The problems confronting the current economic system: high unemployment, environmental destruction, poverty and increasing social dislocation, are proving intractable. The solution, we're constantly told, is to increase productivity, to become more competitive. Economist DICK BRYAN explains in simple terms why this is a dead-end strategy which benefits only business.
Capitalism is a system driven by profits, and the energy and creativity expended by labour are the source of profits. Capitalism is also a system in constant change. This is partly because the search for profits creates change through competition, and partly because the anarchy of capitalism means that it is a system which cannot ensure its own stability. It is a system of both growth and instability.
To understand the current period in these terms, it is necessary to identify the general nature of change in the international capitalist system. This change is not uniform. Different societies, even different individuals will have experienced change differently, but there are some critical universal developments which impact on all our experiences.
Over the past quarter of a century, there has been a conspicuous tendency for international competition to encroach into all economic activity. Why is this the case?
The postwar boom in the international economy came to an end around the early 1970s. Had I been a keen observer at the time, I think my instinct would have been that as a system moves into some sort of crisis, it would become insular and introverted. Capital would look to the safety of "home". That would have been a wrong instinct, and further consideration would have hit upon the reality that capital has no "home". Some capital will seek to construct a national sanctuary, and manoeuvre for protection, but more will roam the world looking for profits.
Accordingly, the 1970s and 1980s emerged as a period of rapid globalisation. The first thing to grow after the end of the long boom was trade. Amidst the recession of the mid 1970s, international trade was growing rapidly. This was followed by a surge of international credit. "Eurofinance" and "Eurobond" markets developed in the late 1970s and '80s.
We all recall the 1980s being labelled the debt decade — companies borrowing up to the back teeth, much of it for gambling in corporate expansion, especially takeovers. The excesses of the 1980s, and the losses so many capitals made in this casino decade, have put pressure on the current era to recoup profits, and this time real profits rather than paper ones.
As well as credit growth, there was in the 1980s a rapid growth in international investment, much faster than investment within nations. This is investment by transnational corporations (TNCs).
There is a temptation to see transnational corporations as the scourge of capitalism: spreading across the globe, crushing everything in their way. This is out of perspective. The real development is the combined impact of trade, finance and investment by TNCs, for combined they have integrated the world into one economic process. In particular, the massive movement of finance around the world has created an integrated capital market. Money can now be moved almost instantaneously and without cost to whatever in the world generates the best rate of return. This, more than anything else, has integrated all economic activity into the process of international competition. Profitability is now determined by international, not national, conditions.
National economies are therefore very different from what they were even 20 years ago, for virtually no activity is isolated from international calculation. So national economic policy, in Australia and all other economies, is not about pulling the levers that will bring about national recovery independently of what is happening in the rest of the world. The notion of national recovery — that we can fix up our economy in isolation from the rest of the world — is the rhetoric of politicians; it isn't the reality.
The levers that are being pulled are overwhelmingly those designed to make industry within each nation more internationally competitive (that is, policies which can make local production profitable in international competition). So policy is not inward looking, about rebuilding domestic accumulation. Policy is saying that capital, and people who work for capital, have to get out there and meet international standards. For capital, the standard is being able to make profits in internationally exposed markets; for labour, it is about adhering to world's best practice. If you can't cut the mustard, you go out of business. You can't look to the state for comfort.
So the ethic of competition as a central determinant of change in capitalism is now being played out increasingly as a global process, and the implications for industries within nations are profound.
It is not sufficient to be good at producing something; you've got to keep getting better — producing a better and cheaper version — because if you don't, somebody else out there will be developing the technology, the work practices, the marketing to run straight past you. Competition is not just a vision or an ideology of economists (though it is that); it is a reality, dominating economic change, and the nationally experienced consequences of change.
With national policy being so heavily oriented towards making industry competitive — and we see this in Australia as clearly as anywhere else — the question is: what makes for competitive industry?
Most of the managerial and industrial experts will say that it has a lot to do with producing products that people want, good quality, after sales service, delivery on time. We hear a lot about this in relation to making Australia an exporter of manufactured goods. And these are important ingredients.
But making profits is all about being able to deliver these attributes at a cost. In a world where technology, inputs, even management is internationally mobile, producing at a cost means predominantly the cost of labour: its cost relative to its productivity.
Labour is the one component of production that is not internationally mobile on a large scale. It is therefore labour that is the ultimate focus of government policy for competitiveness. The objective in an international context is to make labour within each nation more productive, better trained, more efficient, and cheaper.
To realise the significance of this development, it is useful to situate it in Marxist theory. This can tell us something about the logic which informs policy formation, which is different from the standard policy rhetoric, with its recourse to notions of Australians living beyond their means and needing to tighten their belts.
The process I've described above in terms of productivity is actually a question of surplus value, and international competition involves competition between national working classes to have the highest rate of surplus value. With a high rate of surplus value, capital will want to produce here, export from here, and local accumulation expands and the national balance of payments improves.
Surplus value has three determinants. One is the value of labour power, or the general standard of living of workers which sustains the working class. Real wages are the major component, though there is also, in advanced capitalist societies, often a significant state-provided element. Another determinant of surplus value is the length of the working day — how many hours workers have to work to receive their wage — what Marx calls absolute surplus value. The third factor is how productive labour is within a given working week — what Marx calls relative surplus value.
The way to increase surplus value, and so make local production more internationally competitive, is to cut the value of labour power, so that workers spend less of each week producing their own income, and more doing unpaid, surplus labour for their boss; and to increase absolute and relative surplus value.
The fall in the value of labour power in Australia is clear (though not the same fall for all workers). It is hardly necessary to make the case that the wage component has been falling: Kelty and the ACTU have made a virtue of the fact that wages have fallen (he poses it as labour making the sacrifice for the national good, to make Australia competitive).
But, comes the response, the social component of labour's living standard has increased. What constitutes the "social wage", and whether it has indeed increased, is a debate I don't want to get into here. In this context, it is sufficient to recognise that the working class has provided most of the state's revenue, and the tax rates paid by the rich and companies have been falling. So the social wage component is just redistribution within the working class. It is not increasing the working-class standard of living (the value of labour power) nor compensating for falling real wages.
The more recent shift towards youth wages, a training wage and enterprise bargaining is only going to accentuate the trend to a fall in the value of labour power.
The second path to increase the rate of surplus value is increasing relative surplus value. This has been heavily emphasised in Australia, indeed in all countries. Emphasis on training, multi-skilling, world's best practice, and enterprise bargaining, not to mention the desperate pleas for capital to invest, are all about increasing relative surplus value — getting labour to produce more and more within a given working day.
The third source of surplus value, absolute surplus, has, surprisingly, emerged in the last decade. I say surprisingly because it has long been believed that the length of the working day is not a contested issue — that the long-term trend is for working hours to decline, even for full-time work. Working hours have steadily decreased over the century, and these have been celebrated union victories.
Indeed, Marx suggested that the Factory Acts in Britain in the 1840s and 1850s put limits on the length of the working day, and the future history of capitalism would be based on relative surplus value appropriation. Capitalism, Marx said, was distinctive as an economic system because it so rapidly developed the forces of production — technology and work organisation — and this was about competition between capitals to increase the rate of relative surplus value, not absolute surplus value. After all, the length of the working day has limits; technology does not.
But in the last decade, there is some evidence that capital in Australia has reverted to absolute surplus value as the path to competitive production. Look at the first chart, taken from the Australian Bureau of Statistics publication The Labour Force in Australia, published in January 1994. It shows the average working hours of full-time and part-time workers.
There are problems with interpreting these figures as a measure of absolute surplus value, for changes in absolute surplus value are unpaid changes in hours, and we need to know whether any additional hours worked are paid or unpaid. For this reason, we must ignore the part-time figures. (Though I suspect that we all know part time workers, particularly in the helping professions like community services where part-time work has grown rapidly, who are working more than their paid hours, either because their bosses require it or because a concern for clients causes committed workers to stay back to finish the job.)
So we look to full-time employment, not because it is more important, but because it is easier to measure. The solid line in Chart 1 shows that over the last 12 years (over the life of continuous Labor governments), the number of hours per week worked, on average, by each full-time worker, has increased from 38 hours to nearly 41 hours. It has fallen a bit in the recent recession (presumably because of falling paid hours), but the longer-term upward trend is clear. Some of this increase has been by self-employed people, looking to survive the recession by working more, but much of it is wage workers.
But how do we know that these extra hours are unpaid labour time? We need to look at evidence of overtime to see, for this measures paid extra hours. Chart 2 shows average overtime worked over the same period. It is clear that average overtime per worker per week was increasing up to 1989. But paid extra hours increased by only 36 minutes per week, still leaving 1.5 hours unpaid extra hours per worker per week. Even up to 1989, absolute surplus value was increasing.
Form 1989, the evidence becomes alarming, for it is the period with the most rapid increase in hours worked, and average paid overtime actually falls, by almost half an hour per week.
So from 1989 to early 1992, unpaid working hours increased on average by 1 hour and 40 minutes for each full time worker in Australia. Add to this the real wage reductions, and the increasing productivity, and the story of labour's experience in the past five years is disturbing. And this is the standard which is now forming the base line from which enterprise bargains are being struck.
Why might this be happening? Clearly unemployment in the last few years has increased the power of capital. This is what Marx saw as the impact of the "reserve army of labour". To hold your job, you work the extra hours, and don't complain.
Perhaps it is also about changes for white collar workers, and the service sector generally. In many of these jobs, the only way capital can increase productivity is to sack some workers and get the remaining workers to do more work. And that often means extra hours. Many public servants can tell of this experience.
But also, there is a story of how capital reacts to international competitiveness. What do you do if you try to increase relative surplus value, but you still can't compete profitably in internationally exposed markets? You get your workers to do more for less.
It can be sold as a short-run sacrifice for long-term gain, a line Kelty has bought, but this short-term necessity can apply year after year. Eventually we find that longer hours are entrenched, and standards of living are lower. In short, this is the story of labour, as the immobile component of production, bearing the costs of international competition.
What are the implications of posing international competitiveness and national responses in this way?
One implication is that there is an important political role in resisting increased working hours, resisting wage cuts and resisting the push for (unpaid) increased productivity. This amounts to resisting the whole agenda of making this or any nation more "competitive". There is a fundamental deception in the notion that if we work harder, longer, smarter and for less pay in the short term, we will all benefit in the long run — that new wealth will be created, incomes will go up.
Being competitive is not just about improving productivity and cutting costs. It is about improving productivity and cutting costs faster than in other countries. There is a problem if workers in every country are being told the same as us in Australia: that if they work harder for less, they will finish up better off.
Not everyone can become more competitive at the same time. For every winner, there is a loser. Workers in Australia can make the "sacrifices" that capital demands (and that Kelty is so proud to have delivered), and finish up no more "competitive" than they were before.
Part of resisting what's going on in the labour market at the moment is also resisting the competition between national working classes to deliver the highest productivity at the lowest cost. Australian workers are being played off against the wages of China and the productivity of Germany.
The success stories of Germany and Japan, and the rising standards of living of South Korea and Singapore are dangled before us as the symbols of success. But, by definition, in competition not all countries can be winners.
We could in Australia get fiercely patriotic and say, "We can be the best". Such jingoism is offensive. Even if Australian workers did devote their lives to helping companies make profits (and they call that "winning!"), we know that someone else out there has got to lose. We have to say clearly that competition — creating winners and losers, and making fear of losing the primary social incentive — is no basis on which to organise a society.