital in its purest form, that of the money form begins to be questioned, nominal interest rates head down towards negative territory and even if real interest rates do not accompany them, long term debts become more difficult to collect as profits and wages decline, and sentiments begin to swing away from the concomitant and unlimited rule of the market towards that greater state intervention that will once again put a floor under demand. Or in other words: what goes around, comes around, and we can certainly see tendencies in that direction today.
Capitalism and Democracy At the level of formal rights, and with one qualification, there is no obvious contradiction between capitalism and democracy. The qualification has to do with Marx’s distinction between an earlier phase of capitalist development characterized by what he called ‘the formal subsumption of labor to capital’ and ‘the real capitalist mode of production’ or ‘the real subsumption of labor to capital’ for which the earlier phase was mere prologue. Under formal subsumption the labor process was much as it had been inherited from precapitalist times and surplus value was appropriated in its absolute form. Only by extending the length of the workday or speeding up the labor process could surplus value be increased. The capitalist’s gain was the worker’s loss and vice versa. But under real subsumption this is no longer the case. Surplus value is now appropriated in its relative form. This is achieved through altering the labor process and so raising the productivity of the worker. Henceforth to the extent that labor’s real wage increases capital can compensate for any losses of profitability by transforming the labor process.5 5
According to Marx, as productivity in wage goods industries declined, so real wages would fall, assuming no change in the worker’s basket of goods. Individual firms could also achieve temporary increases in relative surplus value by the adoption of productivity raising techniques; but as soon as other firms adopted the same technique, that advantage would disappear. So for Marx, productivity increases only had permanent effects on 14
The shift from formal subsumption to real subsumption has political implications. As Fine and Harris (1979) have written: “It can be too readily assumed that the establishment of wage-labor heralds the rights associated with freedom of exchange, but these are rights that have to be won in class struggle. The restriction of those rights best serves the reproduction of absolute surplus value ...The (subsequent) systematic organization of the working class around a program for political and economic emancipation promised grave dangers for the bourgeoisie, unless they could be accommodated through a restructuring of capitalist social relations” (pp.113-114)6; which of course they were through the introduction of machinery and the constant revolutionizing of the labor process as a chronic feature of capitalist development.7 In short, the record of capitalist development,
relative surplus value through their implications for the real prices of good s and hence for the wage that workers demanded. 6
Jessop (1990:176) expresses a similar view: “...it would have been dangerous to extend full citizenship rights to the working class as long as profits hinged on the extension of the working day and the intensification of labor (as opposed to technological and other means of improving productivity from which both worker and capitalist could gain increased earnings)...”. 7
Compare Therborn (1983: 269): “One of the main reasons why nineteenth- and early twentieth-century liberals could deny the compatibility of democracy with private property was their dread that popular legislatures and municipal bodies would greatly increase taxation. However, they were disregarding the elasticity and expansive capacity of capitalism ... Rises in productivity make possible a simultaneous increase of both rates of exploitation and real incomes of the exploited masses. This is, of course, not in itself conducive to democracy. But it is relevant in so far as it provides the bourgeoisie with an unprecedentedly wide room for manoeuvre in dealing with the exploited majority”. The contrast with a recent and ambitious attempt to theorize the relations between capitalist development and democracy in a book with the same title (Rueschmeyer, Stephens and Stephens 1992) is highly informative: "The chances of democracy ... must be seen as fundamentally shaped by the balance of class power. It is the struggle between the dominant and subordinate classes over the right to rule that -- more than any other factor - puts democracy on the historical agenda and decides its prospects. Capitalist development affects the chances of democracy primarily because it transforms the class structure and changes the balance of power between the classes.” (p.47). This shift in the balance of power they attribute firstly to the rising hegemony of industrial capital over the landed classes. This is because industrial capital is not reliant on state-backed extraeconomic coercion in the way that large landowners were; accordingly their stake in a state in which the working class was unrepresented was much weaker. And second, the 15
whether in North America, Western Europe or among NICs such as South Korea and Taiwan is indeed one of the extension of the franchise and the formation of democratic states of the party competitive kind.
Nevertheless, notions of contradiction between capitalism and democracy have arisen in the context of the debate about globalization. Significantly, however, this has been not so much with respect to formal rights as to their substantive implications: whether or not those rights could be converted into real material gains for the working class either individually or collectively through the progressive elaboration of the welfare state and a realization of the goal of full employment. Brenner’s ‘long downturn’, for example, saw the first broaching on the part of academics of a conflict between the competing demands of accumulation and legitimation. This was the dominant way in which the subsequent strains on the state were interpreted by people like Offe (1984), Habermas (1973) and O’Connor (1973) and prior to the discovery of ‘globalization’ as the explanation which would legitimate state policy by, in effect, referring state impotence to forces beyond its control. According to this view the state had to seek a balance between facilitating accumulation and legitimating the institutional status quo through policies of redistribution, and social security for the broad mass of the population: in other words, to accommodate the masses to policies aimed at accumulation and the enrichment of the few, capital had to be made to appear as a cornucopia for all. But as Offe pointed out, in the ’seventies this became increasingly difficult to do, for while on the one hand the state found itself faced with a proliferation of demands, it had to cope simultaneously with a diminution in the resources available to it.
So is there a contradiction in this sense – a contradiction between capital on the one hand and the promise of the franchise – or isn’t there? And if there is, why is it more apparent
working class gains strength from urbanization which shifts "members of the subordinate classes from an environment extremely unfavorable for collective action to one much more favorable, from geographic isolation and immobility to high concentrations of people with similar class interests and far-flung communications" (p.58). In short, and in contrast to the analysis offered here, we are provided with a view of classes as things in themselves relating in a seemingly contingent manner in a struggle for power. 16
at some times than at others? And what does globalization have to do with it? In answering these questions, I put the accumulation process as a process of class reproduction at the center.
Marx’s theory of accumulation takes off from his labor theory of value and the separation of immediate producers from the means of production as the necessary precondition for that theory. Recall here that for Marx the values of commodities are proportional to what he called their ‘socially necessary labor times’. It is the working class as a whole that produces value. This is then divided up between the owners of capital and the immediate producers. Within those two classes the forces of competition produce a further distribution: more efficient firms receive proportionally more of the value produced than the more inefficient. Similar processes occur within the working class though mediated by differences in degrees of organization either through labor unions or professional organizations and their varying abilities to leverage increased shares. As we shall see, however, the way in which competition mediates the redistribution process needs to be set against a backdrop of forces that is quite thoroughly social rather than merely technical, and which, among other things, constructs concepts of worth in a labor process that is inevitably social in character.
The shares of capital as a whole and the working class as a whole were defined by Marx as ‘capital’s accumulation fund’ and ‘labor’s consumption fund’ respectively. Capital’s accumulation fund was what accrued to capital for further investment. True, owners of productive capital could choose to consume this revenue. “But, in so far as he is capital personified, his motivating force is not the acquisition and enjoyment of use-values, but the acquisition and augmentation of exchange values”. This, Marx (1976) continues, is “the effect of a social mechanism in which he (the capitalist) is merely a cog. Moreover, the development of capitalist production makes it necessary constantly to increase the amount of capital laid out in a given industrial undertaking, and competition subordinates every individual capitalist to the immanent laws of capitalist production, as external and coercive laws. It compels him to keep extending his capital, so as to preserve it, and he can only extend it by means of progressive accumulation” (p.739).
17
Labor’s consumption fund, on the other hand, was what the working class depended on for the reproduction of its power to labor: means of subsistence or what Marx called ‘wage goods’. He saw the ratio between this and capital’s accumulation fund as a relatively stable one. In his discussion of the industrial reserve army, for example, increasing wages, to the degree that they threatened capital’s rate of accumulation would incite countermeasures whose effect would be to restore conditions favorable to accumulation. In particular he outlined how capitalists would substitute machines for workers. This would increase the number of unemployed so that increased competition for jobs would lower wages to the point at which a balance between the two funds favorable to capital had been restored. Marx was less informative on how an imbalance to the advantage of capital’s accumulation fund would be corrected than an imbalance in the other direction and this is one of the silences that regulation theory has sought to exploit. As Brenner and Glick have pointed out, however, under conditions of real subsumption and assuming constant rates of employment and nominal wages, as the values of consumption goods decline so real wages should increase.8
Yet for Marx there were also longer term tendencies towards overaccumulation: a contraction of opportunities for profitable investment relative to the funds seeking those opportunities. Profits could decline, therefore, over the longer term and in a way that had nothing to do with the balance between capital’s accumulation fund and labor’s consumption fund. In this case renewed profitability would eventually come about through the abandonment of less productive physical plant as a result of bankruptcy and takeovers, and the devaluation of other plant. In this way, productivity relative to the value of fixed capital could increase, once again raising the overall level of profitability and creating new opportunities for valorizing capital.
8
"It has therefore seemed an elementary empirical generalization that, for the history of capitalism the rise of mass production does not require but rather issues in, mass consumption -- that the latter has depended upon the former, even though, in some important ways facilitating it." (Brenner and Glick 1991: 66) 18
This does not mean that labor’s conditions of life cannot improve, however, and pace the view that Marx predicted the progressive impoverishment of the proletariat. He made it very clear that the value of the worker’s labor power had in its determination what he called ‘a historical and moral element’: i.e., “... the number and extent of his so-called necessary requirements, as also the manner in which they are satisfied, are themselves products of history, and depend therefore to a great extent on the level of civilization attained by a country; in particular they depend on the conditions in which and consequently on the habits and expectations with which, the class of free workers has been formed” (1976: 275). Beyond that Marx did not have much to say, but we can safely assume that defending the realization of those ‘habits and expectations’, and redefining them upwards as ‘products of history’ are essential elements in the struggle between capitalist and worker over the way in which the social product should be divided.
As a result, the defense and expansion of labor’s consumption fund represent an ongoing challenge for the capitalist class. It is this challenge which capitalists seek to meet through revolutionizing the forces of production and hence the productivity of the worker. In this way they defend their accumulation fund against encroachment and maintain profitability. But at the same time, and this is something that Marx had little to say about, unemployment, increasing productivity and hence increasing real wages (assuming that nominal wages remain constant) create spaces for new products and services. Product competition is something that is only implicit in Marx.9 But just as clearly capitalists seek to reproduce themselves by pursuing the quasi-monopolistic profits that can come from the development of new consumer goods and services. The increasing disposable incomes and unemployed labor that come from increasing productivity elsewhere in the economy provide necessary conditions for their production. Likewise, the appearance of new products and services are necessary conditions for shifting the standard of living of labor upwards, since it is in this way that new wants are defined. And obviously in many ways, some intended, as in advertising, and others not, 9
It is implied by the real subsumption of labor to capital since this creates a market for new, more efficient means of production. 19
as in the contagious, path dependent nature of the consumption of many new products (like ‘the house in the suburbs’), capital finds that redefinition something that can work to its advantage.
The point of this discussion is to emphasize both the unity of capital and labor, and the contradictory nature of that unity. Capital needs the expenditure of labor power if value is to be created and if it is to reproduce and deepen its ownership of the means of production. Owing to their separation from the means of production workers look to the money of capitalists as the means through which that separation can be suspended. But as a class workers resist that alienation of their product through seeking the higher real wages, improved benefits, and reduced workday length that are the major conditions for transforming their standard of living.10 Their resistance, however, provokes ongoing revolutions in the productive forces which protect the accumulation fund from that encroachment which would place at risk the ability of capitalists to reproduce themselves as capitalists and hence the capitalist class as a whole.
The extension of the franchise to the broad mass of the working population obviously increases the variety of weapons that it has at its disposal for increasing the pressure on capital’s accumulation fund. It can work to deepen the protections of labor in the workplace, facilitate the growth of the union movement as well, increase rates of taxation on business for purposes of extending the worker’s safety net, in addition to directly legislating increasing rates of pay as in minimum wages. But Marx’s theory of accumulation suggests that, depending on the threat it poses to profitability, this will be resisted, not necessarily politically, though this clearly happens as business lobbies sketch out for public consumption the ultimate consequences of the legislation in question for the worker herself; but also through investment decisions as (e.g.) businesses substitute machines for those protected by minimum wage laws, decentralize locations so as to minimize the threat of worker organization or, where the state attempts to protect workers
10
Not the only conditions, however, for as I pointed out about, assuming no change in nominal wages or unemployment rates, increasing productivity and hence the decreasing values of consumer goods should translate into increased real incomes. 20
against retrenchment, by an unwillingness to hire new workers and the costs that their dismissal would entail. So while as the forces of production develop workers may see an improvement in their standard of living, and this is something that they do indeed have to fight for,11 the notion of increasing, in an enduring manner, labor’s relative share of the total product that is implicit in the notion of a shifting balance of advantage between capital and labor, and brought about by the extension of democratic rights, remains a chimera.
This does not mean that some capitals, workers, regions, sectors will not do better than others, nor that the shifting fortunes implicit in representative democracies may not play a role in that outcome. Nor does it mean that for some capitals profitability may not diminish. But these are merely redistributive within the working class and capitalist class respectively. From the point of view of the workers the energy invested in exclusionary labor market practices reflects in part the difficulties of shifting the balance between capital’s accumulation fund and labor’s consumption fund. On the other hand, the various redistributive effects of the market, often mediated by state interventions, pave the way for reasserting that balance. So as the profitability of some firms declines, so they become the target for takeovers and a reduction in capacity that again shifts the balance of advantage in labor markets back to capital.
These tendencies, however, the tendency for the balance between capital’s accumulation fund and labor’s consumption fund to be continually re-formed, the tendency for the development of the productive forces, and the improvement of workers’ living standards, coexist with more cyclical fluctuations in the form of what have been called ‘long waves’. In marxist historiography this is an idea that has been controversial and the status of long waves is far from settled.12 Part of the problem is reconciling them with the tendency to overaccumulation followed by periods of adjustment through devaluation
11
Although the realization process suggests that this is something that is often in capital’s interest. 12 Interestingly, Tom Bottomore’s Dictionary of Marxist Thought does not make mention of either Kondratieff or the long waves whose study he initiated. 21
that I referred to earlier, unless, that is, the waves are seen as corresponding to this alternation. Empirically, however, the fact of their existence seems hard to contest. As Kondratieff (1926) pointed out in his original statement, capitalist history seems to break down into periods of approximately fifty years in length, each divided into a long upswing followed by a long downswing of approximately equal duration. During the upswing the rates of productivity change and profitability are relatively high and investment buoyant. During the downswing the opposite occurs. In this regard the early ‘seventies appear as something of a watershed separating capitalism’s Golden Age from the long downturn that followed it. We can also suggest links to the employment relationship. During the upswing capital finds it both easier to make concessions and also more necessary: ‘easier’ because the expansion of productivity and of markets increases the likelihood that wage increases will not be at the expense of profits; and ‘more necessary’ because tighter labor markets strengthen the hand of labor and the subsequent possibility of industrial action threatens the stream of revenues. But during the subsequent downturn the converse is likely to apply. Not only is labor weakened as a result of increased unemployment, but capital is in no mood to make concessions simply because in terms of is own financial position and prospects, they would be so much more damaging. It is at such times, therefore, that the contradiction between capital and democracy is felt most intensely.
In consequence it might also appear, at least in part, that labor’s fortunes depend on the changing balance of class forces, and that democratic rights assist in pressing claims. But this is misleading, since it is not just a matter of how changing conditions enable labor, it is also a matter of capital’s willingness to resist. For sure, capital may feel it has to yield, but it will only concede what it judges either prospectively or by dint of experience it is able to. Whether or not democracy can be turned to the advantage of workers, therefore, depends on the accumulation process; and even then, the advantages acquired will not be at the expense of the capitalist class since the concessions will only be made or allowed to be consolidated in the prospect of recouping what has been conceded through increased productivity or an ability to pass increased costs on. And this suggests that seeing the issue of capital vs democracy in terms of a changing balance of class forces is
22
quite inaccurate.13 It is not any weakness of capital that allows workers to improve their standards of living; rather it is the objective circumstances, at any one time, of the accumulation process and, over longer periods of time, the particular phase of the long wave that it happens to be in. In other words: In understanding the gains that labor makes, democracy is not the ultimate determinant; rather it is the accumulation process that we should be focusing on.
But why, therefore, is it that democracy and democratic rights have been raised in the context of the recent conflict between the claims of capital and of labor respectively? And why is it that that conflict has taken the more specific form of a conflict between ‘globalization’ and ‘democracy’? An answer to these questions returns us to arguments outlined earlier in the paper. The initial effect of the slowdown in the global economy was to diminish the ability of capital to meet the expectations of labor for increasing wages. This explains in part the characteristically keynesian response of governments in the earlier phase of the developing crisis. At the same time, capitals looked around for ways out of their profitability dilemma. As we saw, these included overseas sales drives, investments in less developed countries. And as keynesian policies intensified inflation and so lost favor, so the state looked too for alternative ways of restoring capital’s profitability: privatization, marketization, deregulation and the verities of competition. But given the fact of democratic rights, there had to be political support for the state’s attempt to break out of the crisis of stalemate between capital and labor: a new coalition of forces around a new vision of the future had to be created. Democracy, therefore, became a problem.
13
Simon Clarke (1988: 85) has written: “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 institutionalization 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”. It should be evident that I have some doubts about this analysis. It has a voluntaristic element – as I believe do all analyses which appeal to a changing balance of class forces – that is at odds with the primacy that I accord the accumulation process. 23
For the fact is that although I have placed the accumulation process at the center of the picture and accorded it primacy in maintaining a balance between capital’s accumulation fund and labor’s consumption fund, it always works in and through a broader social integument of which it is the predominant moment. Despite the assertions of its nineteenth century ideologues, capital never succeeded in disembedding itself from the rest of society. And while Polanyi (1944) might argue that the process of statification of the economy was a process of re-embedding, in fact capital’s rule was always mediated through the various pre-capitalist forms like paternalism, through the family, through nationalism and religion which it managed at various times and in various places to internalize as crucial conditions for its reproduction. The development of the interventionist state subsequent to its democratization has to be seen less in terms of a reembedding, therefore, and more a replacement of mechanisms, like the family and religion, which were showing signs of wear.
In short, capital requires some sort of reasonably durable social fix: belief systems and concomitant practices, expectations which help maintain social stability in the context of the considerable social tensions generated by the inequality, unemployment, sense of insufficiency which the accumulation process inevitably engenders. And apart from a modicum of social stability capital needs other conditions that it cannot itself provide and for which the state has become highly important. The exercise of democratic rights has seemingly been significant in this. The electoral threat of leftwing political parties laid the foundation of the welfare state in the early years of the century and, in the case of Germany, earlier still. Parties supported by the labor movement tended to be the ones that then deepened it in the ‘thirties in the case of the US and later in Western Europe.
Changing this state-mediated social fix, however, is a politically challenging process. What had seemingly been won through the democratic process and then expected, planned for on the basis of those expectations, is threatened with elimination and can no longer be expected and planned for. States that had presented themselves as the defenders of full employment and increasing prosperity find that they are no longer able to deliver, but the popular expectation that they can and should deliver endures. Accordingly
24
democracy seems to be in the balance and will certainly be taken up as a powerful symbol by those who have most to lose from the changes that others are defining as necessary.
But democracy is also, and curiously, implicated in overcoming the barriers to change and, or so the advocates of change thought, opening the way to renewed profitability. This is because enfranchisement incorporates workers into the state and subordinates them to its own logics, and as a capitalist state these are ones that ensure the reproduction of capital and the class relation. These logics are several-fold. But the one I want to draw attention to here is that of the formulation and implementation of hegemonic projects.
By ‘hegemonic project’ I mean, and following Bob Jessop (1990: Chapter 7), programs of state action which bring together different class fractions, cemented by concessions of a material and symbolic kind, but which “explicitly or implicitly advance(s) the long term interests of the hegemonic class (fraction)...” (Ibid, p.208). Hegemonic projects, moreover, normalize: they define the difference between the good and the bad, the worthy and undeserving, the rational and irrational. Under democratic conditions it is through the competition of political parties that hegemonic projects are developed, advanced and achieve a social base. Two of them have been central to the discussion in this paper: the social democratic / Keynesian welfare state project of capitalism’s Golden Age; and the neo-liberal, with its valorization of the individual and stigmatization of the so-called ‘nanny state’, which has become so dominant over the last twenty years.
The old hegemonic project, therefore, emphasized market failures and the role of the state in face of them. This was a conception that received broadly bipartisan support and had a huge number of beneficiaries, though along with others who could be persuaded, if it became necessary, that their stake in the old social fix was something that they should reexamine. But if the state was now defined as the problem by those seeking a new accumulation path, given the widespread acceptance of the social democratic model, overcoming popular resistance could only be achieved by asserting the presence of forces beyond the state’s control. The state had to be defined as a problem not because it didn’t
25
work in principle, though a significant minority of politicians and intellectuals clearly believed that to be the case; but because circumstances had changed: in brief, globalization had trumped the welfare state. On the other hand, or so it was argued, all was not lost. This was because globalization itself was not just a limit, it was also an opportunity. Widening markets, new possibilities of outsourcing overseas, provided opportunities for restructuring which would lay the basis for national regeneration.
In a sense ‘globalization’ was tailor made for the right. The political right can never win elections except by appeal to its role in defending not a class interest but a national or racial / ethnic or religious interest; something, in other words, that cuts across the class cleavage. There have been all sorts of versions of appeal to the national interest, not the least the right as defender of the national honor, but also as guardian of a universal wisdom that guards against the – always particularistically defined – radical, ‘unreasonable’, claims of labor. Globalization defined a set of forces challenging the national economy and therefore something that should be faced up to, seized as a window of opportunity, regardless of class.14
That ‘democracy’ should be appealed to as a counter-rhetoric should not surprise. The welfare state was seen as a result of the exercise of democratic rights on the part of the labor movement, though we should be careful to recognize that what made it all possible was the Golden Age of capitalism: something which some would argue, particularly among the regulationists, was the result of the keynesian welfare state, but which the rhythms of the accumulation process suggest was due to other conditions. The term also has strong symbolic appeal. But in assessing what has been lost caution should be exercised. The fact remains, the achievements of democracy on behalf of the working class under the social democratic project were decidedly qualified ones. They were for a 14
Coincidentally, while much of the globalization rhetoric in Britain and in the US has been of a two-nation sort, pitting the already advantaged against the less so – something borne out by the widely recognized increases in income inequality in the two countries and sharply enhanced inequalities in the distribution of wealth – there has also been, more implicitly, a one-nation element as the major capitalist countries have sought to use the rhetoric of globalization to penetrate the economies of the less developed and open them as markets and as fields for investment. 26
start, highly uneven as the literature on segmented labor markets made clear well before the onset of the long downturn. Subsequent restructurings have probably on balance worked to the advantage of women, for instance, the burden of the dual role for many notwithstanding. And even during that period capital’s counter-attack had begun as traditional working class communities were dissolved and workers incorporated as increasingly individualized consumers: a softening up process for what was to follow.
Discussion In order to evaluate recent claims about globalization and its politics I have argued that our starting point has to be Marx’s model of accumulation under capitalism. Our starting point, and the conventional wisdom notwithstanding, cannot be globalization itself, and even less the globalization of different parts of capital: in particular its industrial and finance forms. Rather globalization in the sense of a set of material practices exercised by both capital and state, has to be seen as one, and only one, response to the long downturn that set in simultaneously across national economies from the early ‘seventies on; a downturn that originated in industrial capital and against which the strategies of finance capital have to be assessed. To say that globalization is the problem, therefore, is wrong, although globalization has provided a useful discursive umbrella for changing institutions in a way which, some at least, believe will provide a way out of the secular decline in profitability.
Marx’s model of accumulation is indeed one in which capital exploits labor: it appropriates value from labor, then lays it out for yet more means of production and labor power so that the values in its possession show a progressive tendency to increase. It is also one, however, in which both capitalist and working classes are subordinated to the logic of the system as a whole (to paraphrase Marx, as cogs in a machine). But despite the ever-increasing accumulation of values in the hands of the capitalist class, this does not mean that working class standards of living are static or diminishing. Accumulation is the mechanism through which the forces of production and hence worker productivity are increased. Competition forces capitals to drive down costs of production so that each worker produces progressively more in a given period of time. This creates the possibility
27
of rising real incomes for the working class. But this is also a necessity if the values in the hands of the capitalist class are to continue to accumulate: values have to be realized15 if the accumulation fund is not only to be replenished, but also to grow.
In short, there has to be a balance between capital’s accumulation fund and labor’s consumption fund and this balance is asserted regardless of the struggles and counterstruggles of one class vis-à-vis the other. Labor may indeed be advantaged at certain times as a result of (e.g.) labor shortage, but capital as a whole will only concede what it can without impinging, at least prospectively, on the fund for accumulation and on pain of bankruptcy. The notion of judging political change in terms of a changing balance of class forces has to be put aside once and for all.
Nevertheless, over time the capital accumulation process becomes highly politicized. Under formal subsumption, capital opposes the extension of the franchise to the working class since it has yet to attain that elasticity of response that Therborn wrote of, and which comes with the development of machinery and the application of science and technology. But under real subsumption, capital intervenes in the labor process so that technical revolutions become a chronic feature of capitalist development. Accordingly the onward march of labor productivity can quickly restore any threat to the balance between accumulation and consumption funds resulting from the pretensions of an enfranchised working class.
But the exercise of democratic rights means that the adjustments that the accumulation process makes in order to preserve balance now have to be state mediated. Workers push for, and as long as the rate of accumulation does not falter, may gain new privileges. These form part of a hegemonic project, like the keynesian welfare state, which is also underpinned discursively in the form of abstract arguments about the relation of state and 15
Of course, they can be realized in other ways other than through the consumption of wage goods and the capital goods that go to produce them. Military spending would be one example. But as a matter of historical record, the trajectory of capitalist development, however fast or slow, whatever the particular country one is talking about, has been accompanied by increasing working class consumption. 28
capital. The result is that the accumulation process becomes highly politicized, so when it falters, as it has in the form of the long downturn, changing the hegemonic project in order to rediscover the conditions for growth, in order to reassert the balance between capital’s fund for accumulation and labor’s fund for consumption, becomes difficult. The appeal to globalization has eased this transition. For on the one hand it has explained why the old hegemonic project is dead; and on the other, why a new one can flourish and provide the basis for a return to profitability and the onward march of living standards.
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