Industrial decline & the TUC
The haemorrhaging of manufacturing jobs continues.
In April, Peugeot announced the closure of its Ryton (Coventry) plant
with the loss of 2,300 jobs. Now, General Motors is threatening 1,000
job cuts at its Ellesmere Port (Merseyside) Vauxhall plant. Over the
last 30 years the British manufacturing sector has lost around five
million jobs. What is the answer? MICHAEL FISHER examines a recent
response from the Trades Union Congress (TUC).
IT HAS BEEN just over a year since MG Rover at
Longbridge closed. Six thousand jobs were lost at the plant, and a
further 20,000 from firms in the supply chain. Today one-third of the
former Rover workforce remains unemployed. Of those who have managed to
find work, they are on average £3,523 a year worse off than before.1
The closure of MG Rover is only one further
indication of the relative decline of manufacturing industry in Britain
that began before World War One and accelerated after World War Two.
According to the OECD, annual growth in manufacturing output in the UK
averaged 1.1% between 1964 and 1999. This compares to an annual average
of 4.5% in Japan and 3.7% in the USA. Over the same period, total
manufacturing output in the UK increased by 47%. This compares to an
increase of 242% in the USA, 163% in Italy and 117% in Germany.2
The consequences of this relative decline for many
workers have been devastating. Since 1979, the numbers employed in
manufacturing industry have fallen by 50%: from seven million to just
under 3.4 million. Over a million of these jobs have been lost while
Gordon Brown, the supposedly ‘pro-industry’ and ‘union friendly’ future
leader of the Labour Party, has been Chancellor. In every month since
the closure of MG Rover in March 2005, the number of jobs in
manufacturing has continued to fall.3 In April this year, the
crisis of employment in manufacturing deepened with the announcement by
Peugeot that it intends to close its car plant near Coventry.
A key question confronting the working class and the
labour movement is what should be done, not only to stop further job
losses, but to reverse the industrial decline that has contributed to
massive increases in poverty, crime and drug abuse in those communities
abandoned by capitalist industry.
One answer has been offered by the TUC. It has
recently published two new policy documents: An Industrial Policy for
the United Kingdom; and Investment Chains: Addressing Corporate and
Investor Short-Termism. In these documents the TUC sets out what it sees
as the problems confronting industry in Britain, and recommends policies
to deal with them. They are useful and important documents because they
highlight precisely what the approach of the labour movement to these
issues should not be.
The TUC argues that governments should become more
involved in promoting industrial development. However, it is quick to
reassure Labour ministers and the Confederation of British Industry
(CBI) this does not mean challenging the so-called ‘free market’. Its
Industrial Policy document states: "The market is valuable in creating
competition, delivering efficiency and keeping prices low. No return to
state power or large-scale nationalisation is sought... We support the
principle of open competition". (p33)
The document is silent on the fact that increased
competition has been largely responsible for the haemorrhage of jobs
from industry since the mid-1960s. More to the point, having
uncritically accepted the allegedly ‘valuable’ role that the free market
plays, it becomes impossible to then argue for policies that would stand
any chance of halting the damage that the market is responsible for.
It is not surprising therefore that the concrete
policy proposals contained in the document, even if they were
implemented, would have very little impact. The TUC’s key policy
recommendation is that government should offer selective and periodic
financial support to large firms that are ‘strategically important’ to
the British economy when they confront temporary difficulties. And, in
return for this money and the full cooperation of the trade union
movement, does the TUC demand that these firms guarantee no job losses,
recognise trade unions, involve workers in real decision making, or
commit to using their future profits to fund productive investment
rather than making their owners even richer? No. Money should be given
to large capitalist firms, with the active support of the labour
movement, without any strategic advantage being secured for the labour
movement in return.
Even if, for a moment, we accept the argument that
companies should receive occasional assistance from the state with
almost no strings attached, why limit this to ‘strategically important’
firms? While the closure of large plants such as MG Rover receives much
political and media attention, the vast bulk of the job losses in
manufacturing since the mid-1960s have resulted from the closure of
firms that employ a few hundred or a few thousand workers. Today, some
of these firms are heavily dependent on the business of the big
high-profile corporations. But many are not. What does the TUC propose
the government should do to help workers in these firms? Beyond
encouraging employers to invest more in workforce training and
development, very little.
A short-term view
IN INVESTMENT CHAINS, the TUC attempts to grapple
with a key cause of Britain’s relative industrial decline: short-termism.
The argument here is that shareholders in publicly-owned companies place
a high premium on short-term profitability at the expense of long-term
strategic investment in new products, production technologies and
workforce development. When a company experiences falling profitability
because shareholders have no long-term stake in the business, they may
abandon the company in search of more profitable opportunities
elsewhere, rather than shoulder the risks and costs involved in helping
it to survive. These trends are exacerbated by the British banking
system, which is also preoccupied with short-term returns, and is
therefore reluctant to lend to firms for the purposes of long-term
investment at affordable rates.
In case these arguments against short-termism might
be interpreted as being in any way ‘anti-business’, the TUC asserts its
pro-employer perspective: "There is… a significant shared agenda with
business here. Short-termism is typically no more in the interests of
companies than it is in the interests of employees". (p6)
The key question is: what is the source of short-termism?
For the TUC it is the anti-industry bias of British banks and the
impatience of shareholders. Government should therefore develop
incentives and forms of regulation that will encourage banks and
shareholders to invest for the long term.
But this completely misunderstands the nature of the
relationship between finance and industry in the British economy.4
Historically, it is true that industry and finance in Britain were not
highly integrated. But this was not because the banks were hostile to
industry. Many firms did not want or need to become closely involved
with the banks. Industry was able to secure the profits it wanted by
means of privileged access to protected imperial markets and by sweating
outdated plant and machinery. Firms preferred to fund new investments
from their retained profits, rather than risk losing control of their
assets by borrowing from banks.
With the end of empire after World War Two, and the
end of post-war growth in the 1970s, parts of British industry became
increasingly integrated into global finance. Firms borrowed more to fund
mergers and acquisitions. They began investing in the financial markets.
The more successful firms issued shares and became traded on the
international stock exchanges.
This ‘financialisation’ of British industry did not
happen because the banks suddenly became less hostile to industry.
Confronted by a crisis of profitability, many British industrial
capitalists sought to use the facilities and resources offered by
financial capital as a means of restoring their rates of profit.
Financial capital provided the credit necessary to fund investment in
new technology and the relocation, acquisition and building of plant.
The excess capital liquidity promoted by the deregulation of financial
markets and the banking industry helped to support levels of demand for
industrial output. Furthermore, becoming answerable to shareholders
acted to discipline business operations, placing further pressure on
workers to work harder to increase output, efficiency and productivity.
There was also greater pressure from shareholders to close plant and
impose mass redundancies in order to maximise profits.
There was a clear class motivation behind
financialisation and the deregulation of money in the 1970s and 1980s.
By converting the value of industrial assets into internationally traded
shares, bonds and other forms of financial investments, the ownership
and control of capital would become more international and mobile, and
so less tied to particular nations. Capital could then move more easily
around the globe and escape those places with politically powerful and
industrially militant working classes.
No common cause
THE TUC IS right to implicitly recognise that
financialisation has exacerbated short-termism. Highly competitive
global commodity markets awash with excess liquidity are very unstable.
In this context some shareholders and financial institutions constantly
move their investment capital, searching for the highest rates of
short-term return regardless of the consequences for long-term
industrial development. This generates significant new business risks
for capitalists – hence the rapid growth of ‘risk management’ services
since the 1970s. However, while a few may bemoan the increase in short-termist
behaviour, many capitalists view it as a tolerable problem preferable to
the alternative: stronger political controls on the mobility and
profitability of capital, with the related risk of increasing the
industrial and political strength of the working class.
The TUC is therefore wrong to argue that business
has as much interest in combating short-termism as workers. Any moves to
significantly limit short-termism would necessarily involve government
trying to exert greater control over the investment decisions of the
financial markets and multi-national corporations. The most powerful
capitalists would view such attempts as an intolerable interference with
their private business decisions and would offer fierce resistance. The
appropriate response to this would be for socialists to mobilise the
labour movement and the working class to confront and defeat that
resistance. Building for such a strategy is not an option considered by
the TUC.
Ultimately, short-termism is the product of the free
markets and open competition that the TUC endorses. Ending it will
require abolishing the market. It will require replacing the chaos and
waste generated by competition with a rational, planned, democratic
economy. And no capitalists, be they financiers or industrialists, will
ever support that. Therefore, attempts by the labour movement to find
common cause with the capitalist class on this issue are both doomed to
failure and politically counterproductive.
These TUC policy documents confirm the extent to
which a large number of trade union leaders, and a leading layer of the
British trade union bureaucracy, have come to fully accept the economic
logic of capitalism. What kind of ‘alternative economic strategy’ for
the labour movement is it that accepts all the fundamentals of
capitalism, argues that workers have fundamentally similar interests to
those who employ them, and advocates policies none of which will make a
substantial difference to the problems they are supposedly intended to
solve?
But these weaknesses also apply to most members of
the so-called ‘awkward squad’, such as Billy Hayes (CWU) and Tony
Woodley (TGWU). Both have spoken and written in recent years about how
important it is that the left develops its own economic strategy in
opposition to neoliberalism. What such a strategy might contain was
indicated by Woodley in a Guardian article in May last year.5
On the Rover closure he concluded: "The government did all it could to
help during the Longbridge crisis – within the tightly drawn parameters
of the global free market that apparently set the limits for political
debate and decision-making".
And Woodley’s alternative to this ‘global free
market’? More state money to help ‘return companies to health’.
Woodley’s practical policy proposals differ little from those of the TUC
– except he wraps them up in some vaguely anti-capitalist rhetoric.
The lesson to be learned from the deepening crisis
of employment in Britain’s manufacturing base is that in the absence of
a credible and popularly understood socialist economic strategy that can
challenge the economic logic that drives plant closures, and which
offers a positive alternative based on prioritising the social needs of
the working class, much of the labour movement will be limited to
observing the crises of capitalism rather than acting to bring them to
an end.
However, the main obstacle to learning this lesson
is not one rooted in the complexities of economic theory and policy. It
is political. The key problem is that most of the awkward squad, in
common with the TUC, do not believe it is possible or desirable to build
a new mass party to the left of New Labour. If the Labour Party is the
only possible political vehicle for trade unions, then there is no point
in arguing for socialist economic policies, no matter how necessary they
may be from the point of view of workers, because Blair, Brown and the
rest of the leadership will simply ignore them. Having limited their
economic horizons to those set by a thoroughly pro-capitalist political
party, it is not surprising that the resulting policy recommendations
are completely inadequate.
The question of which economic policies the labour
movement should argue for is therefore inseparable from the question of
which political party is likely to implement them. If policies that
really can reverse industrial decline, guarantee employment and
eliminate short-termism will not be implemented by the Labour Party,
then it is time to build a party that will.
1 The Work Foundation (2006), Life After MG
Rover: a report prepared for BBC Radio Four
2 OECD figures quoted in M Kitson and J Michie
(2000), The Political Economy of Competitiveness. Routledge, London
3 Office of National Statistics,
www.statistics.gov.uk
4 For a Marxist account of the historical
relationship between finance and industry in the British Economy, see S
Clarke (1988), Keynesianism, Monetarism and the Crisis of the State.
Edward Elgar, Cheltenham
5 An end to passivity: the state must act to
prevent another Longbridge, The Guardian, 3 May 2005
