The Global Crisis Of Wage-labour - Studies in Political Economy

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The Global Crisis Of Wage-labour PHILIP MCMICHAEL ntroduction This is an interpretation of the current crisis of wage-labour. There is a wealth of statistics that offer perspectives on this crisis-from predictions of substantial and increasing labour displacement by automation, through global unemployment data, to the instability of labour in the "race to the bottom" dynamic generating cheapened labour forces across the global economy. The current Asian financial crisis reveals the volatility of late-twentieth century virtual capitalism, and the ultimate vulnerability of labour anywhere. As is already evident, increasing numbers of people are exiting the formal economy. The decline of industrial employment and the casualization of labour worldwide express the transformation in the "global wage relation:" the geo-political ordering of labour forces. These changes are symptomatic of the crisis of wagelabour. But the real crisis of wage-labour is a crisis of the political organization, and discourse, of capitalism; that is, the nation-state system of global power relations and developmentalist ideology. In analyzing the current crisis, I use the term "global wage relation" for three reasons. First, it situates capitalist history in relation to the rise of wagelabour and its political reorganization of the world as a unity of non-wage forms of labour expressing their value through the wage form. Second, a history of the wage relation demystifies the developmentalist fetish, which views the world as divided between developed and underdeveloped regions and naturalizes history as a progressive development of material benefits (where "development" is abstracted from "capitalist development"). And third, I argue that the crisis of wage-labour is symptomatic of current transformations in the global wage relation.

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Studies in Political Economy 58, Spring 1999

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There is, therefore, a need to think further about these issues. This paper does so with the concept of the "global wage relation," emphasizing the political and relational dimensions of wage labour. It draws on Karl Marx's concept of the wage relation and Karl Polanyi's concept of the instituted market. The wage relation is the centerpiece of Marx's historical theory of capitalism. Using the concept of the instituted market, we can situate the wage relation as simultaneously global and political; in short, as institutionalized in the state system. At the core of this global wage relation is the institution of wage-labour, arguably a key to the formation of the nation-state (understood as institutionalized social rights). This essay elaborates these insights into an historical account of the changing character of the global wage relation, and the roots of the current crisis of wagelabour. The rise of wage-labour Viewing wage-labour as the historical centerpiece of capitalism is a conceptual strategy of anchoring capitalism's heterogeneous (global) relations. While wage-labour has probably never been the majority form of labour under capitalism, it is our analytical point of departure. When Marx wrote, wage-labour was concentrated in the new manufacturing and transport sectors of the metropolitan states, and surrounded by other forms of commodity-producing labour in the centres and on the periphery of metropolitan capitalism. Nevertheless he employed the historical concept of wage-labour as the theoretical kernel of capitalism. In the 1990s, wage-labour is considerably more generalized across the world economy, including agricultural sectors. It is still not the majority form of labour and there are indications that wage-labour is subject to a global process of labour "casualization." In the historical centres of capitalism, the stability of wage-labour is now in question. Indeed, there are indications that the institution of wage-labour is collapsing as capitalism undergoes a profound metamorphosis. I argue that the growing instability of the institution of wage-labour is directly connected to the crisis of the nation-state (not, however, to its elimination). In order to make this argument, it is necessary to view the wage relation as 12

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a global relation, in which wage-labour is politically linked to other forms of non-wage-labour, whose value was historically expressed through the wage form. This may be a direct expression, as a labour price, or an indirect expression where unpriced labour forces are subordinated to the commodity form (e.g., Brazilian slaves producing sugar for planters or Turkish peasants producing wheat as a state export-both commodities being valorized at their European destination as wage foods). The point is that labour may take many forms across the world but once incorporated into circuits of capital, it enters the global wage relation. How we view the "wage relation" is the key to its continuing analytical priority. I am arguing that the wage relation is governed by, but not coterminous with, wage-labour. In addition, viewing the wage relation in political terms allows us to grasp the changing history of capitalism, including the role of wage-labour. I believe The Great Transformation by Polanyi provides some clues. In that book, Polanyi essentially chronicled the institutionalization of the wage relation (the "discovery of society"), offering us an institutional perspective on the wage relation that complements Marx's perspective. The institutionalization of the wage relation was a process, not an event. Further, it was a world-historical process. It matured with the development of capitalism through the nineteenth century into the twentieth century as social democratic politics crystallized in the metropolitan states. The social rights of labourers, qua citizens, fused in the elaboration of the post-WWII welfare state. However, were social democratic politics inherent in capitalist development (via the concentration and politicization of labour)? The conventional assumption is that the concentration of capital is simultaneously the concentration of wage-labour, out of which a class politics developed to shape twentieth-century political institutions.! But this assumption may be unravelling today with the fragmentation and demobilization of wagelabour, in the face of an unprecedented concentration and centralization of capital. By focusing on the politics of the wage relation, I believe we can make some sense of this transformation.

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The global wage relation The concept of the "global wage relation" is methodologically tied to Marx's historical theory of capitalism. It implies a world economy on the one hand, and a key relation of production on the other. Each is a condition of the other, historically. In Capital, volume I, Marx claimed that the history of capital required a "worldembracing commerce" as the condition of its reproduction. Further, he argued that the rise of free (wage) labour depended on the organization of this commerce by the state. In particular, Marx noted the significance of merchant capitalists financing the national debt in return for state pursuit of mercantilist policies to enhance commercial opportunities. In other words, commercial-bureaucratic states were integral to the emerging capitalist world economy. Historically, this relationship depended on the shift from dynastic to territorially-based political power. This involved a shift in the meaning and machinery of power. Absolutist state organizations became the repository of power over and above princely wealth and authority. And in distinguishing private property and public resources, states also focused on augmenting the latter by promoting the interests of the former, through commercial development. Absolutism integrated formerly separate foreign and local trade circuits and legitimized the rights of merchants in the process. The world economy was fully embedded in the structure of political and class power, and vice versa.s The historical specificity of "stateness" is a key to my argument, suffice to say here that early modem states initially instituted a world market built on mercantilist principles. That is, commercial policy institutionalized the monopolizing tendencies of merchant capital as a means of enlarging national wealth. The colonial system, operating on the zero-sum premise of commercial monopoly in which European states competed for territory and control over plantations and markets, generated the conditions for industrial capitalism. Marx observed: "Slavery has given value to the colonies; the colonies have created world trade; world trade is the necessary condition of large-scale machine industry.r ' Conceptually, the historical significance of the colonial system was that it anticipated the industrial proletariat in

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how it organized labour. Slave labour was the first form of large-scale commodity-producing labour, as European regulations limited proletarianization during the mercantilist era." Marx theorized capital as a "relation" and a "process," whose "point of departure is money," and whose original activity is the development of exchange.> Merchant capital presumes only a world trade unifying disparate and dispersed, and historically given rather than transformed, sites of production. The colonial system, merging the interests of states and merchants in a politically-organized world market, laid the political and economic groundwork for the rise of machine production. Capital accumulation became a competitive goal of the mercantilist state, and the construction of national markets, incorporating colonial trade, conditioned the rise of wage-labour and Modem Industry. Modem Industry significantly transformed the character of the state and the world economy. This was not, however, simply a technological process. It involved a political reorganization of the world economy under British hegemony. There are two features of this reorganization worth noting: first, it was anchored in wage-labour and, second, it involved a particular political pattern. The combination of the two perhaps distinguishes this period from the late-twentieth century: a distinction between a national developmentalist regime then and a global regime now. (a) Wage-labour: the concept For Marx, "wage-labour" was not an empirical concept. In the mid-nineteenth century, wage-labour was the core of a larger set of labour forms. Note that this conception differs from those represented in the Wallersteinv/Brenner? debate, where Brenner contested Wallerstein's view that capitalism comprised multiple forms of labour as the relations of production of the world system, arguing that wage-labour defined capitalist relations of production. In contrast, Marx viewed wage-labour as the organizing principle of a world capitalist economy which included non-wage forms of labour, subject to the value regime of wage-labour. As Marx would claim: wage-labour was an exemplary social category constituting "a rich totality of many determinations and relations.:" That is to say, it was the product of large-scale social transformations including 15

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the construction of a world market and the expropriation and/or subordination of peasantries in Europe and beyond. The reproduction of wage-labourers depended on key colonial inputs such as sugar, cotton and wheat, produced with non-wage-Iabour.f The quantitative increase in wage-labour depended, in tum, on expanding world markets for manufactured goods. Wage-labour also prefigured the future, insofar as the commodity system would become generalized. With the consolidation of machine production based in wage-labour, capital controlled rather than mediated production, as under merchant capitalism. The enhanced scale and productivity generated new markets, new dimensions of commodification, and a mode of self-expansion requiring the relaxation of mercantilist regulations. This mode necessitated unlimited access to world, rather than colonial, markets. The division of labour, no longer dictated by mercantilist doctrine, was progressively based on the exponential requirements of capitalist production. 10 Colonial systems of production using non-wage-labour continued-but where they were once the "pedestals" of commercial capitalism (to use Marx's metaphor), they were now subordinated via the law of value to the competitive requirements of wage-labour in an increasingly open world market. As I have argued elsewhere, for example, ante-bellum slavery and the Southern cotton culture were transformed from a patriarchal to an industrial system with the machine production of cotton for an expanding world market. The new commercial credit system enabled the westward reproduction of the cotton plantation (and the internal slave market). Here, the personalized mercantile connections of the colonial period were replaced by a generalized system by which factors drew bills on London financial houses. I I The easy credit associated with the new discount market sped the turnover of commodities in world trade, and now profits depended directly on the competitive organization of labour, rather than simply the protection of trade flows. In this sense, the wage relation was global. Metropolitan wage-labour not only depended on consumption of a range of products from global production sites, but also its production dynamic engendered a reorganization (centralization) of

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banking and finance that reorganized commodity-producing labour across the world. Whether waged or not, these forms of labour were reconstituted within the new unity of global value relations. The global wage relation did not so much abolish, or homogenize, other forms of labour, as subject them to the discipline of a world market governed by the law of value. The viability of these forms of labour, then, depended increasingly on how they met the competitive demands of the capitalist world market. (b) Wage-labour: its politics The politics of wage-labour concern the geo-politics of the world market in the nineteenth century. Both Marx and Polanyi stress the state's role in the process of "primitive accumulation," prior to the capitalist accumulation of capital under nineteenth-century Modem Industry. Marx's treatment of the Modem Industry period then focuses on the "internal" contradictions of the wage relation (struggle of working day, technical division of labour), with less attention to the sphere of circulation. Polanyi's concern is with the conception and organization of the nineteenth-century social order, in particular with the contradictions of the ideology of economic liberalism. The wage relation forms within the contradictions involved in the attempt to institute the "self-regulating market." Polanyi observes that the social disembedding of the commodity market was an institutional act engineered by British capitalists to facilitate machine production, and its need for expanding inputs and market outlets. Ideally, unlimited commodification required the dominance of the price-form, extending to land and labour, which Polanyi regarded as "fictitious commodities" since they are not produced for sale. And being international, the self-regulating market needed a universal commodity equivalent-gold-to facilitate global exchange. Such commodity money was also a fiction as there were limits on its production as a complement to the changing rhythms of accumulation, especially expansive episodes. The institution of the gold standard (as the mechanism of self-regulating money markets) thus needed tempering to preserve stable national environments for accumulation. Currency management, via central banking credit policy, was universally adopted as the method by 17

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which central banks mediated the national balance of trade through adjustment of national economic conditions via monetary policy. Such adjustment was inherently political and therefore it encouraged constitutional government, through which different social interests had political input. Polanyi's portrait of nineteenth-century civilization, by centering on the so-called "fictitious commodities," presents a unique view of the global wage relation. His narrative of the cycle of commodification and market regulation in fact describes the related processes of nation-state formation and the extension of the world economy. In Polanyi's narrative of English capitalism, by eliminating local parish support for the working poor and promoting labour mobility, the 1834 Poor Law Act instituted the labour market. The Bank Act of 1844 instituted central banking, establishing fiduciary money and stabilizing the accumulation of capital, while the repeal of the Com Laws in 1846 stimulated cheap grain imports from the "New World" to reduce the cost of wage foods. Together, these measures instituted the markets in labour, currency and land that underpinned Britain's prodigious commercial expansion on a global scale. In tum, the European/metropolitan states gained access to a broadening array of tropical products from the colonies (sugar, tea, coffee, oils, cotton, jute, rubber), and temperate products (grains and meat) from the settler states of North America and Australasia to fuel industrial capitalism.l? While British measures to institute commodity markets opened up the nineteenth-century world to the dynamics of industrial capitalism, they also generated a protective cycle of market regulation across the world of constitutional states. In this movement lay the various national forms of regulation: land markets and agricultural trade generating agricultural tariffs (and early conceptions of national food security); labour markets generating social democratic responses (in domestic labour legislation and early import-substitution industrial strategies); and money markets generating currency management to stabilize national economic relations. In reference to the latter process, Polanyi proclaimed the "constitutive importance of the currency in establishing the nation

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McMichaellWage-Labour as the decisive economic and political unit of the time.")3 Indeed, the protective response was not only the source of what Polanyi refers to as the "discovery of society," but also it was part of the process of formation of nation-states. While protectionism gave political-economic definition to states, it also combined progressive and conservative social movements on a world scale--including agrarian reaction, socialism and imperialism. Polanyi viewed the latter, the fusion of state and trade power, as uncharacteristic of "nineteenth-century civilization"-particularly the use of territorialism to gain cheap resources and gunboat diplomacy to "stabilize" financial relations. Imperial rivalries sewed the seeds of World War I, which dismantled the world market, thereby limiting the use of imperialism to adjust national balances and turning the problem of currency stabilization inward. The global wage relation, whereby labour aristocracies depended on a hierarchy of trade relations sustained by the sterling/gold standard, collapsed. Polanyi's political conception of the world market is exemplary. His use of the contradictory aspects of the three "fictitious commodities" allows him to construct an account of the rise and fall of the British-centered world market that is historically contingent and systemic at the same time. Polanyi suggests that the introduction of "market civilization" stimulated a cumulative process of state-building, which, via the various regulatory mechanisms, is inherently political. Commodification inevitably brings business persons, workers and landed classes into the national arena through the combined and contradictory impacts of market exposure and currency management. These groups move to imprint their concerns on state policy, within a nationalist discourse (e.g., agrarian appeals to the territorial basis of sovereignty, working class acceptance of the cheap food benefits of world trade, the Prussian marriage of iron and rye, etc.). Polanyi's geo-political conception ofthe world market, however, is undeveloped. Arguably, this is because he focused on a critique of the ideology of economic liberalism, explaining the phenomenon of fascism as stemming from the adherence to this ideology beyond its institutional possibilities-when the sterling/gold standard was no longer viable. Polanyi does

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not dwell on Britain's role in organizing the world market and its impact on other states, although we can extrapolate. Britain's attempt to impose a free trade regime in the world economy was itself an ideological project. Freedom of trade for Britain, as "workshop of the world," was, in fact, an attempt to impose a colonial system writ large with Britain as the metropolis. Such "free trade imperialism" combined market and military power to lay the foundations of industrial capitalism-not only in England, but also in Europe and the United States which jointly benefitted from Britain's development of a non-European periphery and the rise of a world, rather than rival colonial, trade. The adoption of central banking and constitutional government notwithstanding, rival states responded to British commercial superiority by industrializing, using various combinations of industrial protectionism and formal imperialism. Both of these responses eventually undercut the unity of the British-centered world economy. The collapse of Britain's nineteenth-century world market regime precipitated a series of state-centered national experiments, as Polanyi outlines. Alongside Russian Bolshevism, German National Socialism and American New Dealism, there were the Latin American import-substitution policies. The latter policies informed the EeLA prescriptions for an "inner-directed" strategy of economic growth modeled by the United States, as opposed to the former, British model of "outer-directed" economic growth.H Rise and fall of the instituted wage relation Just as Britain's hegemonic strategy was to reproduce a single colonial system in the world economy as a whole, so the American hegemonic strategy was, in a sense, New Dealism writ large. The former was a liberal (market) regime premised on the international division of labour while the latter was a regime of "embedded liberalism" premised on the deliberate organization of the world market around national economic priorities.J> It was, in fact, a consciously instituted market on a world scale. One could say it was the projection of an American version of the welfare state into the state system; 16 that is, aid came with strings attached, notably foreign assistance in return for adherence to the principle of the 20

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freedom of enterprise. I? The reconstruction of the world economy after World War II underwent a significant elision from Roosevelt's initial "one-worldism" to Truman's Cold War-based "free-worldism.vlf But at the foundation of it all was the ideology of developmental ism, buttressed by US control of 70% of world gold reserves and a growing academic and policy corps dedicated to formulating and formalizing a social science of development. The development project emerged as an internationallycoordinated strategy of national economic growth, modelled on an idealized combination of Western state-building and industrialization (with variation on the same theme in the Soviet bloc). While discursively presented as the vehicle and outcome of self-determination in the post-colonial world, the development project reconstructed international relations of space and time around the singular belief in national development as natural, providing a hegemonic discourse that powered US anti-colonial and Cold War imperialism. Like Britain's free trade regime, the development project was an unrealizable ideal in an asymmetrical world order.l? It combined national and international forms of regulation in its four basic elements. First, it responded to, and sponsored, the completion of the nation-state system via decolonization and the institutionalization of the principle of self-determination in the United Nations. Second, the 1944 Bretton Woods conference institutionalized the regulation of monetary relations on a world scale. Unlike the nineteenthcentury, when world money was produced through private financial houses, post- WWII world money was produced through a combination of the US Federal Reserve and an allied coalition of central banks,20 with an IMF/World Bank loan system designed to stabilize currency exchanges (aided by capital controls) and to incorporate post-colonial states into the development project. Third, national political-economies, with considerable variation, regulated wage relations with combinations of Keynesian macro-economic policy and Fordist strategies to stabilize expanding production and consumption relations. Fourth, the Marshall Plan and other foreign aid programmes driven by Cold War concerns infused

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the world economy with technological and financial relations privileging US corporate and geo-political interests. These four regulatory elements instituted a world market within a developmentalist framework. Incorporation of developmentalism into the state socialized capital via a socialdemocratic compromise with labour, stabilizing the wage relation as a predominantly national construct. On this basis, national employment statistics remained relatively stable through the two decades of the postwar boom, with rising real incomes. Even if this period was an aberration from chronically unstable capitalist relations, or an interregnum between eras of "internationalization," it became the yardstick of capitalist developmentalism inspiring a veritable development industry. Developmentalism included a strong ideological commitment to stable employment as the cornerstone for social democratic politics. The story of the collapse of the Bretton Woods monetary regime (from within) has been told elsewhere.U For our purposes, the most significant effect in the ensuing era of "financialization'

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