An optimistic view of worker power

I am close to finishing the manuscript for my next book (with co-author, Italian journalist Thomas Fazi) which traces the way the Left fell prey to what we call the globalisation myth and formed the view that the state has become powerless (or severely constrained) in the face of the transnational movements of goods and services and capital flows. Social democratic politicians frequently opine that national economic policy must be acceptable to the global financial markets and, as a result, champion right-wing policies that compromise the well-being of their citizens. In Part 3 of the book, which we are now completing, we aim to present a ‘Progressive Manifesto’ to guide policy design and policy choices for progressive governments. We also hope that the ‘Manifesto’ will empower community groups by demonstrating that the TINA mantra, where these alleged goals of the amorphous global financial markets are prioritised over real goals like full employment, renewable energy and revitalised manufacturing sectors is bereft and a range of policy options, now taboo in this neo-liberal world are available. In today’s blog I discuss trade unions and strategies available for workers.

Two recent articles bear on this topic. The first, a Financial Times article (October 3, 2016) – The left in Europe needs to change political course – by Wolfgang Münchau, provides an interesting perspective on recent political developments and challenges the idea that the reinvigoration of a truly Left policy agenda is inevitably a dead-end or in his words “a lost cause”.

The second, a Jacobin magazine article (September 29, 2016) – Workers of the World – by US sociologist Beverly Silver argues that:

The potential for workers to resist capital is as strong as ever.

The arguments presented in both articles coincide with many of the ideas that we are advancing in Part 3 of our book.

An overriding theme of our new book is that the idea that the nation state is powerless, which appears to have become absorbed within the mainstream Left narrative is false at the most elemental level.

We argue that while they Left has seemingly become beguiled by the idea that amorphous capital markets need to be assuaged by policies that increase their capacity to gain increasing proportions of the real income produced around the world, the Right has understood all along that they had to work through the state to gain advantage for their constituents, notably the top-end-of-town and capital, in general.

On August 23, 1971, a US lawyer Lewis F. Powell, Jr published the now famous Attack on American Free Enterprise System, which he had prepared for the US Chamber of Commerce.

What became known as the Powell manifesto was a major turning point in the way the corporate sector approached the political system.

Powell wrote that:

In the final analysis, the payoff — short-of revolution — is what government does.

While the Left was busily writing books about the ‘Fiscal Crisis of the State’ and was, increasingly, buying into the line that the State was now powerless in the face of globalisation, the Right certainly understood that to get things done they had to work through the political process – “short-of revolution” that is.

Powell thus advocated aggressive action to influence the political process:

Business must learn the lesson, long ago learned by labor and other self-interest groups. This is the lesson that political power is necessary; that such power must be assidously (sic) cultivated; and that when necessary, it must be used aggressively and with determination.

In the next several years, we saw the creation of well-funded and influential think tanks, increased lobbying groups, and more, all designed to take over the political process and steer the policy regimes away from traditional social democratic ends towards outcomes that empowered capital and reduced the capacity of workers to defend their interests.

While the Right agenda had a lot of money thrown at it, it was also strategically superior in conception because it began with the notion that “short of revolution”, the legislative process had to be steered in a particular direction.

The Right knew that if it wanted wide-scale deregulation and the power of trade unions to be diminished then it had to work to change the legislative decision-making.

The idea that the so-called free market would just materialise out of thin air as some natural state was not intrinsic to the thinking of the Right. They may have used the ‘free-market’ concept in a metaphorical sense but they knew damn well that the state would have to be co-opted to create the conditions amenable to their interests.

They also knew that if the state resisted and continued to support a more equitable distribution of income and continued to support the retention of workplace protection for workers etc, then capital would have to continue to work within that constrained environment. Short of revolution that is.

In some nations, as we saw on September 11, 1973 (Chile), capital could get away with revolution by trashing the democratically elected government and installing, in its place, a vicious and murderous puppet regime whose sole purpose was to repress freedom and advantage capital.

But in most nations that route was not possible and so capital had to work strategically to manipulate the political process in order to co-opt the legislative process.

Wolfgang Münchau’s latest offering notes that history tells us when “centre-left parties” become “ever more centrist, ultimately supporting deflationary economic policies” they rapidly lose electoral support and allow more extreme parties to take power.

He uses the example of the “SPD in the Weimar Republic”.

In the current era, he notes that:

Several social democratic and socialist parties in the EU have supported austerity policies since the financial crisis and are now paying the political price.

He also makes the point that I have reiterated regularly that while so-called progressive political parties (like the SPD in Germany) may extol the virtues of “higher infrastructure investment”, they:

… cannot deliver any of this because of its commitment to a balanced budget.

When past national Greens leader in Australia told me that it was too politically difficult to challenge the neo-liberal macroeconomic consensus (even if my criticisms of that consensus were valid), it just distracted voters from their main message, which was unambiguously progressive in both the social and environmental context.

I pointed out to that leader that by accepting the austerity narrative as the norm for responsible fiscal conduct, even if his party gained office (which it will never do in our two-party system), they would be unable to initiate their progressive social and environmental agenda because they would have hamstrung themselves in a neo-liberal macroeconomics.

That is – the essential problem facing so-called progressive political parties – they must extricate themselves from the mainstream macroeconomic consensus and adopt Modern Monetary Theory (MMT) as the basis of their understanding of the capacities and opportunities that a nation state has when it issues its own currency and floats it on international currency markets.

Wolfgang Münchau notes that only the British Labour Party under Jeremy Corbyn is “the only established political party that offers” to introduce a large public infrastructure investment program that offers “a chance of ending our post-crisis malaise”.

In terms of the Eurozone, he writes:

… the choices are even more extreme. Eurozone citizens only have two paths towards more investment. The first is exit from the euro, the only legal way for a country to escape the fiscal rules that constrain investment at national level. It is the choice offered by extremist parties.

The second option would be a eurozone-wide investment programme, centrally administered, funded by the issue of common debt securities or, more crudely, by printing money. The issues of eurobonds and debt monetisation are deemed politically unrealistic, given Germany’s opposition. So unless you opt for extremist parties, there is no real-world choice.

He acknowledges that Jean-Claude Juncker’s much touted investment program, which allowed him to con his way into the Presidency of the European Commission, “has turned into a smoke and mirrors exercise, an underfunded macroeconomic irrelevance”.

I wouldn’t have expressed it in this way because it implies it had credibility from the start. In fact, it was always an irrelevancy given the ridiculously low funding commitment and the quid pro quo that was expected to be given by the Member States in return.

The overall point of Wolfgang Münchau’s article is that he is “certain”:

… that the overwhelming consensus in favour of centrist libertarian economic polities is breaking down, and that will have an impact on how we come to regard leaders like Mr Corbyn.

When the British public voted for Brexit, I tweeted:

1. June 23, 2016 – Looks like it will be a great result for UK. Now British labour has to abandon its neoliberalism & provide people with a progressive future.

2. June 23, 2016 – It’s going to be a long haul. It took decades for the neoliberal to dominate.

3. June 30, 2016 – I hope the British Labour Party membership deselects all MPs that voted no confidence in their leader and expunge the Blairite disease.

4. September 9, 2016 – No one promised a MMT utopia – just space for progressive politics to feel if they could summon leadership & vision.

In between, there were tweets in response to these saying I was delusional; pointing out that the neo-liberals remained in charge, and some claiming that the EU was a progressive force in the UK (read today’s comments on past blogs for more of that nonsense).

The point is that the Brexit vote provided the scope for a progressive leadership to stand up and start leading for the first time in may be 40 years.

In Britain, the British Labour Party abandoned a progressive agenda in the mid-1970s when it fell prey to the Monetarist logic. I have extensively documented that surrender as part of a series of blogs in this series (see below).

The surrender occurred progressively throughout Europe and the rest of the world in the decade or so that followed.

The patent failure of that strategy – the adoption of neo-liberal macroeconomic policies – thinking it would keep the amorphous global capital markets on side, signals the need for a major rethink in the way the progressive side of politics understands macroeconomics, in general; and the relative power position of the state against capital.

It also provides worker movements (such as, trade unions) with a motivation to develop new ways to reassert their position in the capital-labour conflict.

A progressive agenda will require both levels of activism to occur. That is, a change in the outlook of political parties representing worker interests, and, a change in the way workers represent their own interests in the industrial and consumption spheres.

Note I broaden the concept of worker struggle beyond the industrial sphere, which, in effect, means that new forms of organisation, that target the consumption sphere, will be required.

This brings me to the second article of interest, which appeared in the Jacobin magazine article (September 29, 2016) – Workers of the World.

It covers an interview with US sociologist Beverly Silver on the prospects of the trade union movement and worker struggle in general.

It is historically informed, as is Wolfgang Münchau’s analysis, and provides a hopeful agenda for working class struggle that goes beyond the way progressive politicians (who allegedly represent the political domain of this struggle) are currently behaving.

The first point is obvious. Trade union membership has fallen dramatically in many countries over the neo-liberal period.

The OECD say that (Source):

Trade union density corresponds to the ratio of wage and salary earners that are trade union members, divided by the total number of wage and salary earners … Density is calculated using survey data, wherever possible, and administrative data adjusted for non-active and self-employed members otherwise.

In 1960, trade union density in Australia was 50.2 per cent. In the US it was 30.9 per cent and in the UK, it was 40.4 per cent. by 2014, density had fallen to 15.5 per cent (Australia), 10.7 per cent (US), 25.1 per cent (UK).

However, density rates have risen in Belgium, Denmark, Finland, Italy over the same period, which counters the generalisation of trends that are particularly concentrated in the Anglo-speaking nations.

Beverly Silver traces the ways in which “capital moved to restructure — reconfiguring the organization of production, the labor process, sources of labor supply, and the geographical location of production” to maintain control.

These dynamics or in the words of “David Harvey … spatial fixes”, were in response to the threat posed by “strong labor movements”.

Capital:

1. moved “to lower-wage sites”.

2. reduced “their dependence on workers by accelerating automation”.

3. moved “capital out of trade and production and into finance and speculation as yet another means of reducing dependence on the established, mass-production working class for profits.”

The neo-liberal period has been marked by all three “fixes” and it is essential to understand that:

… what looked like a sudden collapse in the power of organized labor in the United States in the eighties and nineties was actually rooted in decades of restructuring on these multiple fronts that began in the mid-twentieth century.

She argues that these “capitalist fixes unmade the established mass-production working class, but they simultaneously made new working classes”.

Capitalism hasn’t done away with the working class, even though the narrative from the think tanks and the mass media are designed to disabuse us of the notion of the existence of a working class.

Capitalism, by its very definition, requires a working class to produce surplus value as the ultimate source of profit.

What Beverly Silver reinforces is that the nature of the working class – and the terrain in which it labours – has been manipulated by these “fixes” but remains a latent force for labour struggle.

The “restructuring, co-optation, and repression” of the workers has not eliminated – nor will it ever eliminate – their necessity in the capital pursuit of surplus.

Silver points out that:

… the co-optation of trade unions and working-class parties — their incorporation as junior partners into national hegemonic projects and social compacts — also played an important role.

This is a dominant theme of our new book and also resonates with Wolfgang Münchau’s message.

Beverly Silver also notes that:

… the movement of surplus capital into finance and speculation is also contributing in a major way to the increasing salience of exclusion. Finance — especially those financial activities that are not adjuncts to trade and production — absorbs relatively little wage labor; more importantly, it derives profits primarily from the regressive redistribution of wealth through speculation, rather than the creation of new wealth.

This is one of the reasons why in our progressive manifesto we advocate a regulative approach to financial market reform rather than trying to manipulate it via the price system (for example, ill-conceived Robin Hood taxes, which seem to dominate progressive thinking with respect to bringing the financial markets to heal).

A truly progressive agenda has to legislate against “those financial activities that are not adjuncts to trade and production” – that is, make them illegal.

They serve no productive value, create no new wealth, and have a tendency to run out of control through greed, corruption, and incompetence, which then reverberates negativity throughout the real economy. The GFC!

Beverly Silver distinguishes between “structural power and associational power” when it comes to worker capacity.

The latter is “is the capacity to make gains through trade union and political party organization” whereas:

Structural power is the power that comes from workers’ strategic location within the process of production — a power that can be, and often has been, exercised in the absence of trade union organization.

As the associational capacity has slumped (with falling trade union density) – although we should see that as a one-way trend to zero – progressives will have to increasingly rely on the structural power to defend its interests.

Silver says:

There are two main types of structural power: workplace bargaining power and marketplace bargaining power.

The former relates to strategic positions in the actual workplace. Workers can still bring the production process and the surplus value creation process down if they organise correctly.

Silver believes that while progressive bemoan the loss of worker influence due to automation etc, the reality is that “workers’ power at the point of production is undoubtedly, on balance, increasing.”

How so?

1. “the spread of just-in-time methods in manufacturing … no buffers or surpluses are built into the production process.”

2. “a relatively small number of workers … can bring an entire corporation to a standstill.”

3. “workers in logistics — transport and communication — have significant and growing workplace bargaining power tied to the cascading economic impact that stoppages in these sectors would have.”

4. “notwithstanding the almost universal tendency to think of globalization processes as weakening labor, the potential geographical scale of the impacts of these stoppages has increased with globalization.”

But the reality is that the exercise of worker power at the point of production is always strongly resisted by capital which “becomes extremely hostile and … moves to a more repressive strategy”.

That doesn’t mean that unions cannot exercise action in this sphere to advantage their membership but it does mean that they cannot afford to become “too successful and deliver to much their base”.

Which also suggests that the struggle has to shift “from the point of production to the streets or community”. That proposition was put to Beverly Silver who who said that:

1. “Struggles at the point of production continue to be an important component of overall world labor unrest.”

2. But it had to be recognised that “the excluded — the unemployed and those with weak structural power — have no choice but to make their voices heard through direct action in the streets rather than direct action in the workplace.”

One of the shortcomings of the traditional union movement in the 1970s was its failure to embrace solidarity with the rising pools of mass unemployment is the first wave of Monetarist posterity was implemented.

By unifying the struggle for jobs by the unemployed and the struggle for better wages and conditions by those in employment, the progressive movements would enhance their bargaining power against repressive neo-liberal government policies and directly against the repressive push of capital.

Silver gives the example of the “Flint factory occupation and subsequent 1936 and ’37 strike wave” – as a joint effort of “point of production” struggle simultaneously impacting with the “struggles in the streets of unemployed workers and community solidarity”.

She notes that the ideal would be, following the vision outlined by Marx and Engels in the Communist Manifesto, for the “trade unions to connect with the unemployed in the single organization”, to unify “struggles at the point of production and struggles in the street”.

In part of this quest for unity must be the creation of “a mass political movement”, which purges the neo-liberal tendencies of the current social democratic political institutions.

She makes another interesting point – that environmental constraints that assumed “nature is a free good” and underpinned the “mass production …[and] … the promise of working-class mass consumption” is no longer viable.

In other words, using what I have called in the past, generalised Keynesian expansion to maintain full employment is no longer going to be a plausible model of sustained growth.

A progressive public sector will have to do be more strategic in its spending targeting to prioritise ‘green’ activities and, increasingly, reallocate the national productive resources to these activities.

That will require a fundamental shift in the way we think of productive activity and efficiency.

Please read the following blogs – Towards a progressive concept of efficiency – Part 1 and Towards a progressive concept of efficiency – Part 2 – for more on this.

Conclusion

There is a lot to consider in these two articles. The two main messages are:

1. Progressive political parties will have to embrace MMT as a core understanding of the way the monetary system operates and develop policies based on that understanding rather than be corralled by a neo-liberal fantasy depiction of the budgetary system which biases policy towards austerity and directly undermines worker prosperity.

2. Workers need to be educated on their structural power options and work out strategies to enhance their point of production power. In part, this will require them to elect governments that repeal the raft of anti-union legislation that outlawed secondary boycotts and other practices that allowed trade unions to redress the imbalance between labour and capital.

The series so far

This is a further part of a series I am writing as background to my next book on globalisation and the capacities of the nation-state. More instalments will come as the research process unfolds.

The series so far:

1. Friday lay day – The Stability Pact didn’t mean much anyway, did it?

2. European Left face a Dystopia of their own making

3. The Eurozone Groupthink and Denial continues …

4. Mitterrand’s turn to austerity was an ideological choice not an inevitability

5. The origins of the ‘leftist’ failure to oppose austerity

6. The European Project is dead

7. The Italian left should hang their heads in shame

8. On the trail of inflation and the fears of the same ….

9. Globalisation and currency arrangements

10. The co-option of government by transnational organisations

11. The Modigliani controversy – the break with Keynesian thinking

12. The capacity of the state and the open economy – Part 1

13. Is exchange rate depreciation inflationary?

14. Balance of payments constraints

15. Ultimately, real resource availability constrains prosperity

16. The impossibility theorem that beguiles the Left.

17. The British Monetarist infestation.

18. The Monetarism Trap snares the second Wilson Labour Government.

19. The Heath government was not Monetarist – that was left to the Labour Party.

20. Britain and the 1970s oil shocks – the failure of Monetarism.

21. The right-wing counter attack – 1971.

22. British trade unions in the early 1970s.

23. Distributional conflict and inflation – Britain in the early 1970s.

24. Rising urban inequality and segregation and the role of the state.

25. The British Labour Party path to Monetarism.

26. Britain approaches the 1976 currency crisis.

27. The 1976 currency crisis.

28. The Left confuses globalisation with neo-liberalism and gets lost.

29. The metamorphosis of the IMF as a neo-liberal attack dog.

30. The Wall Street-US Treasury Complex.

31. The Bacon-Eltis intervention – Britain 1976.

32. British Left reject fiscal strategy – speculation mounts, March 1976.

33. The US government view of the 1976 sterling crisis.

34. Iceland proves the nation state is alive and well.

35. The British Cabinet divides over the IMF negotiations in 1976.

36. The conspiracy to bring British Labour to heel 1976.

37. The 1976 British austerity shift – a triumph of perception over reality.

38. The British Left is usurped and IMF austerity begins 1976.

39. Why capital controls should be part of a progressive policy.

40. Brexit signals that a new policy paradigm is required including re-nationalisation.

41. Towards a progressive concept of efficiency – Part 1.

42. Towards a progressive concept of efficiency – Part 2.

43. The case for re-nationalisation – Part 2.

44. Brainbelts – only a part of a progressive future.

45. Reforming the international institutional framework – Part 1.

46. Reforming the international institutional framework – Part 2.

47. Reducing income inequality.

48. The struggle to establish a coherent progressive position continues.

49. Work is important for human well-being.

50. Is there a case for a basic income guarantee – Part 1.

51. Is there a case for a basic income guarantee – Part 2.

52. Is there a case for a basic income guarantee – Part 3.

53. Is there a case for a basic income guarantee – Part 4 – robot edition.

54. Is there a case for a basic income guarantee – Part 5.

55. An optimistic view of worker power.

The blogs in these series should be considered working notes rather than self-contained topics. Ultimately, they will be edited into the final manuscript of my next book due later in 2016.

That is enough for today!

(c) Copyright 2016 William Mitchell. All Rights Reserved.

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    6 Responses to An optimistic view of worker power

    1. Wayne McMillan says:

      Hi Bill,
      I couldn’t agree more with your summary in the above article on worker power. Ordinary workers need to unite at a community level, an enterprise level and at national level to lobby for industrial legislative change that allows unions to operate fully and powerfully as true representatives of labour. Having a coherent, alternative macroeconomic strategy to neo-liberal economics, based on sound, MMT principles is a must.

      In addition, accords with political parties that restrict the legitimate bargaining power of unions and their members will never deliver the best outcomes for workers. Accords inevitably require workers to forgo real wage increases from productivity gains and allow employers to take those gains in increased profit shares, larger salaries and increased perks and lurks in the form of shares and options for senior managers. In effect workers get screwed!!
      Regards
      Wayne

    2. mahaish says:

      heres a prediction.

      its not the left that’s under threat with the current framework in play, its the neo liberal right.

      the arithmetic logic that bill and mmt point out makes it so. to paraphrase david Suzuki, the economic neo cons have their own pitchfork that going to come back and poke them in the eye.

      when you support a policy framework based on theoretical foundations that don’t understand banks, and subsume economic rent as another category of capital, the numbers for any party using the framework won’t work out, and we get a crisis.

      and the next crisis sometime between 2017 and 2025 is going to be biggest problem we have had since 1930 perhaps 1890.

      the next 10 years isn’t going to be about the splintering of the left, its going to be about the splintering of the right. the current paradigm will be over thrown, and the left who are more likely to be the natural constituents of a new approach will have long periods of power.

      and bill can be treasurer ;)

    3. Keith Newman says:

      Dear Bill,
      Thank you for the interesting labour-related post. I completely agree with Ms. Silver. The union I worked for did commit substantial resources to do some of the things she proposes: engage in a very popular country-wide campaign to preserve (Canadian) Medicare despite representing no health care workers, reduce working time to spread good jobs around, welcome part-time and marginally employed workers into the union, fight to include pharmaceuticals in Medicare. While it was understood that, if successful, some of the benefits would accrue to union members, it was clear that the main beneficiaries would be the most disadvantaged parts of the population: non-union, unemployed, low income.
      It is not an easy fight to maintain since it requires a long term commitment to apply limited resources to a broad struggle and short term imperatives tend to take precedence. Nonetheless it can be done and hopefully will happen more if conditions for the working class become more dire.

    4. Mike Ellwood says:

      Bill,

      In your list of articles in the series related to the book, the link for
      “39. Why capital controls should be part of a progressive policy.”
      seems to be a bit broken.

    5. bill says:

      Dear Mike Ellwood (at 2016/10/07 at 7:20 am)

      Thanks very much. The correct link is http://bilbo.economicoutlook.net/blog/?p=33943

      best wishes
      bill

    6. First, it’s a macro problem rather than a micro problem.

      Second, from my US perspective, I see two fundamental drivers.

      The first is the public’s distaste for inflation. So even when Trump declared the US can always make it’s
      $US payments, Clinton fired back with Weimar and Zimbabwe.

      The second is about the ‘tipping point’ where more people are ‘takers’ of state $ than ‘givers’ of state $.
      And as takers dominate they vote themselves ever increasing $ until the whole thing collapses.
      The statement is then made, and with no pushback, that something like half the population doesn’t pay any income taxes, so we’re now passing that tipping point and we’re doomed if nothing is done to reverse it asap. Interestingly, they don’t call FICA taxes, highly regressive taxes set up to ‘fund’ Social Security and Medicare, which are the largest US tax and if ‘included’ would push the number of tax payers well over 50%. And, also never discussed, that number goes down when unemployment goes up, so there would be a vested interest in keeping employment high to remain above that tipping point.

      Also note that ‘Mitchell style’ macro full employment policy is what then insulates govt. from global markets, and also in general functions to support workers. Or, said another way, unemployment policies are what create the vulnerabilities.

      To conclude, the fundamental obstacles to MEP (Mitchell employment policy) are the fear of inflation and the threat of the ‘takers’, and MEP is the ONLY understanding of inflation (the currency is a public monopoly, govt is price setter, etc) and at the same time functions to increase total employment, with those employed being the real ‘givers’.

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