Capital & Class. - 1984. - Issue 22 issue 22

THE CURRENT CRISIS IN ISRAEL Nira Yuval-Davis

The resignation of Prime Minister Begin triggered the collapse of Israel's `Correct Economy', adding an economic crisis to the chronic military and political problems facing the Israeli state. This article outlines the regional and internal contexts of the Israeli crisis showing how the continuities of Zionist history prevent the existing political parties finding a resolution either for internal problems or for Palestinian resistance. COMMUNITY activists in various Israeli

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slums, where oriental jews live, organised a mass demonstration in October 1983 . It was called by its organisers `the demonstration of giving back bribe' . As a symbolic gesture, they returned to the government a colour TV set and a video . The mass buying of such gadgets at artificially low prices was one of the major sources of the populist popularity of the Begin government. It was initiated shortly

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6 before the last election campaign, in 1981, by Yoram Aridor the finance minister . In a typical doublethink language (Israel's invasion of Lebanon was called `the operation of peace in Galilee) the policy was dubbed `the Correct Economy' . It flooded Israel with cheap imports to encourage consumerism, controlled artificially the value of Israeli money, and allowed salaries to rise on the basis of an index of prices which more than compensated for an annual inflation of 130 per cent. The initial `success' of the `Correct Economy' was such that Japanese importers suspected their local import agents of reselling to Europe - no country with Israel's population could have such a large market . Intelligent export manufacturers, who could not survive in these economic conditions, became instead importers of foreign goods . These days are over. The `Correct Economy' has collapsed, after causing major damage to the already surrealist Israeli economy. In October 1983 alone prices rose by some 50 per cent . Inflation is now expected to soar to 300 per cent . The ability of salaries to rise in compensation is failing. Israel is entering a period ofeconomic austerity . The collapse was triggered by Begin's resignation which brought to the fore the existing social and political tensions of Israel. The demonstrators `giving back the bribe', told journalists how cheated, stupid and naive they felt for allowing themselves to be hoodwinked by so transparent a policy as the `Correct Economy' . But, would they now vote Labour? The disgust on the faces of the demonstrators became even more pronounced- `to vote for them? Never' . There is a long history to this sentiment. In times of workers' unrest in Israel in the 1960s, the dockers burnt the red flag in protests because it symbolized the control of labour exercised through the Labour Party, the state and Zionist institutions .

The disillusion of workers with the major parties could provide space for a strengthening of the left. But there is no real left in Israel, and what little there is is even more depressed than usual . The liberal centre is in similar depression . People are talking, as they have for a dozen years, of establishing a new party . But the talk is not convincing. As a result of the way political party machines work in Israel, previous attempts to start new parties have eventually failed . The only vibrant political movement at the moment is the protest movement of those who refuse to serve in the army in Lebanon . But they are relatively few. The average Israeli male (women do not, as a rule, serve in front areas or in the reserve army) curses but continues to go to serve in the army and in the reserve (up to two months a year) . The threat to soldiers' investments from the economic crisis and the spread (as in Vietnam) of dope smoking represent a more widespread challenge to the military than conscientious objection . Israeli society is in a crisis. It is not that the regime is going to collapse overnight . There is no viable alternative to take its place, although the conditions for a Sharon-type dictatorship improve as the idea spreads that a'strong man' could `get us all out of the mess we are in' . But this may never happen, Shamir's popularity is growing now that people get used to seeing him as a prime minister, and the regime may be able to hobble along . The clue to the relative stability of the regime was given by an economics professor at the Hebrew University . A journalist came to interview him on the question of `What will happen now' . The professor sat for more than half an hour analysing various economic alternatives, or rather non-alternatives . Finally he stopped, turned to the journalist, shrugged his shoulders and said to him `But we both know that none of these possibilities will happen . Eventually the USA will give Israel

Behind the news : Crisis in Israel

enough money to pull it out from the mud in which it is stuck and things will continue more or less as before .' The importance of this story lies not so much in whether or not things will happen the way the professor envisages, but in its indication of the extent to which even orthodox economists are aware how political is Israel's political economy, rendering meaningless traditional national economic models of supply and demand . Soon after Begin came to power, Milton Friedman was called in as an adviser . Even he calculated contributions from the us government and the Diaspora Jewry to Israel as part of the GNP . Apart from the Vatican, no other economy is so dependent on ideologically motivated contributions from abroad . In November US congress approved increased economic aid to Israel . In 1983 Israel, with only 3 million inhabitants received 20 per cent of all American foreign aid. In other words, each Israeli family received the equivalent of 2400 dollars from the us government . Begin came to power six years ago after more than thirty years during which the Labour parties controlled both the zionist movement and the Israeli state . Whilst the Begin regime made more intense and extreme certain processes which had begun under labour and whilst certain basic choices were made after the 1967 war, there are many important continuities in zionist history, the present growing political polarization in Israel notwithstanding . This article will outline some of the major characteristics in this history, both in the regional as well as in the internal context in Israel, in order to be able to understand more fully the various dimensions of the present crisis . I shall not enter here into the historical debate concerning the causes and justification of the rise of zionism as a `solution' to the `Jewish problem'; nor will I analyse the present situation of the Palestinian movement or the Lebanon - all these are important

subjects and warrant articles in their own right - my analysis in this article is geared towards better comprehension of the present internal crisis in Israel . I begin this analysis by examining the history of the Israeli conflict with the Palestinians and with the Arabs in general, because it was in this context that the most important historical choices of the zionist movement have taken place . The regional context It was not until 1967 that Israel ruled directly a great number of Palestinians, but the conflict with them started with the first zionist settler in Palestine . Until 1948 the colonization of Palestine by the zionist movement was done under the formal rule of the Ottoman empire and then the British mandate . The zionist colonization of Israel is sharply distinguished from other colonizations; the zionists did not want to exploit the dispossessed Palestinian peasants . It wanted them out and away, in order to create an autonomous Jewish class society . They, and especially the dominant labour zionist movement, did not want to use them as cheap labour - the creation of a Jewish working class and `peasantry' was considered to be part ofwhatJewish liberation was about. In more general terms, and this was emphasised by both labour and right wingzionists (out ofwhom eventually the Likud party grew and whose strategy put more emphasis on military-political struggle than the gradual crystallization of the settlement process), a creation of an exclusively Jewish society strengthened the zionist political claim for national sovereignty over Palestine which in the Jewish tradition was their country of origin two thousand years ago . The `conquest' of l land ; 2 production and 3 the labour market, were the three exclusivist slogans which formed the strategy of the zionist, especially labour zionist settlement in Palestine . Land was

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8 purchased from absentee landlords, and the local population who worked the land, either left or were forced to leave . This put the zionist endeavour in a total confrontation with the Palestinians from the beginning. Palestinian resistence started on a sporadic local level and then developed into a national movement which fought the British and the zionist settlers both . Its power was virtually broken before WW2 started, but because of the war the British had to start making concessions to them in questions of Jewish immigration to the country, just when the pressure of Jewish refugees became acute . This led to a zionist resistance to the British mandate and to the eventual UN resolution of 1947 which spoke of dividing Palestine into Jewish and Palestinian states, although even in the part of Palestine which constituted the planned Jewish state, Jews were then barely a majority. War was declared in 1948 by the Arab states against the established Jewish state . Their defeat provided an interim solution to this demographic problem . The Palestinian state was never established - most of its territories were divided between Israel and Jordan and most of the Palestinians within the boundaries of the new Jewish state fled or were expelled and became refugees . Their lands were annexed by the state and given exclusively to Jewish settlements . Two opposing policies were directed towards the few remaining Palestinians, most of them villagers, who were the first Palestinians to be ruled directly by Israel . On the one hand, there were formal attempts to keep them separate and excluded from the new Jewish civil society by keeping them under military government and restricting their movements . On the other hand, various legal and illegal mechanisms continued to operate to confiscate most of the lands these Palestinians owned for Jewish use . Inevitably, by the

'60s the Palestinians became incorporated at the bottom of the urban and rural labour market as unskilled labourers that is, exploited rather than just excluded . The 1967 war changed all that . For the first time Israel directly ruled not only a few hundred thousand Palestinians but a number equivalent to more than a third of its own population. Although the tactics applied to them have been basically the same as to the original Palestinians in Israel - i .e . confiscation of land for Jewish settlements and exploiting them as cheap unskilled labour power, the difference in the size of Palestinian population has had its own effects . Part of the effect is related to the Israeli internal class structure and the structure of the economy (a question to which I shall return) . Part of the effect has been that these numbers have proved too large to digest. This, plus international pressure prevented Israel from formally annexing the occupied territories and depriving the Palestinian inhabitants of even the minimal legal and social rights formal citizenship in Israel would have provided (although the level of income of many of them rose as a result of becoming wage labourers) . This and the emergence of a Palestinian national movement based in the refugee camps outside Israeli rule, have encouraged the local population to continue to resist the Israeli occupation for 15 years now. In Israel itself, the discussion concerning the fate of the occupied territories re-opened debates that were thought buried since the establishment of the state between what is popularly known as hawkish and dovish, or right and left wing zionists . For the right wing zionists, the main issue is sovereignty over land . The dream of Greater Israel, for them, is being realised step by step, and any part of `Eretz Israel' (The land of Israel - to some the whole of mandatory Palestine, to others including Jordan) which is `liberated' should be held fast to . The Palestinians

Behind the news : Crisis in Israel

do not really matter, as long as the Jews rule. The left-wing or dovish zionists, share with the right wingers the zionist aim of a Jewish state in Palestine, but formal democracy is important for them. This cannot exist with a great number of Palestinians, so they are ready to compromise and have a smaller Israel, as long as the Jewish majority is not threatened . (It is important to emphasize, however, that it was the 'dovish' labour party, still in power, that started the process of Jewish settlements in the occupied territories, supposedly for `security' reasons . The Likud party only intensified these processes .) A third position is being developed by Fascist zionists, like the movement of Rabbi Kahana, the Thia party and General Sharon. This position sees the solution in mass expulsion of the Palestinians from the West Bank (in the first instance?), transferring them into Jordan, which will become a client state of Israel . The `Sharon Plan', as this plan is known in Israel, concerns then, not only a Jewish domination in Palestine, but gives Israel a mini imperial power role in the Middle East as a whole . Stability and peace with the other Arab states which surround Israel is a precondition, however, for this plan to `solve' the `Palestinian problem' . This is the perspective from which the initiative for the Lebanon war has to be seen . Until the Camp David agreement the confrontation between Israel and the Arab world had been total . For various reasons - arab nationalism, Islam, xenophobia, internal power considerations and identification with the Palestinians, the Arab states resented and fought against Israel . The defeat in the 1948 war added national humiliation, and since the 1956 Suez operation, in which Israel fought with Britain and France, Israel is identified as the `watchdog of imperialism' against which the `progressive' arab

national movement has fought. In 1967, however, for the first time except for a few months in 1956, Israel occupied directly arab territory (parts of Egypt and Syria) other than Palestinian, and added another dimension to the conflict. The Camp David agreement, which settled the direct conflict between Israel and Egypt, marked the point when Israel turned from a strategy of crystalising and expanding its hold only in Palestine to one of directly involving itself in the class and national power struggle in the Middle East as a whole . By invading Lebanon, Israel wanted to break the power of the independent Palestinian movement based in Lebanon in order to break the resistance in the occupied territories, but it also wanted to tip the balance in the internal power struggle in Lebanon between the moslims and christians in favour of the latter, in order to make Lebanon an ally. The invasion should have brought peace to a second front so that Israel's energy could turn towards a third, Jordan . While the first aim, breaking the PLO seems to have been achieved (although by no means is the Palestinian resistance to Israel in the occupied territories over), the second one has not. Israel's reliance on the Phalangists to do its work, after Israel had opened the way, proved to be over optimistic . Israel had to remain in Lebanon, involved in an endless military operation of the kind it cannot afford (it costs Israel about a million dollars a day) with the growing disapproval of Israeli society who cannot be deluded that this is another war required for Israel's survival . Moreover, the main beneficiaries from Israel's invasion seem to be the Syrians, who also wanted, for their own goals to break the power of an independent PLO and who have come, rather than Israel to be the main controlling power in Lebanon and in the Arab world as a whole. The way to the `Sharon plan' mentioned earlier seems as far away as before the Lebanon

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10 war . Moreover, the Lebanon war has created growing tensions between Israel and the USA, their aid to Israel notwithstanding. Israel has never been a puppet of the USA, as it has never been that of the British. However, the immanent conflict of interests between the zionist movement and the local and surrounding population has created an objective correspondence of interests at most times between it and the dominating imperial power in the area at the time. Unlike other regimes in the area, Israel could be relied upon to continue to ally itself to the imperial power even if a change of government occurs . Moreover, because of the excellence of the Israeli military, the Israeli army could be relied upon to fight for its own, and for the USA's interests (in contrast, at least until very recently, to the situation in Vietnam, for example, where American soldiers had to fight by themselves) . The importance of Israel to the USA, however, extends beyond its military power and includes other services in return for the US government's support of Israel. In the early '60s, Israeli experts were sent to developing countries to present an alternative model of modernization to the communist one . After 1967, when this was no longer possible, Israel gradually became a major armament supplier to various dictatorships in the Third world which the CIA wanted to encourage. This helped to develop Israel's military industries which are by now the most important export of the Israeli economy (the only one which was not affected by the `Correct Economy') . In addition Soviet armaments captured in Israel's various wars (the latest being from Lebanon) were exported to countries where the CIA does not want it to be known that western armaments were supplied. Israel is the only country other than the USA in which American aid money can be spent.

But there seem to be growing tensions between Israel and the USA. The most visible is the fact that American soldiers and not only Israeli ones are getting killed now in the Lebanon . But there are also others . The Sharon plan is in contradiction with American interests which expect the USA to be the major imperial power in the area - Reagan's plan which was developed as an alternative to the Sharon plan and concerns a possible federation between Jordan and an autonomous West Bank under American sponsorship, indicates this . Moreover, the Americans in their present strategy want to engage local forces to defend their interests as rapid deployment forces (similarly to the West Indian forces which helped to `legitimize' the Grenada invasion) . Egyptian forces are too far away . The US governmentwas planningto create Jordanian deployment units . This plan was thwarted by Israel's friends in the Congress (and of those there are many the Israeli lobby is the most organised one in the USA), but the reality of possible diverging interests is there . Continued Palestinian resistence in the occupied territories, no forseeable resolution of Israel's involvement in the Lebanon with growing human and economic price to pay for it, and no clear possible strategy to solve these issues within the constraints of basic Israeli policies, constitute then the regional context to Israel's present internal crisis . I shall turn now to internal developments in Israel, to show how external circumstances have shaped the internal developments .

The internal context Israeli society developed a capitalist class structure in the 1950s, after the establishment of the state and after the majority of the Jewish population had arrived in Israel . Prior to the 1950s the zionist settlers

Behind the news : Crisis in Israel were composed mostly of zionist volunteers, predominantly young and single or with young families, mostly male, and mostly from East European petitbourgeois origin . The economy was organised to ensure the survival and expansion of the zionist stronghold, with collective and cooperative endeavours being used at the geographical and economic frontiers as the most efficient forms of organizing in the cut throat competition with the indigenous Palestinian population, and with the international zionist movement supplying the financial and human resources for that. After 1948, the nature of Jewish immigration to Israel changed . Post WW2 European refugees and whole middleeastern jewish communities unsettled by the growing conflict between Israel and the arab world constituted the overwhelming majority . The motivation of these refugees was no longer explicitly ideological and the cultural and political background of the vast majority of them was very different to that of the original zionist settlers . The dominant political and economic positions, however, remained mostly in the hands of those who came in the pre-state period and their children . This was ensured by a strategy allocating both the new immigrants and the economic resources required to `absorb' them to various political parties according to the existing proportions of power. This effectively ensured long term political control over those immigrants and thus ensured internal political stability for many years . At the same time, Israel was gradually incorporated into the international capitalist system and the newcomers have been integrated as the new Israeli working class . As a result of these two processes, the Israeli class system was enmeshed in its ethnic divisions - most of the occidental Jews were at the top and the orientals at the bottom . The annexation of the occupied

territories in '67 changed this class 11 structure somewhat . The Palestinians have come to occupy the very bottom of the class ladder, at least in the private sector of the economy. Israel has always had a large public sector in the economy . The two major employers have been the government and the Histadrut. The Histadrut, contrary to what many think, has never been a trade union organization. It has a department for trade unions, but it has in fact been the major organizational tool for conquering the labour market for Jews . (In fact, until the 60s non Jews were legally forbidden to join it .) It has various welfare services like health and pension insurances, organizes the various co-operatives and develops its own large companies, some of which have become multinationals and some of which work with other companies, including South African. In the Histadrut, as in the government sector-the managers have been virtually all occidental Jews, and the oriental Jews had them for their bosses . Similarly, the Jewish agency which supplied housing and loans to new oriental immigrants were also in occidental hands . The private bourgeoisie in Israel developed out of the sponsorship of the state. Sapir, the famous finance minister in the '60s had a small black book in which he wrote to whom to give special subsidies and concessions from taxation, as encouragement for investments in Israel. Most of this bourgeoisie were also occidental . The picture changed after '67, on two grounds . First of all the radical expansion in markets as well as the huge building projects of settlements and of military positions (like the Bar lev line on the Suez canal) created an economic boom, in which small private entrepreneurs and skilled labourers like buldozer drivers and building contractors could accumulate capital . In addition new sources of cheap labour for super-explotation were

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available . More and more oriental Jews moved to the private economy, or aspired to do so. They directly benefited from the occupation. In the public economy, however, more and more industries were associated with military production Palestinians were excluded and the managerial strata continued to be basically occidental . This was the material basis for the growing opposition among oriental Jews to the Labour party and their turn to the right wing Likud party. Begin is also an East-European Jew, as is most of the elite of his party, but he symbolized realistic opposition to the 30 years of unchallenged Labour party rule, that no newly formed oriental Jewish party could have achieved .

The rise of the Likud party to power, as a result of a leadership crisis within the Labour party and the general shift in ideology to the right, accelerated processes of repression of Palestinians and of Jewish settlements in the occupied territories but by no means started these processes . This process of escalation of existing tendencies was reflected also in the economic sphere . Israel always had an extremely dependent economy . Talks about 'economic independence' as a political goal were abandoned in the '30s . Economic rationality was always discarded when political or military operations were considered, whether it was subsidizingJewish



Behind the news : Crisis in Israel

immigration, Jewish settlement or war operations. More than half a billion dollars annually are contributed to Israel by world Jewry who treat Israel (erroneously) as long term insurance for a `rainy' antisemitic day ; about a billion is contributed to Israel annually since the 50s by West Germany, as collective (in addition to individual) reparations to the Jewish people for the Nazi holocaust . But most importantly of all, and growing more so, has been the American financial support, which has risen to at least 3 billion dollars annually. Israel's dependency on foreign capital became more crucial after the '67 war, when suddenly Israel had to maintain an army and administration on a territory three times larger than before and with the acceleration of settlements there . The Israeli economy did not have problems of employment, but inflation rose and reached heights of 30-40 per cent annually. Salaries in Israel were always indexed, but it was still a strain . When Begin came to power, the Israeli money was allowed to float against the dollar, and there was a general liberalization of financial policies, relaxation of travelling abroad, taxation etc . These policies, plus the growing military and settlement policies under the Likud brought the annual inflation rates to almost 150% annually, and every financial transaction was carried in real terms in dollar rates, including the indexed salaries . This `Correct Economy', brought into action towards the end of the first term of the Likud government, was intended to strengthen the populist (rather than bourgeois) appeal of the regime . Although the Israeli shekel continued to float, it had a fixed ceiling to its float (of 5% monthly) while the salaries continued to rise according to the index. This gradually raised the value of Israeli money vis a vis the dollar . As a direct result most of the Israel's private industrial and agricultural

export production was destroyed . 13 Another effect was that people who used to keep their savings in dollars started to look for other venues which would benefit from the `Correct Economics' . Banks became very popular in Israel . Everybody played the stock markets . As a result the banks themselves, especially the four major ones started to encourage people to buy their own stocks . They created other companies who discreetly bought the stocks whenever their value started to flounder, so that their return in real terms (apart from inflation) reached about 30 per cent annually, and more and more people invested their savings in the banks' stocks. Everything went well as long as Begin's popularity was great and as long as the growing gap between the real and controlled value of the Israeli Shekel was not too visible . The populist attraction of the Begin regime was very strong. Even policies which potentially have been against the interests of the oriental masses - for example centering building resources in the West Bank rather than in the slums and development towns - were neutralised, because young couples who wanted but could not afford comfortable new flats could get them under heavily subsidised conditions in the West Bank. The feeling of omnipotence and drunkenness with power which penetrated Israel after the 1967 war was only dimmed a little bit after the 1973 war, and came to dominate the mass mood. It focused in the charismatic halo of prime minister Begin and the security minister Erik Sharon, the popular slogan of King of Israel was given to both . It must be said, however, that this mood was not all pervasive in Israel . Growing numbers of occidental, middle class labour zionists saw with growing anxiety, not only their relative power diminishing, but also a growing gap between western democratic practices and the Israeli ones . (It is not that zionist Israel was ever a parlia-

Capital E5 Class 14 mentary democracy in the western sense it would take another article to explore the de jure and de facto apartheid practices immanent in Israel - but the absence of democracy was less visible when there was only a small non-Jewish minority) . They supported the policy goals - but they were repulsed by the means taken to fulfill them . The public catharsis happened after the massacre of Sabra and Shatila - huge demonstrations and counter demonstrations showed the growing gap in Israeli public opinion. For the first time an antigovernment Jewish demonstrator was killed by counter demonstrators. But the crisis started also among the pro-government masses, mostly around the forced resignation of Erik Sharon as a result of the public inquiry on the Sabra and Shatila massacre, in spite of the fact that the overall conclusion of the inquiry committee was a cover up for the government's responsibility . Suddenly the two `kings' were in conflict and the Lebanon war was not the quick brilliant victory everybody expected . Nevertheless, Begin won and the ranks were closed behind him . The real shock came with Begin's resignation and the way it took place . Suddenly the charismatic `king' was shown naked - an old, sick man who seemed not to know how to pull Israel out of the various messes he landed it in, who was shocked by parents blaming him for their sons' death in the Lebanon war and who has sunk into depression . The rainbow bubble of omnipotence seemed to burst. Everybody rushed to their banks to buy dollars as a big devaluation of the Israeli shekel seemed unavoidable . The most fluid source of money, of course, were the `safe' stocks of the banks . After a few days the banks found out that not only had they run out of dollars forcing them to rush abroad to buy more and more Eurodollars to be able to respect their

commitments, but also they could not continue to keep up artificially the value of their stocks. The rest, as they say, is part of history - the banks should have gone bankrupt, but the government bought for them enough money to save them from their fate, the public lost `only' 40 per cent of their savings, if they keep their stocks for five years, but beyond that there is now a general recognition that the `fete' is over, and while the major Israeli expenditure on the military and settlement is not going to be diminished, the consumerism is. . Taxation was put on travelling abroad, subsidies for basic foods are being cut and, unless going abroad, people are not allowed to acquire dollars . But even more important than the economic crisis itself is the fact that it epitomizes a much more general sense in the people - that basically things might continue to go on as they are, but that the `fete' is over. And things are going to continue not because they should continue in this direction, but because there is no other viable alternative given the basic assumptions of the regime - economic, political, military. And while continuing, the process of slow disintegration of the system will also continue . As Amos Oz, a well known Israeli author and liberal expressed it : `What will happen to us all - I do not know. Whoever has a solution, should stand up and tell us, and he had better hurry. The situation is not good '. I would like to thank my comrades in the Israeli anti-zionist left, & especially Moshe Machover, Avishai Ehrlich and Uri Davis for the help they have given me in discussing the issues raised in the article, and to Ben Crow from the C&C editorial collective who patiently bore with me and translated my idiosyncratic language into English . Needless to say, the responsibility is all mine.

ARGENTINA Ronaldo Munck This article examines the high cost of the failure of the military face of capital - its disastrous and brutal proimperialist economic policies at home, its `anti-imperialist' adventures overseas and the backlash to both. The author asks whether the civilian face of capital under the recently elected Radical Party will succeed any better, particularly in the first test of its `anti-imperialist' foreign policy - not the Malvinas issue but the IMF . THE RECENT victory of the Radical Party

in Argentina took most observers by surprise, although many, on the left and right alike, had hoped for a Peronist defeat . It is not however too difficult to account for the victory of the middle-class Radicals over the trade union-based Peronists . The latter's period in office between 1973 and 1976 was generally seen as chaotic and paving the way for the most repressive military regime ever seen in Argentina .

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16 Hundreds of thousands of new young voters turned decisively away from the discredited authoritarian populism of Peronism. The radicalized middle class, which had shifted towards support of Per6n in 1973, had seen its hopes dashed and now returned to the Radical fold. Even the disillusioned supporters of the guerilla movements of the early 1970's turned towards the `clean' and 'democratic' Ratil Alfonsin . On the positive side, Alfonsin who represents the 'renewal and change' tendency within the Radicals, had offered a clear cut and decisive condemnation of the military and their adventure in the South Atlantic . The Peronists, by contrast, had been widely seen to have engaged in a nefarious tradeunion-military pact which involved a discreet veil being drawn over the latter's abuse of human rights . The Radicals have their roots in the pre-Peronist populist figure of Hip6lito Yrigoyen who governed Argentina between 1916 and 1930, representing the new rising petty bourgeoisie . They supported the overthrow of Per6n by the military in 1955 and one of their governments was in turn overthrown by the military in 1966 with the support of some trade union leaders . Today the Radical victory is portrayed as a last chance for Argentina to restore `normal' stable bourgeois democracy. Over half the electorate certainly voted for Alfonsin's `democracy' (see election results in the Appendix) but this entailed in their minds a decisive settling of accounts with the military, a restoration of decent living standards and the fullest exercise of democratic rights . The Peronist vote - just over 40% - represented the core of the working class which will persist in its fightback against capital. There is little chance of Alfonsin being able to contain the pent-up demands of the workers or his own middle class supporters. His credibility can only last for a limited period and all hopes of a

`democratic counter-revolution' will be dashed. The International Monetary Fund is unlikely to be any more generous towards a civilian government and will in fact expect the increased legitimacy of the latter to carry through their austerity measures . In a way, the election results have `broken the mould' of Argentinian politics and a clear-cut confrontation between `democratic' capitalists and workers will ensue . Today Peronism is ceasing to be the support for a `charismatic' leader (Presidential candidate Italo Luder hardly qualified for this) and is becoming simply a form of political identity for the working class. It is the workers movement which broke the offensive of capital since 1976 under its `military party' . It now remains to be seen how it responds to capital's `civilian party' and how the latter faces up to its internal contradictions. To assess its prospects we turn to a review of developments since the military seized power in 1976 . Capitalist strategy The economic policy of the military junta has been described by one Argentine economist as `a neutron bomb in reverse' : it has allowed people to survive (at least most of them) but has destroyed the economic infrastructure . The main measures taken by the first Minister for Economic Affairs, Martinez de Hoz were : 1) the reduction of real wages by nearly 50%, an increase in the price of public services, and an end to the subsidy of social services such as health and housing; 2) a programme of progressive reduction of import tariffs, no subsidies to nontraditional exports, encouragement of agricultural exports ; 3) a liberalisation of the exchange and financial markets ; 4)the reduction of government expenditure and employment, the reprivatis-

Behind the news :Argentina ation of state owned firms .' The first phase saw the regeneration of the foreign debt and the signing of a stand-by areement with the International Monetary Fund . Inflation was significantly reduced and at first unemployment did not appear to rise . The financial reform of mid-1977 freed interest rates and prompted a spectacular growth of finance companies . Huge financial empires were built overnight and `hot money' poured in from abroad seeking a rapid speculative profit . Closely linked to the financial reform was the opening of the economy to the world market in a bid to seek a favoured position in the new international division of labour . The aim here was not to achieve a return to the pre-1930 agrarian `golden era' as some observers believed . The aim was simply to eliminate the `inefficient' units of industrial capital, and strengthen the emergent agri-business sector and key `modern' industries such as petrochemicals . A more long-term aim was to settle the long standing competition between the agrarian and industrial fractions of the bourgeoisie through a stable compromise . One of the first measures taken by the military government was to eliminate the traditional tax on agricultural exports and cut the fiscal, tariff or credit advantages enjoyed by industry . Those sectors involved in the production of consumer goods for the home market - such as textiles or domestic appliances - were virtually destroyed by the influx of cheap imports. This industrial `national bourgeoisie' had tended to support Peronism's economic nationalism and redistributive policies, so there were political advantages gained here too. As to the state sector, the usual threats to privatise were made but in practice state expenditure was not drastically cut, although employment in some cases (e .g. railways) was . The major productive and service concerns run by the state were not privatised

because they were not profitable or be- 17 cause the military had a vested interest, as with the arms industry. Even the dismantling of Argentina's rudimentary welfare state, built by Peron, proceeded slower than expected. In 1982, the military government was even forced to introduce unemployment benefit for the first time, due to the growing number of people out of work . Finally, the hoped for wave of foreign investment in the productive sector did not materialise in spite of the `open door' policy of the government. Instead the foreign debt continued to grow with the banking sector of the imperialist centres keen to lend during . the international capitalist recession . It was perhaps inevitable that without a solid recovery of the productive sector the financial euphoria would be short lived . Effectively, the first months of 1980 saw the big finance capital conglomerates Sasetru, Oddone, Grecco, etc - collapse one after the other. A process of concentration of banking capital ensued which saw the banks and finance companies reduced from 400 to 300 . By the beginning of 1981 it was widely recognised in the economic press that the monetarist policies had brought the financial and productive structures of the country to the brink of collapse . The government of General Viola, which was in power from March to December 1981, represented a I return to more pro-industrialist policies but he was ousted by General Galtieri, whose Minister for Economic Affairs, Roberto Alemann led a return to the Martinez de Hoz policies . The economic indicators show the results of these policies : Under the military regimes since 1976 gross domestic product in Argentina has dropped by 14% . Whereas in 1975, industry accounted for 28% of output by 1982 it represented only 22% . In terms of volume, industrial production has been cut by half since the military assumed

Capital & Class 18 power. The share of wages and salaries in the national income has dropped from 45% to 20% over the same period . If no sector of the bourgeoisie is now happy with the military-monetarist policies, it is the working class which has paid the highest price for them. The lynchpin of the dictatorship's strategy after 1976 was without doubt its labour policy.' The reduction of real wages was an essential component of the monetarist economic strategy. The military state was further committed to a decisive weakening of the trade union movement which had been an important countervailing element in Argentine politics since the war . In the weeks following the coup armed police detachments stood at the doors of office and factories to arrest shop stewards and union activists, many of whom joined the 30,000 desaparecidos (disappeared ones) ; but terror by itself was not sufficient to inflict a historic defeat on the Argentine working class. The drastic restructuring of the labour market since the coup is best expressed in the decline of the number of workers in manufacturing from 1,030,000 in 1976 to 790,000 in 1980 . The effects on the labour movement are obvious : the auto workers union has lost 36,000 members and the textile union has declined from 120,000 to 40,000 members . The remodelling of the labour market severely weakened the traditional solidarity of the working class which had been based upon a homogeneous labour market and strong links between the fac-

1976 Annual growth -2 .0 rate of industry Consumer 444 price index Foreign debt 8,280 (million dollars)

tory and the community . Now, a large section of the work force are `selfemployed', perhaps running a taxi or a market stall . This process of atomisation was sharpened by a conscious policy to increase wage differentials between industrial sectors and the various fractions of the labour force . Wage differentials were to be linked closely to productivity and disparities of over 75% created an internal hierarchy within the labour force . The restructuring of the labour market did not immediately lead to an increase in unemployment, which was masked by the increase in `self-employment', the 150,000 or more women and youths expelled from the labour market, the forced return of 300,000 immigrant workers to neighbouring countries and the massive emigration (economic exile) of technicians and professionals . By 1981 however the govenment was admitting that unemployment had reached 8-10% and one report suggested that as much as 40% of the economically active population was `underemployed' . There was also an organisational offensive against the trade unions . The CGT (TUC equivalent) and other major unions embracing three quarters of the unionised work force were `intervened' by the government (i .e . union officials were appointed by the military government), as they were after the military coups in 1955 and 1966 . All trade union activity - assemblies, conferences, meetings, elections - was banned ; workers on strike would come under military jurisdiction; the labour law was re-

1977 5 .9

1978 -10 .9

1979 9 .1

1980 -3 .5

1981 -16

1982 -5

176

176

160

101

138

210

9,678

12,496

19,035

27,162

32,000

38,000

Behind the news : Argentina written to remove most clauses favourable to workers . The social services, clinics, rest homes, etc owned by the unions and which had provided an alternative welfare state, were taken over by the state . A priority target for the military state was the grass roots labour movement and in particular the comisiones internas (shopsteward committees) which had been the backbone of labour resistance since the 1940's. Restrictions were placed on the number of shop stewards per plant, their prerequisites for office, their functions and so on. It is well to remember that the military coup had been justified in terms of the existence of an `industrial guerilla', which meant that the same policy was going to be used against the factory floor activist as had earlier been used to rout the armed guerilla movement . Labour's response The labour movement did not accept this offensive by capital and the military state passively - in fact the period since 1976 has been one of unremitting labour resistance . The first spontaneous, uncoordinated actions against the new military government were extremely important because they laid the basis for the build up of forces and a concerted fightback in the months to follow. Despite the military repression by the state, the working class was able to organise strikes, go-slows, lightning stoppages and various ingenious forms of sabotage . At the IKA-Renault plant in Cordoba production dropped from 40 to 14 units per day in mid 1976 and the military administrator declared that `obviously this was caused by industrial sabotage' . One of the most persistent and effective forms of labour protest was the so-called `sad working' (trabajo a tristeza), a form of organised and widespread go-slows . The early strike movements were however largely defensive, designed to ward off state attacks on strategic sectors of the movement which

had been in the vanguard of labour 19 struggles against repression and the speed up of the line . With the most combative unions `intervened' some previously less militant sectors also came to the fore. One example was the electricity workers of Buenos Aires who organised a series of strikes in late 1976 which served to reactivate other sections of the labour movement culminating in the big rail strike of 1977 . After a period of reduced labour militancy in 1978 a new phase of resistance developed culminating in the first general strike against the military dictatorship on April 27th 1979 . The 24 hour strike was called in protest at the government's economic policies and for the release of imprisoned trade unionists . Given that only one of the union confederations backed the strike call, a 30% turnout was quite respectable . Workers resistance had effectively created a space for the unions to re-enter national politics and, at the grass-roots, the strike created an increased level of self-confidence . In the months that followed, with long and difficult battles, the structure of the union movement was rebuilt and the crucial links with the community were reestablished . By October 1979 the Ministry of Labour even began issuing a daily bulletin on the supposedly illegal strikes. This represented a turning point in the pattern of strikes . From now on struggles against the effects of the economic recession - factory closures, layoffs, etc -were to achieve more prominence over wage demands . In the course of 1980 there were several important strikes. In June, a national seaman's strike was organised by unofficial `struggle committees' (comisiones de lucha) which prompted the admiral in charge to declare that `the legitimate union leaders had shown themselves impotent to control the activities they were supposed to be in charge of.' The fourth

Capital E5 Class

20

CSE 1984

CONFRONTING CAPITALISM

New opportunities for the 80s

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Behind the news :Argentina major rail strike since the coup occurred shortly afterwards with a similar role being played by unofficial rank and file committees. In the car plants there was fierce rearguard action against redundancies and plant closures . Whereas between 1976 and 1978 very few strikes had been called by regional committees and there had been virtually no sympathy strikes, in 1979-80 there were at least 44 strikes called by regional trade union bodies and 56 major sympathy strikes . By 1981 the recovery of the labour movement had become consolidated to such an extent that we can realistically speak of a labour offensive from then on . Pickets and factory occupations were returning to the scene . The economic struggle of workers was now being ex-, tended to a general offensive against the military dictatorship and its economic policies in particular . In July the auto workers union called a 12 hour national general strike to protest against the rundown of the industry. The ensuing street protests by this section of the working class had a deep impact on the whole labour movement, leading to a general strike towards the end of the month . This time the general strike was solid, particularly in the industrial belt around Buenos Aires . The level of organisation was strong, with union activists mounting strike pickets, distributing leaflets and in places even using bent nails (the famous miguelitos) to stop traffic . This upsurge of labour militancy, which combined economic and political elements culminated in the strike call for March 30, 1982 under the slogan Peace, Bread and Work. Though by now there were rumours of war with Britain one union leader declared that `the role of the people cannot be subordinated on the sole grounds of defending national sovereignty' and the strike went ahead . Throughout this period the labour bureaucracy was divided into various

political tendencies, reflecting the general 21 crisis of the Peronist movement . The socalled Group of 25 followed the orthodox Peronist line with a `harder' image than the CNT (National Labour Commission) which concentrated on putting forward a more `professional' image along the lines of US business unionism . These tendencies were embodied in the CGT-Brasil and the CGT-Azopardo which have now merged into one . This experience demonstrates the failure of a `non-political' trade unionism to take root in Argentina, a prerequisite for the junta's long term capitalist project . Furthermore, it shows the continued importance of the trade union bureaucracy even under military dictatorships, when they could appear as the `representative interlocutor' (interlocutor vklido) of labour . By mid-1980 the bourgeois economic press, which had earlier called for the destruction of the Peronist `union barons', was saying that `the government, by depriving union leaders of room for manoeuvre, are leaving a vacuum that may be filled by moderates today, but by someone quite different tomorrow' .' Another call for `normalisation' of union affairs came from the rank and file, who for different reasons needed to restore union structures. Given the threat to their positions, many union leaders, especially at an intermediate level, were drawn into the struggle by the rank and file . Under the new Radical govenment we can expect the union bureaucracy to resume its role as `broker' between capital and labour . The early policy statements of the Radicals indicate that they also wish to pursue the union `democratization' policies ofits military predecessors . Mirroring Mrs Thatcher's bid to break the link between Labour and the unions, Presidentelect Alfonsin declared recently that `the worker has a right to his (sic) political beliefs ; what he has no right to is to put his union at the service of a political party' (ie

Capital & Class

22 Peronism) . However it is unlikely that this policy will succeed in the new mood of post-dictatorial euphoria .

War The war in the South Atlantic in mid1982 between Britain and Argentina had the unwitting effect of dramatically accelerating the political crisis in Argentina . British socialists have inevitably concentrated on its effects in their own country' so it is well to pause and contemplate its possibly deeper effects in Argentina .

There is now little doubt that General Galtieri had to accelerate his plans as a direct result of the massive demonstrations on March 30, 1982 . After the invasion all the political parties, including much of the far left, threw their weight behind the military adventure . The Montoneros, the radical Peronist organisation, which had suffered most at the hands of the dictatorship offered (from e)dle) its political prisoners to fight `to the death' in what it considered a genuine nationalist endeavour . In the working class itself these jingoistic attitudes were

CSE 1984

CONFRONTING CAPITALISM Now opportunities for the '8os CSE's 1984 conference will explore the ways in which people have reacted and organised against the effects of the economic crisis and the political shift to the right . Despite setbacks, new opportunities have opened up in the mid-1980s for socialist strategies . Major shifts in capitalism and patterns of daily life will be explored, both in advanced capitalist and third world countries. Focus will be placed on strategies and demands in areas like industry, health, housing, education, science and technology, law and employment, as alternatives to the initiatives of the radical Right . Please send papers on the effects of the restructuring, current responses and possible socialist strategies to : CSE Conference Committee, 25 Horsell Road, London N5 . Date : 7-9 July 1984 . Saturday - Monday . Manchester

Behind the news : Argentina less prevalent and even some trade union leaders were less than enthusiastic about supporting the `repossession' of the Malvinas . Certainly a long standing opposition to British imperialism was rekindled - after all Argentina was considered part of Britain's `informal empire' before Per6n first came to power in 1946 . Nevertheless the pro-war rallies were not well attended, and certainly the presence of workers on them was minimal . Generally speaking there was a kind of `dual consciousness' about the war in working class quarters - enthusiasm for the real or imagined defeats of the British task force, and a general cynicism towards the motives of Argentina's military rulers. These were after all the same armed forces which had always supported the penetration of imperialism (including Britain's) and had been involved in a fierce economic, political and military offensive against the people of its own country . The Mothers of Plaza de Mayo (see page 24) perhaps encapsulated this sentiment best with their slogan `The Malvinas are Argentina's but so are the desaparecidos' . In retrospect it is hard to see how the forces of the left could have supported the military dictatorship, not only `objectively' but in some cases quite openly. However, the struggle for socialism in Argentina is not through the recovery of the Malvinas (however justifiable this might be) but rather through the struggle for democracy. The military rulers of Argentina were not motivated by nationalism but saw the war (or rather the war games they thought it would amount to) as an opportunity to distract attention from its failing economic and political policies. In the longer term the 'Malvinas question' was seen as a means of reunifying the nation behind a hegemonic military project and of breaking the `pendulum politics' of Argentina, whereby military regimes followed on weak civilian ones and were in

turn destabilized.-' No doubt General Galtieri saw himself as a potential military candidate with a real chance of winning in an open democratic election, something no bourgeois representative had done since the first Peronist period. In this context, the forces of the left could rely only on the simplified schema of imperialist power versus semi-colonial or oppressed nation wherein the latter should be supported regardless of its form of government. However, any objective analysis of Argentina's role in the world capitalist system must place it as a subordinate regional power. This not only because of the level of industrialization and foreign investment by Argentine capital but also because of the state's `counterinsurgent' role in Central America, in the Bolivian coup d'etat of 1980, etc. When the Pope visited Argentina on June 11, 1982 over two million people demonstrated under pacifist slogans completely overshadowing any remaining pro-war sentiments . When reports started coming back of the gross mistreatment of the young working class conscripts by their officers during the war, resentment against the military was fuelled even further. The corruption of the officers who profiteered on army petrol and the chocolates collected in schools - symbolised in the sinister figure of Captain Astiz - could only deepen the anti-militarism of the Argentine masses. It was not'technological dependence' which led to the defeat of Argentina's armed forces but its complete lack of political intelligence caused by its traumatic internal defeats. The bourgeoisie itself was hardly enthusiastic about the military adventure and must have had second thoughts about its `military party' which could so totally misread Britain's response and the role which the USA would play. The new civilian government will have to decide, as one of its first tasks, whether to allow the

23

Capital & Class 24 armed forces to buy anew all the expensive machines of death they lost in the war, so as to re-equip for a new civil war or another adventure such as a war with Chile over another few islands .

Democratization In the wake of the war in the South Atlantic the long term capitalist project of 1976 was seen clearly to have failed. The armed forces had not only failed economically but at their own profession : war . By the end of 1982, the military institutions themselves were passing through the most serious crisis since their formation . On December 4 during a medal awarding ceremony in La Plata, marching conscripts threw down their rifles, insulted their officers and chanted in unison with the attending public -'se va

a acaber, se va a acabar, la dictadura militar' (the military dictatorship will be finished) . Later the police went on strike for higher wages barricading themselves in their quarters . The repressive apparatus of the state was no longer secure and omnipotent. The military government hastily approved an `amnesty law', the main purpose of which was to absolve the torturers and kidnappers of the military itself. The persistent heroism of the Mothers of Plaza de Mayo - who had maintained a lonely vigil for their desaparecido sons and daughters - now blossomed into a full scale mass movement. For 24 hours on 9-10 December tens of thousands of people demonstrated in support of the Mothers and for the release of all political prisoners . On December 16 a `march for democracy' called by the political parties and the trade unions brought out 200,000 people whose slogans went far beyond the moderate intentions of the organisers . The fight for human rights, above all for the desaparecidos, was not just a fight for one more `bourgeois democratic right'

but became the dividing line between progressive and reactionary forces in Argentina. In fact, this struggle for democratic rights prevented a smooth changeover (recambio) from the military to a civilian/military coalition as was planned . The working class has been in the forefront of the mobilizations which have occurred since the debacle in the South Atlantic . On December 6, 1982 the two branches of the CGT, along with the independent unions, called a general strike in which 9 million workers paralyzed the country, eliciting the support of vast sections of the petty bourgeoisie . In the wake of the war, strike action was generalised across all sectors of the working class and open demonstrations in the street often accompanied the struggles in the factories. The govenment was forced to allow internal elections in most major unions to replace the government appointed interventores, whilst the old law of professional associations was restored, as were the union's important social services provisions . It was the union leaders who emerged strengthened from the post war debacle . In the new political period which has begun, there will be a renewal of antibureaucratic struggles . The establishment of `coordinating commissions' outside official union structures in the run up to elections points towards a resurgence of rank and file power. The union bureaucracy will find that its teens of reference will also be set by mass mobilizations . The very fact that this sector was brought out of cold storage and restored to power, within the unions, is itself eloquent testimony to the essential combativity of the working class . As in 1973 when Per6n returned to power, workers are likely to engage in a wider range of struggles not excluding a settling of accounts with their own so-called leaders . The open hostility at Peronist rallies displayed towards the titular head of the unified CGT, Lorenzo Miguel, is a

Behind the news :Argentina

sign of this new mood. On October 4 1983, less than a month before the elections, a general strike (the fifth since the assumption of military rule) gained the advance of the traditional Christmas bonus (aguinaldo). This was a sign of things to come . The bourgeoisie had previous experience of a controlled decompression after the military dictatorship which came to power in 1966 was thrown into crisis by the popular upheavals following the Cordobazo of 1969, a semi-insurrection in the provincial capital Cordoba . Under General Bignone, who replaced the disgraced Galtieri, the bourgeoisie relived many of the tensions experienced under General Lanusse between 1971 and 1973 . A leader of the small Christian Democrat party expressed this unease when he declared that `it is impossible to observe passively how the social explosions are beginning; we must interpret them and translate into politics the anger (la bronca) of the Argentines'. 6 This was of course the worry of the bourgeois opposition - that the effects of the military dictatorship would exacerbate social conflict to a degree they could not cope with when constitutional rule was reestablished . For this reason, as late as 1981, a leader of the Radical Party was saying that `for the rest of this century and for several decades of the next one there will not be populist adventures in Argentina in the style of Radicalism and Peronism' .' Of course, when the military began to stumble the following year all the political parties began jockeying for positions and trying to outdo each other in their anti-authoritarian statements . By then of course the stage had been reached when, as General Lanusse said when he began an earlier retreat, `the real discussion was not whether or not to institutionalise the Republic ; the real discussion was how and when institutionalisation would be carried out' .' Few now

remembered the proud boast of the military in 1976 that `the junta has no fixed term, only objectives' (no tiene plazos, sino objetivos) . Even the handover date to the civilian government was brought forward from March 1984, the date originally set, to December 10 1983 .

Prospects From our analysis so far we can concur with the verdict of Poulantzas (in a different context) that `just as an exceptional form of state (facism, dictatorship, bonapartism) cannot develop out of a parliamentary democratic state by a continuous and linear route, imperceptibly as it were, by successive steps, so a parliamentary democratic state cannot develop in this way out of an exceptional state' . 9 Accordingly, the `transitional government' of General Bignone was marked by sharp discontinuities and crises- Even today, the process of `normalisation' has severe limits, because the armed forces retain an important role . More fundamentally, the very nature of this process and its prospects will be dictated by the rhythm of the class struggle . Capital's economic strategy is in disarray and there is no coherent, unified policy emerging to unite its various fractions . Capital as a whole backed the military intervention of 1976 but most capitalist sectors suffered in one way or another from the economic policies adopted and protested vigorously once the perceived popular threat waned with the defeat of its most evident manifestation - the guerilla movement - by 1977-78. Now, a more `enlightened' bourgeois fraction - the Radicals - is coming to power with just as little chance of keeping everybody happy, especially as they do not `represent' the key dynamic internationalised fraction of capital but rather the small national capitalist . The bourgeois state has suffered a lot

25

Capital E. Class 26 of wear and tear (desgaste) because its weapon of last resort- the armed forces has been used continuously for seven years . In the popular camp it is very clear what people were fighting against, (shown in the derisory vote received by openly pro-military parties), but there is less clarity and unity on the aims and objectives of the movement now that the Peronists have been defeated . The trade union bureaucracy will be unable to revive its corporatist project (patria sindical) so discredited in the 1973-76 revival but it will do its best to hinder the Radicals . The forces of the left, relinquished the opportunity to turn popular discontent into a decisive class struggle when they jumped onto the `nationalist' bandwagon during the Malvinas war (see election results in the Appendix) . There is in short, a stalemate situation, so characteristic of politics in Argentina since 1930 . An expression of this is the Radical's parliamentary majority matched by a Peronist control of the majority of provincial governments . The new Radical government is faced with a grave economic situation. Perhaps the most critical question is the attitude which will be adopted towards the massive foreign debt - $42 billion at the time of the elections, half of it short term . The prestigious Business Environment Risk Index of Geneva estimated that Argentina under a civilian government would be the first country to repudiate the foreign debt, citing the rising influence of organised labour as a major factor. 1 ° However neither the Peronists nor the Radicals included a demand for a moratorium in their election platforms and a process of debt-rescheduling will probably be as far as the new government will go. The economic crisis is however getting deeper . Inflation was running at 335% per annum on the eve of the elections, almost as bad as the situation when the military took over in 1976. Industry is functioning at 50 per cent of installed capacity, owing to

heavy indebtedness, liquidation of stocks and disinvestment according to one spokesperson ." Even the slight recovery of the car industry this year does not alter the picture fundamentally . The International Monetary Fund will inevitably hold the new civilian government to the `austerity programme' agreed to by its military predecessors . This, and not the Malvinas issue, will be the first test of the `anti-imperialist' foreign policy of the Radicals . As in neighbouring Brazil, the popular pressure against the IMF programme will be immense ." The pent up demands accumulated under seven years of military rule are now bursting into the open . Not only the working class, but vast sectors of a proletarianized middle class will be struggling to restore their purchasing power . There will be demands over housing conditions, educational provisions, health facilities and so on, which capital can ill afford to meet, but which the continued stability of capitalist rule in Argentina demand . The prospects for the labour movement now depend fundamentally on the degree of autonomous organisation which is being achieved and the rejection of the `social contract' proposed by the Radicals . Nearly seven years of military and monetarist aggression have seriously weakened the social structure of the working class . However, the labour movement has survived, with its major institutions - the trade unions - intact. The British labour movement may be lucky to survive Thatcherism in such good shape . Above all, there has not been a serious political demoralization in Argentina and the defeat of the military in the South Atlantic was in fact a big boost . The loss of the best part of a generation of worker and radical activists in the wave of repression since 1975 is already being overcome . A new layer of activists have emerged in many workplaces, activists who are less informed by the experience



Behind the news : Argentina

of Peronism and nationalist class collaboration. The most coherent economic and political project of Argentina's bourgeoisie since 1890 has been decisively defeated . If the labour movement now takes up squarely the banners for democratic rights - symbolized in the demand for the reappearance of the desaparecidos hitherto borne by radicalized sections of the petty-bourgeoisie, it could become a truly leading, hegemonic class . A democratic advance by the popular forces in Argentina is bound to have a decisive effect on the growing tide of opposition to the Pinochet dictatorship in Chile, the emerging anti-dictatorial movement in Uruguay and further afield in Bolivia and Brazil . In retrospect, the Peronist defeat of 1983 may be seen as a watershed in the history of the working class in Argentina .

Notes 1 For more details on the junta's economic policies see A . Canitrot, `Discipline as the central objective of economic policy: an essay on the economic programme of the Argentine Government since 1976', World Development, Vol 8,1980 . 2 On the junta's labour policy and labour's response see R . Munck (1981)

`Restructuracidn del capital y recomposicidn de la clase obrera en Argentina desde 1976' in B. Galitelli and A. Thompson (eds) Sindicalismo y Regimenes Militares en Argentina y Chile . CEDLA, Amsterdam. The Review of the River Plate (June 11, 3 1980), p 835 . 4 see for example A. Barnett, `Iron Britannia', New Left Review No 134, JulyAugust, 1982 ; for an Argentine socialist perspective see A . Dabat and L. Lorenzano, Conflicto malvinense y crisis nacional . Teoria y Poliitica, Mexico, 1982 ; for a good factual account see Latin American Bureau, Falklands/ Malvinas. Whose Crisis?, Latin American Bureau, London, 1982 . 5 This is expanded in J . C . Portantiero, `Dominant Classes and Political Crisis', Latin American Perspectives, Vol 1 No 3,1974 . 6 0 . Alende, et al, El Ocaso del 'Proceso' El Cid Editor, Buenos Aries, 1981, p 175 . Ibid, p 401 7 8 A. Lanusse, Mi Testimonio, Laserre Editor, Buenos Aires, 1977, p 264 . 9 N . Poulantzas, The Crisis of the Dictatorships, New Left Books, London 1976 p 90 . Latin American Weekly Report (19 10 August, 1983), p 4. (11) Latin American Weekly Report (23 September, 1983) p 11 . 12 On the current role of the IMF in Latin America see Latin American Bureau, The Poverty Brokers : The IMF and Latin America, Latin American Bureau, London, 1983 .

Appendix: Presidential election results - 30 October 1983 Candidates Alfonsin-Martinez (Radical Civic Union : Radicals) Luder - Bittel (Justicialist Party : Peronists) Alende -Viale (Intransigent Party : Centre Left) Frigerio - Salonia (Movement for Integration and Development : Nationalist Centre) Manrique - Belgrano Rawson (Federal Alliance : Right wing) Alsogaray - Oria (Union of the Democratic Centre : Right wing) Cerro - Ponsati (Christian Democrat Party : Centre Left) Zamora - Diaz (Movement towards Socialism : Trotskyist left) Martinez Raymonda - Balestra (Democratic Socialist Party: Centre) Estevez Boero - Rossi (Popular Socialist Party: Left) Ramos - Colombo (Popular Left Front : Nationalist left) Flores - Guagnini (Workers Party : Trostkyist left) Spoiled votes

Vote 7,659,530 5,936,656 344,434 179,589 56,506 51,968 46,497 42,359 42,478 21,439 14,478 13,723 300,659

27

Rhys Jenkins

Interpretations of the new international division of labour can be divided between those which emphasise the sphere of exchange, those which focus on the sphere of production, and those which are based on an analysis of the circuits of capital in the inter28 nationalization of capital . This article reviews these different approaches to the NIDL and discusses their implications for socialist strategies

Divisions over the international division of labour • OVER THE PAST decade there has been a growing recognition on the left of the industrialization taking place in the Third World, and the issue of relocation of industry to low wage countries as part of a process of capitalist restructuring has been widely debated . This paper reviews a number of different approaches to the question of the `new international division of labour' (NIDL), its origins, and consequences for the Third World, and the prospects for the world economy.' As with other issues in Marxist economics it is possible to distinguish between circulationist theories which emphasize the sphere of exchange and distribution and those which focus on the sphere of production. Both these groups of theories, it will be argued, give partial or misleading interpretations of the NIDL . The internationalization of capital based on Marx's analysis of the circuits of capital provides a more satisfactory interpretation . Having reviewed each of these approaches, the paper draws out some of their implications for socialist struggle .



International division of labour Within the general group of theories which emphasise the sphere of circulation (ie . exchange and distribution) in their interpretation of the NIDL it is posssible to distinguish two distinct but converging strands . The first which, following Brenner (1977), I shall refer to as neo-Smithian, emphasizes changes in the world market, and in particular the world market for labour and for production sites, as the determining factor in bringing about the NIDL . The second, again to employ a common label, I shall refer to as neo-Ricardian . This latter approach argues that the NMDL is a consequence of a fall in the rate of profit in the advanced capitalist countries which leads capital to relocate to areas in which wages are lower and the working class weaker.' A Neo-Smithian Approach: Frobel, Heinrichs and Kreye, `The New International Division of Labour' This study, certainly the most comprehensive carried out on the left, explicitly adopts the analytical approach of `world system analysis' associated with Wallerstein . Three preconditions have been decisive in giving rise to a NIDL since the 1960s: (i) the development of a world-wide reservoir of potential labour power; (ii) the development of the labour process in manufacturing which has led to the decomposition of production processes into elementary units and the deskilling of the labour force ; (iii) the development of the forces of production in the fields of transport and communication which has made industry less tied to specific locations. It is these preconditions together with the desire of capital to maximize profits which leads to industrial relocation to the cheap labour countries of the periphery . The parallel with Smith's arguments concerning the effects of the development of transport on the size of the market and consequently the division of labour is clear . The difference is that now the relevant market is the world market, and it extends to the market for labour power and production sites as well as for industrial products (Frobel, Heinrichs and Kreye, 1980, p .178) . The authors are at pains to argue that the NIDL is an "`institutional' innovation of capital itself" (p.46) made necessary by the changing conditions for valorization which have prevailed since the 1960's. It is not therefore a response to changes in development strategies emanating from the Third World countries . It would also, they argue, be incorrect to attribute the NMDL to a fall in the rate of profit in the traditional industrial countries . To stress again, this approach sees the fundamental cause of the NIDL in the constitution of a world market for labour power and production sites.

Exchange oriented theories

29

Capital E. Class 30

Neo-Ricardianism: The profit squeeze and industrial relocation An alternative explanation to the one just discussed sees a fall in the rate of profit in the advanced capitalist countries as a major factor in bringing about a NIDL, viewing the latter as a specific response of capital to the falling rate of profit and economic crisis (Arrighi, 1978 ; Frank, 1980, 1981 ; Fr6bel, 1982, 1983 ; Landsberg, 1979) . The general line of argument is that the postwar period has seen a considerable strengthening of the working class in relation to capital which has made it more difficult to maintain the rate of profit through increasing the rate of exploitation. This strengthening of the working class is seen either as a secular tendency of capitalist development as a result of the concentration and centralization of the working class which accompanies the concentration and centralization of capital (Arrighi, 1978), or as a result of the impact of the post-war boom which largely eliminated the industrial reserve army in the advanced capitalist countries (Frobel, 1982, p .53 1). In the face of this profit squeeze capital had a choice (in the words of the New York Times' quoted by Frobel, 1983, p.17) to `Automate, Emigrate or Evaporate' . Given the strength of the working class in the advanced capitalist countries the ability of capital to increase the rate of surplus value through a reduced rate of accumulation leading to higher levels of unemployment and political measures to weaken labour is limited. At the same time the weakness of the working class in the peripheral economies (Arrighi, 1978) and the growing wage differential between the advanced capitalist countries and the Third World in the post-war period (Frobel, 1982, p .542) make decentralisation of accumulation to the periphery an extremely attractive strategy for capital . Although industrial relocation is determined on the basis of all relevant cost factors, wages are the crucial determinant (Fr6bel,1983, p .19) . To summarize, capital is subject to a profit squeeze as a result of the growing strength of the working class in the distributional class struggle . This is manifested in a fall in the rate of profit and it is in this sense that these theories can be characterized as neo-Ricardian (c.f. Fine and Haris, 1979, pp . 70, 76, 77) . In addition the strength of the working class is seen as constraining the ability of capital to resolve the crisis through increasing the rate of exploitation within the advanced capitalist countries . However industrial relocation makes possible a substantial reduction in the average level of wages on a world scale .

Implications of the NIDL Although maintaining that a NIDL is being established by industrial relocation, this group of writers does not see it altering the fundamental structure of inequality between centre and per-

International division of tabour iphery. Far from emancipating the Third World from the ties imposed by the colonial division of labour, this NDnr merely reinforces their dependent integration into the world economy . The transformation is summed up in the phrase .'banana republics becoming pyjama republics' (Adam,1975, p .102) . The continued subordination of economies which seek to industralise through the promotion of manufactured exports is a consequence of the specific characteristics of industrial relocation and the necessary conditions for it to take effect . Given that the prime mover in the process of relocation is seen as lower labour costs in Third World countries, it is not surprising that these authors emphasize low wages, long hours of work, short holidays, high level of intensity of labour, poor working conditions and rapid rates of labour turnover as characteristics of `world market factories' in Third World countries (Fr6bel, Heinrichs and Kreye, 1980, pp.350-60 ; Frank, 1981, Ch.5) . Low wages are seen as a consequence of 'super-exploitation' whereby capital is not required to pay the full cost of reproduction of labour-power which is borne in part by precapitalist sectors . Competition between workers faced with the existence of a vast industrial reserve army enables capital to impose long hours, short holidays and high work rates in poor conditions . These factors contribute to high labour turnover as a result of the mental and physical exhaustion of the workers . Indeed this practice has been compared to that of shifting cultivation whereby farmers move on once the soil is exhausted . In addition to offering unlimited supplies of cheap labour the state in Third World countries actively seeks to attract capital into export production through various kinds of tax incentives and subsidies . The creation of free trade zones or export processing zones where goods can be imported duty free for local assembly, which have grown rapidly since the mid-sixties, is one clear manifestation of such activity . More generally capital is offered tax holidays, export incentives of various kinds, and subsidized credit in order to export. In order to guarantee the conditions for profitable accumulation in the host country measures to control or suppress workers' rights and trade union activity are often necessary . This may extend to a generalisation of repression involving the installation of a military regime. Frank goes as far as to claim that: `Demonstrably, this repressive political policy has the very clear economic purpose and functions of making these economies more competitive on the world market by lowering wages and by suppressing those elements of the local bourgeoisie who are tied to the internal market' . (Frank, 1981 . p.324) Not only is the NIDL associated with 'super-exploitation' of

31

Capital f5 Class 32

labour and repressive policies, but it is also subject to a number of limitations as a model of capital accumulation . (See Adam, 1975 ; Frank, 1981, Chs . 3 and 5 ; Frobel, Heinrichs and Kreye, 1980, Chs . 16 and 17; Landsburg, 1979) . In relation to the massive industrial reserve army in the Third World the employment created by industrial relocation is extremely limited. Moreover since the bulk of the labour force is given minimal training it does not increase the skill levels of workers . Industrial export production ; like the colonial export of primary products constitutes an enclave with few links to the national economy in which it takes place . It is also still dependent on the vagaries of the world market and subject to the threat of protectionism in the advanced capitalist countries . Moreover production is either directly carried out by transnational corporations or effectively under their influence through their control of technology, design, delivery dates and/or marketing outlets . Where only part of the total production process is relocated then this control is even greater since the local operation is integrated into a world wide production network . While the NIDL leads to `super exploitation', repression and a deepening of dependency at the periphery, it also has negative consequences in the centre . It has been seen as both a prime cause of some of the major manifestations of crises in the advanced capitalist countries (Frobel, Heinrichs and Kreye, 1980) and as a factor which tends to intensify the crisis (Frank, 1980 Ch . 2 ; Frobel, 1982, 1983) . Three related aspects stand out. First, the decline in domestic investment which has been increasingly directed towards rationalization as opposed to expansion of productive capacity. Second, the rapid growth in unemployment within the OECD countries reflecting industrial relocation and the changing patterns of capital accumulation . Third, the fiscal crisis of the state which is faced with increasing expenditures and falling revenues as a result of rising unemployment, and at the same time finds it more and more difficult to tax capital directly because of its increased spatial mobility (Frobel, Heinrichs and Kereye, 1980, pp . 2-10) . As a result of these trends the social democratic consensus of the post-war period in the advanced capitalist countries has been undermined . Limitations of Exchange Oriented Interpretations The limitations of the exchange-oriented interpretations of the NIDL can best be seen by examining the major criticisms which have been levelled against the theoretical framework on which they draw, `world systems analysis' and Neo-Ricardian crisis theory . Brenner (1977) has identified the fundamental weakness in Wallerstein's theory as his failure to analyse the tendency of capitalism to expand through increasing relative surplus value by

International division of labour raising the productivity of labour. Wallerstein's view gives central importance to the growth of the world markets, the general geographical distribution of production and types of labour control systems which are determined by the need to maximise profits, and the transfer of surplus from periphery to centre . Such an approach is explicitly followed by some writers on the NIDL. Frobel et al . (1980) sees the growth of the world market as a result of the development of transport and communications as the basis of the NIDL, drawing a parallel with the developments at the time of Adam Smith (p .178). Moreover certain types of production are relocated to the Third World in order to maximise profits by the use of particular types of labour control stratagies . The emphasis placed by these writers on the Babbage principle as a fundamental factor underlying the fragmentation/relocation of production processes is also illustative of the weaknesses of this approach. Babbage's emphasis on reducing labour costs through the fragmentation of tasks in order to take advantage of workers with the minimum level of skill required for each task is characteristic of what Marx referred to as the area of manufacture as opposed to machinofacture . It therefore highlights the tendency to neglect the role of technical change in increasing labour productivity in this approach (c.f. Dublin CSE, 1979; Ocampo,1980). The analysis of the NMDL which relates it to a Neo-Ricardian theory of crisis is also open to similar fundamental criticism . It has been argued that a profit-squeeze interpretation of crisis is not consistent with Marx's own views on the subject (Fine and Harris, 1979, p .78 ; Shaikh, 1978, p.237) . Moreover the theory is based on oversimplification in its direct identification of the rate of exploitation with the ratio of profits to wages, and in its isolation of distributional struggle as the cause of crisis, abstracted from developments on the sphere of production . The result, as was shown above, is similar to that derived from neo-Smithian theories, namely an excessive concern with measures to increase the rate of exploitation through reducing wages as the prime means of restoring the rate of profit. In both its neo-Smithian and neo-Ricardian variant the exchange-oriented theory of the NIDL sees the dynamic of capital at the centre as the fundamental cause of the NIDL . Furthermore the role of the periphery is to increase the rate of profit through reducing labour costs . However it is precisely the use of the Babbage principle and/or the `profit squeeze' interpretation of crisis which leads to this emphasis on cheap labour . As will be shown below, reducing labour costs in this way is only one possible strategy of capital to increase the rate of profit, and as Brenner points out not the central one as far as the dynamic of the capitalist mode of production is concerned .

33

Capital & Class 34

Empirically too there are reasons to doubt the emphasis which these writers put on reducing labour costs as the primary element in the NIDL . While it is true that wages are considerably lower in the Third World than in the advanced capitalist countries, it does not necessarily follow that unit labour costs are lower because this is also depends on productivity . In other words lower wages do not necessarily mean a higher rate of exploitation (c.f. the debate between Emmanuel and Bettleheim on this point) . Comparisons of US subsidaries in Brazil and Mexico on the one hand with US firms in Europe indicate that despite lower wages in the Latin American countries there was little difference in terms of unit labour costs and that these were often higher in Latin America (Salama,1978) . There is little understanding of the role of innovation and technological development in the accumulation process . The analysis proceeds in terms of given labour processes and existing use values, while capitalism has been characterized by the continuous transformation of labour processes and the introduction of new use values . Demand conditions are largely excluded from the analysis in its concern with reductions in production costs . In practice however these conditions may be crucial. For example, relocation in the semi-conductor industry from the mid-sixties was asociated with a shift in world demand away from military and government uses towards industrial and consumer applications (Ocampo, 1980) . The neglect of these aspects gives a highly one-dimensional picture of the new international division of labour which tends to identify it with certain branches which have relocated to free production zones where cheap labour is the major consideration . As Frank (1980, p.97) puts it: `The archetype of this "new development" is the "free production" or "export promotion" zone, which specializes in producing textile and electronics components for export to the "world market"' . In locating the dynamic which leads to the new international division of labour in trends in accumulation at the centre, these authors deny any independent dynamic within the Third World . Policies to promote exports or attract foreign capital for instance are seen as a result of the `needs' of capital at the centre, rather than as an outcome of local class struggle . `This new international division of labour is an "institutional" innovation of capital itself, necessitated by changed conditions, and not the result of changed development stratagies by individual countries . . . . It is a consequence and not a cause of these new conditions that various countries . . . have to tailor their policies . . . to these new conditions' (Frobel, Heinrichs and Kreye, 1980, p .46) . Not surprisingly this leads to a general underestimation of the role of the state in Third World industrialization (Dublin CSE Group, 1979) .

International division of labour

35

Finally there is a tendency to exaggerate the extent of the phenomenon which is analysed . Relocation of production to the Third World for export to the advanced capitalist countries is still a relatively limited phenomenon restricted to certain industries and countries (see below) . The export of capital is still predominantly between advanced countries rather than towards cheap labour countries of the Third World (Grahl, 1983) . Nevertheless, despite these weaknesses, these writers have opened up a debate on the increasingly international nature of capital accumulation and the need to evolve strategies for labour which transcend the purely national dimension.

Although not explicitly concerned with the NIDL the writings of Warren (1973, 1980) and Schiffer (1981) on Third World industrialization present an illuminating contrast to the exchangeoriented theories discussed above . Since their work was specifically intended as a critique of exchange-oriented theories of underdevelopment, it is not surprising to find that it implicitly presents a rather different interpretation of the NIDL . Central to their critique is the view that capitalism is a progressive force in the Third World . This is argued both with reference to Marx's own writings and with empirical evidence of economic growth and industrialization in the post-war period . It is concluded that `capitalism has struck deep roots there (the Third World) and developed its own increasingly vigorous internal dynamic' (Warren, 1980, p.9) . It is also argued that the obstacles to development in the Third World are not the result of external domination but rather of internal contradictions within these countries, and that the ties of `dependence' are being weakened by capitalist development . Warren contrasts his view `of the world market as a progressive factor opening backward societies to disruptive and liberating influences and the view that it is a source of the extension into precapitalist societies only of the anarchy and irregularity of capitalism' (1980, p .45) . 3 The spread of capitalism is bringing about the industrialization of the Third World and breaking down the colonial division of labour . A crucial factor in this process has been the achievement of political independence by Third World countries in the post war period . Contrary to the claims of theories of neo-colonialism this has led to significant changes in international economic relations . Independence removed the restrictions which colonial rule placed on industrial production in the colonies . New ruling groups emerged in the Third World, with support from the petty bourgeoisie, which were committed to a policy of state support for industrialization. In a situation of increasing competition between

ProductionOriented Theories

Capital E5 Class 36

capitals, intensified inter-imperialist rivalry between the major capitalist powers and East-West conflict, Third World states have enjoyed considerable room for manoeuvre (Warren, 1973, pp. 1016 ; 1980, pp. 170-185) . Implications for the international division of labour As a result of these factors industrial production in the Third World grew more rapidly than in the advanced capitalist countries (Schiffer, 1981, Table 1) . There has been a diversification of exports with a significant increased share of manufactured goods . Not only does the Third World account for a growing share of world industrial production and exports, but manufacturing capacity is becoming increasingly diversified . Thus far from being confined to certain branches of `light' industry, a significant proportion of output comes from `heavy industries' .' Compared to the international division of labour of colonial times, not only have Third World countries shifted away from dependence on imports of manufactured goods, but they have also laid the basis for a broader process of industrialization with the development of intermediate and capital goods industries . In contrast to the emphasis on the dependent nature of industrialization of Frobel, Frank, et al, Warren and Shiffer emphasize the ways in which the spread of capitalism is reducing the dependence of the Third World on the advanced capitalist countries . Despite growing exports of manufactures, industrial production continues to be primarily directed to the domestic market . Third World countries are becoming less dependent on outside sources of capital as a result of the increasing levels of local savings available for capital accumulation . Moreover, the increasingly diversified structure of manufacturing, particularly the development of capital goods industry, is reducing dependence on foreign technology, while Third World states are exercising greater control over the operations of transnational corporations . On this analysis the NIDL is not simply a change in the form of subordinate integration of the Third World into the world economy, but rather a major change in substance .' `The distribution of world economic power is becoming less concentrated and more dispersed and the countries of Asia, Africa, and Latin America are playing ever more independent roles, both economically and politically' (Warren, 1980, p .171) . Thus Third World industrialization far from reinforcing dependency has tended to undermine the dominant position of a small group of advanced capitalist countries in the international division of labour. A further contrast with the exchange-oriented theories discussed in the previous section is the relative importance attached to `external' versus `internal' factors in exlaining the NIDL . For

International division of labour exchange-oriented theories it is the dynamic of capital accumulation at the world level which leads to the NIDL and accounts for its negative impact in the Third World . In contrast `internal' factors particularly related to the role of the state in newly independent countries are given pride of place on the production oriented approach . 6 It is also `internal' factors which are identified as the major obstacles to capitalist development in the Third World . Although the implications of the international spread of capitalism for the first centres of capitalist development are not analysed by Warren or Schiffer, some tentative implications can be drawn from the previous discussion. If, as Warren argues, `world capitalism is characterized not only by uneven development, but by changing hierarchies of uneven development' (1973, p .41), then the rise of new power centres thoughout the Third World must be accompanied by the decline (at least in relative terms) of some traditional industrial centres . By extension however the decline of these centres should also be seen a a consequence of internal factors and not as a direct result of the emergence of new centres of capital accumulation in the Third World. Such an interpretation is consistent with the stress placed on production for the domestic market in contrast to the export of jobs to world market factories stressed by exchange-oriented theories . Critique Although I have categorized Warren and Schiffer's work as production-oriented in order to contrast them to exchangeoriented theories they are so in a very specific and narrow sense .' In effect their main concern is with the development of the forces of production . In so far as they consider the sphere of production (as opposed to the sphere of exchange) they do so in a highly mechanistic way deriving social relations directly from the level of development of the forces of production . Consequently there is no analysis of the specific social relations under which Third World industrialization takes place . Industrialization is identified with capitalist development despite the fact that a significant part of Third World industry is non-capitalist (Emmanuel, 1974) . Moreover, there is no analysis of the form of production of surplus value and the system of accumulation in these countries (Lipietz, 1982a) . Because of the narrow way in which production is conceived, the analysis of capitalist development in the Third World is confined to the level of apearances . Thus all the old indicators of economic growth (industrial output, GNP) are resurrected as evidence of the development of the forces of production and by extension of capitalist relations of production . There is no attempt to penetrate these surface manifestations in terms of Marxist concepts such as value, surplus value or the falling rate of profit .

37

Capital f5 Class

38

What this reflects is the fact that Warren and Schiffer's work are primarily empirical and not theoretical critiques of the exchange-oriented theories which they criticize . As a result of this, in rebutting and negating these theories, they often find themselves adopting the positions which dependency/development theory originally set out to criticize, i .e . the conventional development orthodoxy. I have already indicated the way in which Warren in criticizing the Neo-Smithian position puts forward a position which is akin to Smith's own, seeing the growth of the world market as a progressive force . This is not an isolated example however. The emphasis on internal obstacles to development as opposed to the stress of exchange-oriented theories on external factors is a case in point. Here for instance Warren agrees with the view of the World Bank that debt-servicing problems of Third World countries have originated primarily in the underdeveloped countries themselves (Warren, 1973, p .38) . More generally the emphasis on obstacles to development such as traditional agriculture is reminiscent of mainstream development theory of the fifties and sixties . This is reflected in the way in which these authors often resort to theoretical arguments and empirical data derived directly from bourgeois writers on development.$ Finally, in counterposing an alleged view that development (or independent development) in the Third World is impossible, they argue that such development is inevitable (Hamilton, 1983) . It has been pointed out that in inverting the positions of those whom he criticizes Warren's analysis is limited in the same way. Nowhere is this more clear than in the counterposing of `internal' and `external' factors in development . Thus rather than transcending the false dichotomy (which incidentally some dependency writers of whom Warren is so critical have attempted to do) Warren is content to assert the primacy of internal factors (Bernstein, 1982) . What then are the implications of this general critique of the approach under consideration for the analysis of the NIDL? First, the process of industrialization in the Third World is seen in an entirely undifferentiated light . Although paying lip-service to the heterogeneous nature of the Third World, concentration on the development of the forces of production to the neglect of social relations of production means that there is no possibility of analysing the internal differentiation of the Third World . This can only be explained in terms of general comments to the effect that capitalist development is always uneven. In other words, the specific class structures and modes of surplus appropriation which have permited rapid capital accumulationn in certain Third World countries (particularly the newly industrializing countries) are not analysed .

International division of labour While the emphasis on internal factors and in particular the role of the state in promoting industrialization and capitalist development in the Third World is a welcome qualification to the view that sees the actions of Third World states as purely a response to the `needs' of capital, this again is inadequately developed . The impression that is given of autonomous states promoting industrialization is similar to that of much bourgeois writing on the subject with its emphasis on the pursuit of 'correct' economic policies by governments . The autonomy of the state is not related to the local class structure and only at the most general level to the relation of the national economy to the world economy (e .g. by reference to increasing international competition) . Moreover, the emphasis on the autonomy of states in promoting industrialization gives no indication of the constraint under which these regimes must operate . The stress on the development of the productive forces and the concomitant spread of capitalist relations of production does not permit consideration of the different forms which industrialization of capital has taken in different branches . It is assumed that there is a uniform pattern of capitalist development throughout the Third World . Thus there is no possibility of distinguishing between different branches/regimes in which capital accumulation is based on increasing absolute surplus value and relative surplus values, or of specific analysis of forms of exploitation and the nature of the working class which is emerging. Again, while providing a welcome counter-weight to certain propositions of exchange-oriented theories, Warren and Schiffer often go to the opposite extreme in trying to prove their point . Two examples will serve by way of illustration . First, in contrast to the view that holds that Third World industrialization is a superficial process of an enclave variety, they claim that an intergrated industrialization has taken place which includes production of means of production (and in particular capital goods) as well as means of consumption. However, the evidence for this statement is often presented in a highly aggregated form which lumps together both capital goods and consumer durables . Even the most advanced Third World Countries continue to depend heavily on imports of key means of production.' A similar argument applies concerning the role of TNCs in industrialization . By focussing on the low levels of capital inflows and the extensive use of local funds by TNCs, these authors argue that their role in the industrialization process is negligible . Again this represents the opposite extreme to those who see industrialization as a process directed and controlled by foreign capital . Evidence of the share of TNC subsidiaries in industrial production and exports in various Third World countries suggest that neither

39

Capital E5 Class

40

extreme reflects accurately the existing situation . Moreover, there are considerable variations between Third World countries in the degree of foreign ownership and control (see Table 1) . Table I

Share of foreign-owned firms in manufacturing output and exports of selected Third World countries

Argentina Brazil Colombia Mexico Hong Kong India Malaysia Singapore South Korea Taiwan

Year' 1972/73 1969/74 1974 1970/74 1971/72 1973/70 1971 1968/75 1974 1971

Manufacturing output 31% 42% 2 43% 35% 11% 3 13% 50% 30%' 11% n.a.

Manufactured exports 42% 40% 50% 50% 10% 5% > 70% 92% 31% > 20%

Note : 'Where two dates are given, the first refers to output, the second to exports . 2 Share of assets.' Share of employment. Sources : Jenkins, 1983a, Tables 2.2, 5 .1 uNc'rc,1978, Table 111, 54 Lall,1981, pp .205-10 Edwards, 1981

Internationalization of Capital and the NIDL

Neither an exchange-oriented approach nor an exclusive emphasis on the productive forces provides an adequate basis for a Marxist analysis of the NIDL . A more promising theoretical starting point is found in Marx's own analysis of the circuits of capital which emphasizes the unity of production, distribution and exchange . This has been used as a basis both for the analysis of the falling rate of profit and capitalist crisis (Fine and Harris, 1979, Chs . 4 and 5) and of industrialization of capital (Palloix, 1975, 1978) . In view of our previous discussions which focussed both on crisis and the industrialization of capital such an approach is particularly useful . By focussing on one particular moment of the circuit of capital, namely distribution, Neo-Ricardian theories of crisis can be seen as only giving a partial account . A more complex understanding of the fall in the rate of profit in the advanced capitalist countries since the late 1960s is necessary . Without being able to elaborate here this should relate to the contradictions which emerged between the spheres of production, distribution and exchange and between the tendency of the rate of profit to fall and its counteracting tendencies (Fine and Harris, 1979, Ch .5) . The post-war boom can be seen as a period of harmonious co-existence betwen the tendency of the rate of profit to fall and the counteracting tendencies . Although capital accumulation tended

International division of labour to increase the technical composition of capital, rapid increases in the productivity of capital as a result of the introduction of an accumulated backlog of innovation tended to keep down the increase in the value composition of capital. Moreover, the availabilty of cheap raw materials (particulaly oil) also helped to keep down the value composition. At the same time, the ready availability of labour power (expelled from agriculture, immigrant workers and women) relieved the pressure for wage increases to exceed productivity. The undermining of these conditions from the late sixties gave rise to a declining rate of profit and the onset of the present crisis . Moreover, it should also be noted that the present crisis has its monetary aspect, characteristic of all crisis which is present today in the form of international financical crisis . From this standpoint crisis is not simply a conseqence of a fall in the rate of profit but also a way in which capital is restructured in order to restore (for a time) the harmonious relationship between production, distribution and exchange, and to bring about an increase in the rate of profit . For Marx the most fundamental mechanism whereby this takes place is through the scrapping of old production techniques and the introduction of new ones . It is also achieved through bankruptcies which lead to the depreciation of capitals absorbed by stronger ones in a process of centralizaton, and through the elimination of the least profitable forms and production capacity. It is these mechanisms for restoring productivity through increasing relative surplus value and depreciating constant capital, rather than attacks on the working class in order to increase absolute surplus value, which are central to the resolution of the crisis . Consequently, periods of crisis are also characterized by intense competition as individual capitals battle for survival and to establish positions for themselves in readiness for renewed expansion. DifferentAspects of the Internationalization of Capital Just as the application of the circuits of capital to the theory of crisis enables one to obtain a more comprehensive understanding, this is also the case in the context of the internationalization of capital. It makes it possible to identify different aspects of the internationalization of capital in terms of the three circuits of capital . The circuits of commodity capital, money capital and productive capital were for Marx three different aspects of the process of self-expansion of capital . In the context of the internationalization of capital these three circuits have been identified with the growth of world trade, the growth of international capital movements, and the growth of the operations of TNCs and the international circulation of products within such firms, respectively (Palloix, 1975). Within this framework it can be seen that the

41

Table 2 Imports from developing countries as % of apparent consumption 1968, 1978

EEC Food, beverages and tobacco Textiles Clothing Wood products, paper and printing Rubber Chemicals Petroleum and coal products Non-metallic mineral products Ferrous and non-ferrous metals Transport equipment Machinery and other manufactures TOTAL MANUFACTURING

US/Canada 1968 1978 1 .04 1 .04 1 .93 1 .88 1 .98 13 .52

1968 1 .43 0.55 1 .16

1978 0 .89 2 .31 6 .88

1968 1 .29 1 .12 1 .94

1978 1 .40 2 .79 11 .64

1 .44 0.51 1 .30 2 .35 0 .32 2 .43 0 .79

0.36 0.05 0 .47 4 .06 0 .18 1 .27 0 .01

0 .86 0.84 0.81 5 .25 0.67 2.02 0.22

0 .17 0 .00 0 .25 8 .18 0 .01 2 .97 0 .15

0 .54 0 .36 0 .69 6 .84 0 .22 1 .77 0.11

0 .39 0 .06 0 .62 3 .51 0 .10 2 .52 0 .04

0.98 0.64 0.98 4.43 0.43 2 .12 0 .39

0 .20

1 .30

0 .34

2 .42

0.06

0.55

0 .26

1 .67

1 .14

1 .95

0 .75

2 .04

0 .87

1 .25

0.88

1 .86

1968 1 .65 1 .12 1 .93

1978 1 .99 3 .97 10.92

0 .56 0 .11 1 .04 1 .61 0 .03 4 .28 0 .08

Japan

UNCTAD, Handbook of International Trade and Development Statistics, Supplement 1981, Table 7 .1

Total

International division of labour exchange-oriented theories discussed above focus on only one aspect of the internationalization of capital, namely the internationalization of productive capital, in explaining the NIDL. " Since the three circuits are different aspects of a single process of internationalization, however, such an approach again gives a partial picture of this phenomenon . Two important aspects of the internationalization of capital in recent years which such an approach tends to neglect will illustrate this point. First, there is the growing export of means of production (particularity fixed capital) from the advanced capitalist countries to the Third World which is an essential part of the changing international division of labour (the internationalization of the circuit of commodity capital) . Secondly, there is the massive growth of international financial markets, especially the Eurocurrency markets, and the increasing indebtedness of Third World countries (the internationalization of the circuit of money capital) . The above discussion of crisis theory and the internationalization of capital provides a basis for a more complex analysis of the NIDL than is offered by mono-causal explanations of the kind discussed so far . The relocation of production to cheap labour countries can be seen in perspective as only one aspect of the internationalization of capital and one possible response to the decline in profitability . There are a number of indications of the limited significance of this pheonomenon (Faire, 1981) . First in the late 1970s imports of manufactures from the Third World accounted for less than 2% of total consumption of manufactured goods in North America, the EEC and Japan (see Table 2) . Although in some branches (e.g. clothing where imports from the Third World account for over 11 % of the market) such relocation is significant, this can be seen as a consequence of the specific conditions of valorizaton in these branches rather than a general imperative of capitalist development . In other words, when it is recognised that relative surplus value is the general basis of accumulation in the capitalist mode of production, relocation can be seen as a specific response which arises in circumstances when there are major obstacles to increasing relative surplus value . Thus it occurs primarily in industries such as electronics and clothing where economic and technological considerations make increased mechanization difficult with existing technologies . 12 Not only is the phenomenon limited in terms of the industries involved, but it may also be temporally limited since other forms of capitalist restructuring (particularly technological innovation) may lead to the reimportation of these labour processes to the advanced capitalist countries (Elson and Pearson, 1980) . As already indicated the rate of profit can be restored in a number of ways other than through relocation to reduce wage

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costs. The intensification of competition and the new investments which must be made often require larger markets in order for them to generate a satisfactory profit rate (Ernst, 1981, p .291 ; Faire, 1981, p .152) . This enables productivity to be raised through mass production and economies of scale (Lipietz, 1982) . Thus it has been argued that the Third World is significant primarily as a market for the advanced capitalist countries rather than as a source of industrial competition (Faire, 1981, p .147) . This is borne out by a number of factors . As Warren has argued, industrial production in the Third World is primarily for the domestic market . It is also clear that in the 1970s these countries increased in significance as a market for OECD exports . By 1979 almost 30% of OECD exports of capital goods were destined for Third World markets (Minian, 1981, Table 1) . Studies of individual branches have also confirmed the significance of competition to control markets in the internationalization of capital, even in cases where this has been accompanied by a significant growth of exports from the branches concerned (see Jenkins, 1983 on the motor industry and Ernst, 1981 on semi-conductors) . Other responses to a crisis of profitability which have implications for the international division of labour include measures to reduce the value of constant capital . This might take the form of opening up new cheap sources of energy and raw materials . The value of constant capital can also be reduced by increasing the intensity of machine use and running equipment around the clock with minimum of down-time . This provides a motive for relocation to countries in which limitations on shift work are less restrictive than in the advanced capitalist countries . " In a period of intensified competition requiring new investment, and low profits, individual capitals attempt to socialize the costs of accumulation through state subsidies . The internationalization of capital permits firms to play off one state against another as they compete to attract foreign capital through subsidies to investment . An extreme but by no means untypical example, was the financial inducements offered by the British government to the De Lorean Car Company to set up an assembly plant in Northern Ireland . This last point raises two important aspects for further consideration. The internationalization of capital and the decentralization of accumulation takes place not only to the Third World but also within the advanced capitalist countries . 14 Decentralization to small production units and the use of outwork within the advanced capitalist countries has also been employed as a strategy by capital, with world recession providing increased scope for such measures . 15 Secondly the role of the state in relation to the inter-

International division of labour nationalization of capital needs to be analysed. It is relevant not only in the case of direct state subsidies to capital accumulation, but also in cheapening constant capital, e .g. as in the case of the petrochemical industry where the ability of the state to provide inputs at substantially lower prices is a major factor in relocation (differential pricing) . Moreover, the analysis of the internationalization of capital cannot be abstracted from the widespread interference of states in the international circulation of commodities through protectionist measures. This applies to the 'tariff-hopping' behaviour of capital in order to obtain access to Third World markets, but also to other complex patterns of internationalization which are emerging. For example, in textiles and clothing capital is being exported from certain Third World countries such as Hong Kong and South Korea to others like Sri Lanka or the Philippines in order to bypass the quota restrictions imposed on exports from their home country by the Multi-Fibre Agreement. Recognition of the active role of the state in Third World countries in the process of internationalization of capital suggests the importance of considering the nature of accumulation and class struggle at the periphery in comprehending changes in the international division of labour . Thus, for instance, the shift towards export promotion policies by many Third World states since the mid-sixties can be seen not simply as a response to the `needs' of imperialist capital, but also as a result of the problems of capital accumulation locally given the class structured opportunities for profitable investment . The most obvious manifestations of these problems were chronic shortages of foreign exchange and finance and the narrowness of the domestic market for high cost locally produced manufactured goods . The dynamic of the outcome of uneven accumulation both in the advanced capitalist countries and in the Third World (Open University, 1983, pp .101-2) . So far we have focussed on trends in the internationalization of commodity capital and productive capital . However, they have been accompanied by a growing internationalization of the circuit of money capital. Intensified competition for new markets for the capital goods industry has led to a significant share of such exports being financed through export credits (Minian, 1981, p .88) . Moreover, increased competition in the banking sector has also led to a substantial increase in bank lending to the Third World, particularly the newly industrializing countries (Minian, 1983) . 16 The growing foreign indebtedness of these countries in the 1970s enabled them initially to maintain a high rate of capital accumulation despite the world recession .

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Implications of the Internationalization Approach for the NIDL

A major implication of the approach discussed in this section is that there is no single emerging pattern which characterizes the integration of Third World countries into the international division of labour . It is possible to identify different patterns both between and within branches and between and within countries . One of these patterns has indeed been that stressed by exchange-oriented theories. This has characterized certain parts of the clothing and electronics industries at certain times . It is also characteristic of most Third World industry based in Free Production zones. In so far as production is based on absolute surplus value many of its limitations pointed to by a world accumulation theory remain valid . " In addition the permanent threat posed by the possibility of re-importation of these labour processes to the centre as a result of technological innovation serves to increase doubts about the viability of this model of accumulation . However since these limitations are seen as the result of the specific model of accumulation and not of capitalist development per se, there is a tendency for the state to intervene to raise the technological level of exports and with increasing wages to move towards a model based on increasing relative surplus value . This is certainly not without problems but it is seen as a possibility . In countries where the form taken by the internationalization of capital has not involved the relocation of labour-intensive processes for export but production primarily for the domestic market, a model of accumulation based on relative surplus value is possible, particularly in the more advanced countries of the Third World. An obvious example of such a country is Brazil, where export processing zones are of minor significance, industrial production is primarily for the domestic market and where it has been convincingly argued capital accumulation is based on increasing relative surplus value (Cardoso and Serra, 1978) . An approach based on the internationalization of capital stresses the interpenetration of capitals as opposed to a unidirectional relationship going from the advanced capitalist countries to the Third World. This is related to a point made earlier concerning the need to see developments at the periphery as the outcome of tendencies in capital accumulation at both the centre and the periphery . A vivid manifestation of this, not readily explicable in terms of any exchange-oriented framework is the growth of large local economic groups, particulary in the NICs which in some cases are themselves becoming internationalized (Mandel, 1978, pp .135-7 ; Open University, 1983, pp . 108-110) . One of the most striking features of recent trends in the Third World is the increasing economic differentiation of the area (Hoogvelt, 1982, Ch.1) . The internationalization of capital ap-

International division of labour proach suggests some reasons why this might be the case . Clearly different countries/areas have been affected by different models of capital accumulataion making it impossible to generalize about the effects of the internationalization of capital on the Third World as a whole . Secondly, it suggests that it is impossible to ignore that part played by specific national conditions and the role of the state in the emerging pattern of differentiation . This is not to suggest, as bourgeois economists do that certain countries have adopted the `correct' policies for economic development . Rather it focusses on the need to explain how particular relations of class forces enabled certain states to create local poles of capital accumulation . This, of course requires specific analysis of individual countries.' 8 It should also be noted that the identification of the NIDL with the emergence of authoritarian regimes in the Third World is quite arbitrary. It derives from the assumption that capital accumulation is based on absolute surplus value and hence the 'super-exploitation' of labour . Increasing relative surplus value however is compatible with increasing living standards and a degree of political democracy . Indeed, it has been argued that the greater the role for trade unions which a model of `intensive accumulation' (Fordism) presupposes enters into contradiction with authoritarianism . This presents particular problems where models of acumulation based on absolute and relative surplus value co-exist (Lipietz, 1982) . In view of the different models of accumulation currently to be found in the Third World, and the different specific national conditions into which thay are inserted, it is difficult and indeed dangerous to generalize about the development of a working class in these countries. This can only be done on the basis of specific empirical studies. Thus for example `Bloody Taylorisation' has been based largely on the exploitation of female labour, taking advantage of existing gender subordination (Elson and Pearson, 1980) . It dissolves certain forms of gender subordination and creates or strengthens others . It does not however lead unilinearly to the emergence of a traditional proletariat ." While both the exchange-oriented and production-oriented approaches to the NIDL see a significant change taking place in the international location of industrial production (although of course differing over whether such a change is one of form or substance) the internationalization of capital approach raises certain questions over the extent to which recent trends can be projected . By focussing on only one aspect of the internationalization of capital major obstacles to continuing change in the international division of labour are neglected . First the period in which the Third World expanded its share of the world industrial output was relatively shortlived . Having remained roughly constant in the sixties, it

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increased from 7% in 1969 to 9% in 1977, falling back subsequently (see table 3) . It was able to do this (i.e . continue a process of capital accumulation) on the basis of a rapid expansion of international credit. This has led to the growth of Third World debt, particularly in those countries which were in the forefront of industrial expansion, which is now not only a major constraint on growth, but in a number of cases depressing production . Table 3 GROWTH OF INDUSTRIAL PRODUCTION IN LDCs

1960-65 1965-69 1969-73 1973-77 1977-80

Growth Rates of Industrial Production LDCs World 7.3 7 .6 7 .5 6 .2 8 .8 6 .3 3 .3 2 .8 1 .3 1 .9

LDC Share in World Manufacturing Value Added 1960 1965 1969 1973 1977

6 .9 6 .9 7 .0 7 .9 9.0

Sources: UNCTAD, Handbook of International Trade and Development Statistics, Supplement 1981, Table 6 .7 UNIDO, World Industry since 1960: Progress and Prospects, United Nations, New York, 1979, Table 1I .1 A second constraint is the rising tide of protectionism in the advanced capitalist countries . It is by no means true that all capitals are pursuing strategies of international relocation . Considerable pressure therefore builds up to protect industries threatened by imports, which runs counter to the tendency to decentralise accumulation. There is little doubt that protectionism, particularly through the imposition of non-tariff barriers has been on the increase over the past decade (see Greenaway, 1983, Chs . 8 and 9 for a review of the evidence) . The fact that relocation to cheap labour countries is only one possible way of increasing the rate of profit also limits the extent to which decentralization of accumulation to the Third World is taking place . Measures to increase relative surplus value through the introduction of new production techniques may lead to the re-importation of certain production processes to the advanced capitalist countries (c .f. Kaplinsky, 1980) . Other measures to restore the rate of profit such as the depreciation of constant capital and the concentration and centralization of capital do not necessarily involve any changes in the international division of labour . Such an evaluation of the limitations to major changes in the international division of labour suggests a less catastrophic interpretation of the implications of recent trends for the advanced capitalist countries . Industrial relocation is a consequence of the

International division of labour 49

intensified competition brought about by the crisis (Faire, 1981, p.155). High levels of unemployment in the West cannot be explained in terms of import penetration from the Third World which in aggregate terms remains marginal ." The analysis of this section also suggests another reason why the consequences for the advanced capitalist countries may be less marked than has sometimes been suggested . It was shown that the rapid industrial growth in the Third World in the 1970s was undertaken with substantial imports of capital goods from the OECD countries. Consequently the OECD countries enjoy large and increasing surpluses in their industrial trade with the developing countries (Balassa, 1979, Table 1). This trade surplus was matched by the creation of more jobs in the advanced capitalist countries than were lost through imports (see Table 4) . This is not to deny that industrial relocation has led to a loss of jobs for some workers in some branches and regions . High overall levels of unemployment however are a result of the crisis (of overaccumulation), intensified by deliberate government policies . Table 4 TOTAL EMPLOYMENT EFFECTS OF MANUFACTURED TRADE BETWEEN DEVELOPED AND DEVELOPING COUNTRIES, 1976

1 . Textile Mill Products 2 . Apparel & Other Textile Products .3 . Lumber and Wood Products 4. Furniture & Fixtures 5 . Paper & Allied Products 6 . Printing & Publishing 7 . Chemical & Allied Products 8 . Petroleum Products 9 . Rubber & Plastic Products 10 . Leather & Leather Products 11 . Stone, Clay & Glass Products 12 . Primary Metal & Allied 13 . Fabricated Metal Products 14. Nonelectrical Machinery 15 . Electrical Equipment & Supplies 16 . Transportation Equipment 17 . Instruments & Related Products 18 . Misc. Manufactured Products Total of which sum of positive balances negative balances Source : Balassa, 1979. Table 4

Export 138 .9 40 .8 10 .4 19 .7 33 .3 25 .0 163 .4 1 .1 32 .2 10.1 51 .6 194 .2 91 .9 527 .4 417 .3 486 .2 72 .7 47 .7 2363 .8

OECD Import 192 .2 218.2 26.3 10.6 2.8 2 .7 23 .4 0 .0 63 .1 36 .2 10 .9 27 .7 7 .3 18 .7 122 .7 13 .7 17.8 58.0 852 .5

Balance -53 .3 -177 .4 -15 .9 9 .1 30 .5 22 .3 140 .0 1 .1 -30.9 -26.2 40.7 166.5 84.5 508.7 294 .6 472.5 54 .9 -10 .3 1511 .3 1825 .4 314 .1

Capital f5 Class

50 Approaches to the NIDL and Socialist Strategies

The ultimate test of alternative approaches to the NIDL must be the political strategies which they inform . In particular I shall be concerned here with their implications for socialist strategy in the advanced capitalist countries . It is surprising to find therefore that many of these writers give little or no attention to the practical implications of their analysis and the directions which workers' struggles should take . In reviewing this literature one is therefore forced to extrapolate some of their ideas . Exchange-oriented theories of the NIDL tend to be accompanied by a call for the international solidarity of the working class (Frobel et al, 1980, pp .405-6 ; Landsberg, 1979, p .62) . It is argued that the NIDL is creating the material basis for such international solidarity. The privileged position of workers in the advanced capitalist countries is being undermined by international restructuring leading to declining employment, intensified regional and urban crises and growing domestic instability, while the same process subjects the working class in the Third World to a regime of super-exploitation . The creation of a world market for labour power is thus creating a common interest among workers in advanced and underdeveloped countries in opposing the extension of the new international division of labour . Although some of the obstacles to international solidarity and the development of working class struggles in the Third World are recognized, it is implied that these can be overcome given sufficent political will . This analysis contains a number of serious flaws . First it assumes that the internationalization of capital can and will (almost automatically) bring forth a corresponding internationalization of labour. This parallels the orthodox approach to international trade union solidarity (adopted for instance by the TUC) which sees the obstacles to such solidarity as primarily logistical and holds that the internationalization of capital provides a material basis for the international organization of labour . This approach has been criticized on the grounds that the material basis for workers' solidarity exists primarily at the point of production and the experience of concrete labour whereas the internationalization of capital is part of management's search for a massively substitutable labour force which does not share an experience of community and identity (Haworth and Ramsay, 1983) . Secondly, the exchange-oriented analysis of the NIDL seems to me logically to provide an equally, if not more valid, basis for protectionist strategy to defend the jobs of advanced country workers against low wage imports . Given the obstacles to the development of international solidarity would it not be more effective for workers to call for protection against such imports particularly since in addition to saving their jobs they would also save workers in the Third World from super-exploitation? Such an

International division of labour approach would of course also have the advantage of fitting in with an Alternative Economic Strategy which involves import controls in order to regenerate domestic manufacturing industry . The fact that it runs against the deeply ingrained belief in internationalism of socialists does not rule it out as a logical response to the NIDL . Moreover, socialists also need to take it seriously because in practise it has been a common response of organized labour in the advanced capitalist countries when jobs are threatened . Its reactionary potential however in strengthening chauvinism and racism is clear. What this will illustrate is the danger for socialists of adopting a theoretical approach which can logically be used, not as its proponents suggest as a basis for international solidarity, but quite to the contrary, to divide the working class along national and ethnic lines . Finally, the belief that the NIDL is leading to intensified exploitation of Third World workers and should therefore be opposed by socialists also needs to be questioned . These writers have played an important role in underlining the conditions of intense exploitation which exist in Third World manufacturing . However, the point still remains that there is only one thing worse than being exploited by capital and that is not being exploited at all . Given the alternatives which at present exist in most Third World countries it is by no means clear that workers employed in export production would be better off if these factories did not exist . The Political Implications of Production-Oriented Theories If the implications of the exchange-oriented theories for political action are ambiguous, this is even more so in the case of the production-oriented theories . Indeed Schiffer (1981) explicitly states that `no particular political analysis or perspective necessarily follows from the economic analysis' (p .533) . While this particular remark refers to the analysis of political strategies in the Third World, there is an equal lack of any political conclusions as far as socialists in the advanced capitalists countries are concerned . The only explicit conclusion drawn by Warren in this respect is the need for socialists to distinguish between the rhetoric of bourgeois regimes in the Third World and anti-imperialism (1973, p .44). However, his arguments lend themselves to the interpretation that socialist strategy should focus on speeding up capitalist development and not holding it up (c .f. the quotation from Lenin in Warren, 1980, p .37) . From this standpoint the NIDL is to be welcomed since it extends capitalist relations of production in the Third World and the expansion of the proletariat . The emphasis on internal capitalist development in underdeveloped countries and the role of the domestic market breaks the link which exchangeoriented theories make between Third World industrialization and

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growing unemployment in the advanced capitalist countries . There is therefore no necessary economic basis for international solidarity (nor possible conflict of interests) between advanced and underdeveloped country workers . It is therefore a common political interest in developing the capitalist mode of production on a world scale (in order to overthrow it) that provides a basis for arguing in favour of the extension of the NIDL . This conclusion however is undermined by a number of weaknesses of the approach which were emphasized above . The emphasis on the productive forces and the neglect of social relations leads to a lack of analysis of the kind of labour force which is emerging in the Third World . The possibility that industrial workers constitute a privileged minority with no interest in overthrowing the capitalist system is not considered . The heavy reliance of certain internationalized branches on female wage labour and the question that this poses for mechanistic analyses which derive political consciousness from developments at the point of production is not recognised . Moreover, the emhasis on national processes of capital accumulation and the tendency to attribute a very limited role to TNCs in industrialization of the Third World leads to neglect of some of the main problems which the internationalization of capital poses for socialists . This is compounded by a failure to recognize the different forms of internationalization of capital stressed above . In different ways both the exchange and the productionoriented approaches to the NIDL deny the existence of any conflict between the interests ofworkers in the advanced capitalist countries and the underdeveloped countries . There are, however, plenty of examples where the potential for such conflict exists and denying such a possibility will not further the development of a socialist strategy . As was argued above, international solidarity of labour is not something which develops automatically with the internationalization of capital . It is not a necessary consequence of the defence of immediate economic interests as exchange-oriented theories imply . Elson (1982) puts this in the context of the need to struggle against working class economies . An approach based on the internationalization of capital can illuminate these issues in two ways. First, as was stressed above the implications of the NIDL for the working class in the advanced capitalist countries is not nearly as catastrophic as exchangeoriented theories imply since it is not a major factor in rising unemployment and the decline of manufacturing . Secondly, this approach emphasises the different forms taken by the internationalization of capital and the need for different forms of struggle in order to counter the strategies of capital . Thus a strategy for workers in the car industry might be quite different from one

International division of labour which would be appropriate in the clothing industry . Unfortunately, the question of appropriate strategies in response to different forms of internationalization of capital has so far received little attention . It is only through further empirical study and involvement in concrete struggles such as those at Massey-Ferguson, Kilmarnock and Lee jeans, that such strategies can be evolved (Baldry, Haworth, Henderson and Ramsay, 1983) . Some lessons are already being drawn . The need to establish information networks and grass root contacts between different plants internationally are necessary but not sufficient conditions for effective international organization (Haworth and Ramsay, 1983) . It has also been suggested that workers' struggles which are confined to the point of production place them at a disadvantage vis-a-vis capital (Haworth and Ramsay, 1983) . In the context of the internationalization of capital it is important to bear in mind that the circuits of capital comprise those of money capital and commodity capital as well as productive capital as the role of financial demands in the crisis at Massey-Ferguson and the crucial significance of marketing in the initial success and ultimate failure of the Lee jeans cooperative graphically illustrate . An effective strategy for labour must therefore go beyond demands to protect jobs and existing output . It must also encompass the nature of the use values being produced and the social relations under which they are produced ." This article is a revised version of a paper presented to the Sheffield, July 1983.

CSE

Conference,

1. In discussing MDL I shall focus exclusively on changes in the international location of industrial production . This is not to deny that important changes have taken place in other sectors, particularly agriculture where there has been an increasing orientation of many Third World countries away from subsistence production towards exports often in conjunction with the growth of transnational agribusiness . 2. The similarities between neo-Ricardianism and neo-Smithian Marxism have been noted by Ben Fine in his comments on Brenner's article (Fine, 1977) . 3. In so far as the latter view can be characterized as Neo-Smithian, Warren's counterposing of his own position to it places him firmly in the camp of Adam Smith himself, although of course he claims that this is Marx's own position. 4. `Light' industry is defined as food, beverages and tobacco ; textiles, wearing apparel, leather and footwear; wood products and furniture; paper, printing and publishing . `Heavy' industry comprises the rest of manufacturing industry . The analytical significance of such a demarcation is not clear. It does not correspond to a Marxist distinction between Department I and Department II and is closest to the distinction made in bourgeois development literature between traditional and modern industries .

53

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5. See Cypher (1979) on the debate between those who see the changes as one of form or substance . 6. `This classic imperialist division of labour is rapidly breaking down not at the initiative of the imperialist countries but mainly as a result of changes brought about by the underdeveloped nations themselves' . (Warren, 1973, p.40) 7. Hoogvelt (1982, pp . 188-9) also classifies Warren's approach as productionist. 8. For a detailed elaboration of this point in the context of Warren's views on foreign investment see Jenkins (forthcoming) . 9. Imports accounted for 42% of fixed investment in machinery and transport equipment in Mexico and 75% in South Korea in 1976 . Minian (1981) Table 2 . This of course is not to deny that such attacks may and do take 10. place, but simply to put them in perspective relative to other aspects of capitalist restructuring. 11 . It may appear paradoxical that exchange-oriented theories should focus on the internationalization of the circuit of productive capital. However, it should be noted that this approach has been categorized as exchange-oriented in that it explains the NJDL in terms of development of the world market and/or distributional class struggle, and that the circuit of productive capital encompasses the sphere of circulation as well as of production . 12 . These considerations relate to the rapid devaluation of fixed capital in these industries as a result primarily of changing technology in electronics and fashion changes in clothing (see Minian, 1981 a for a detailed analysis of electronics) . 13 . Both these points are mentioned in passing by exchange-oriented theorists but they do not easily fit in to their theoretical framework with its emphasis on reducing variable capital . 14. It also involves the socialist countries, a point made explicitly by Frobel, Heinrichs and Kreye (1980) but which cannot be explored here . 15 . See Murray (1983) for a case study of Italy . 16. This must of course be seen in the context of recycling the surpluses of the OPEC countries after 1973 . 17. Lipietz uses the term `Bloody Taylorization' for this process . 18. For one such attempt focusing on the four East Asian NJCS, see Hamilton (1983). 19 . The importance of specific national conditions in determining the nature of the impact of industrial growth on the formation of the working class is illustrated by studies of car workers in Brazil and Argentina on the one hand and Mexico on the other. 20 . A number of studies have shown how the loss of jobs as a result of increased imports is much less than that resulting from increased productivity (see Greenaway, 1983, pp .1 79-80 and the references cited therein) . While recognizing the existence of interdependence between stategies of rationalization and relocation, these studies indicate that the latter is clearly not of primary importance. 21 . Elson (198l,p .66) argues for the protection of `infant socialism, of new forms of organization of production in which employees were challenging some aspects of their former subordination' instead of protecting `infant industries' .



International division of labour Adam, G ., 1975 `Multinational corporations and worldwide sourcing' in H Radice (ed .) International Firms and Modern Imperialism, Harmondsworth, Penguin . Arrighi, G., 1978 `Towards a Theory of Capitalist Crisis', New Left Review 111, September-October. Balassan, B., 1979 The Changing International Division of Labour in Manufactured Goods, Washington, World Bank Reprint Series : No. 114 Baldry, L ., Haworth, N ., Henderson, G and Ramsay, H . 1983 `Fighting multinatidnal power: Possibilities, limitations and contradictions' . Capital and Class No. 20, Spring. Bernstein, H ., 1982 `Industrialization, Development and Dependence' in H . Alavi and T . Shanin (eds .), Introduction to the Sociology of DevelopingSocieties', London, Macmillan. Brenner, R ., 1977 `The Origins of Capitalist Development : A Critique of Neo-SmithianMarxism',New Left Review, 104, July - August. Cardoso, F .H . and Serra, J., 1978 `Las desventuras de la dialbctica de la dependencia' . Revista Mexican de Sociologca, Numero Extraordinario . Cypher, J., 1979 `The Internationalization of Capital and the Transformation of Social Formations : A Critique of the Monthly Review School' . The Review of Radical Political Economics. 114 . Dublin CSE, 1979 `Review of F . Frobel, J. Heinrichs and O . Kreye, `Die Neue Internationale Arbeitsteilung', Capital and Class No. 7, Spring. Edwards, C., 1981 Do the Newly Industrialising Countries Represent a New International Division of Labour? University of East Anglia, School of Development Studies, RP 151 . Elson, D ., 1981 `Discussion: Economic Trends and Crisis' in D. Currie and R. Smith (eds.), Socialist Economic Review 1981, London, Merlin Press. Elson, D., 1982 `The Brandt Report : A Programme for Survival?', Capital and Class, No . 16, Spring. Elson, D . and Pearson, R ., 1980 The Latest Phase of the Internationalization of Capital and its Implications for Women in the Third World. Institute of Development Studies at the University of Sussex, DP 150 . Emmanuel, A ., 1974 `Myths of Development Versus Myths of Underdevelopment', New Left Review, 85 . Ernst, D ., 1981 Restructuring World Industry in a Period of Crisis- The Role of Innovation : An Analysis of Recent Developments in the Semiconductor Industry, u N= is 285 . Faire, A ., 1981 `The Strategies of Economic Redeployment in the West', Review, V.2, Fall . Fine, B ., 1977 `On the Origins of Capitalist Development', New Left Review, 109, May-June. Fine, B . and Harris, L ., 1979 Rereading Capital, London, Macmillan. Frank, A .G ., 1980 Crisis in the World Economy, London, Heinemann Educational Books . Frank, A.G ., 1981 Crisis in the Third World, London, Heinemann Educational Books. Frobel, F., 1982 `The Current Development of the World-Economy : Reproduction of Labour and Accumulation of Capital on a World Scale', Review V.4, Spring. Frobel, F ., 1983 Economic Policy in the Crisis: Some Observations from the

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Perspective of the Industrialized Countries, paper presented to the Seminar on Internationalization and Industrialization of the Periphery, Oaxtepec, Mexico. Frobel, F ., Heinrichs, J . and Kreye, 0., 1980 The New International Division of Labour, Cambridge University Press . Grahl, J . 1983 `Restructuring in West European Industry', Capital and Class, No. 19, Spring. Greenaway, D ., 1983 International Trade Policy: From Tariffs to the New Protectionism, London, Macmillan. Hamilton, C ., 1983 `Capitalist Industrialization in the Four Little Tigers of East Asia', in P . Limqueco and B . McFarlane, Neo-Marxist Theories of Development, London, Croom Helm . Haworth, N . and Ramsay, H . 1983 Grasping the Nettle : Problems in the Theory of International Labour Solidarity, paper presented to the British Sociological Association Conference, Cardiff . Hoogvelt, A., 1982 The Third World in Global Development, London, Macmillan. Jenkins, R ., 1983 Internationalization of Capital and the Semi-industrialized Countries: The Case of the Motor Industry, paper presented to the Seminar on Internationalization and Industrialization of the Periphery, Oaxtepec, Mexico . Jenkins, R., 1983 Transnational Corporations and Industrial Transformation in Latin America, London, Macmillan, in press . Jenkins, R ., forthcoming, Transnational Corporations and Uneven Development, in preparation. Kaplinsky, R ., 1980 `Microelectronics and the Third World', Radical

Sciencejournal, 10 . Lall, S ., 1981 Developing Countries in the International Economy', London, Macmillan. Landsberg, M., 1979 'Export-led Industrialization in the Third World : Manufacturing Imperialism', The Review of Radical Political Econo-

mics, 11 :4 Lipietz, A ., 1982 `Towards Global Fordism?' New Left Review, 132, March - April Lipietz, A.,1982a `Marx or Rostow?', NewLeft Review, 132, March-April . Mandel, E., 1978 The Second Slump, London, New Left Books . Minian, I ., 1981 `Semi-industrializacion y division internacional del trabajo', Economia deAmerica Latina, No. 7. Minian, I., 1981a Progreso tecnico e internacionalizaci6n del proceso productivo-el caso de la industria maquiladora de tipo electr6nica, Mexico City, Ensayos del CIDE . Minian, I ., 1983 Internationalization and Financial Crisis in Latin America, paper presented to the Seminar on Internationalization and Industrializaton of the Periphery, Oaxtepec, Mexico . Murray, F., 1983 `The Decentralisation of Production-the Decline of the Mass-collective Worker', Capital and Class, No. 19, Spring. Ocampo, C ., 1980 The Semiconductor Industry: A Critique of Neo-Smithian Marxism, M.A. Dissertation, School of Development Studies, University of East Anglia . Open University, 1983 Third World Studies, Block 4, The International Setting, Milton Keynes, The Open University Press . Palloix, C ., 1975 Las Firmas Multinacionales y el Proceso de internacionalizacidn, Madrid, Siglo XX1 .



International division of labour Palloix, C ., 1978 La Internacionalizacion del Capital, Madrid, H . Blume Ediciones . Salama, P ., 1978 `Specificites de l'internationalisation du capital en Amerique latine', Revue Tiers Monde, t .X1X, No . 74, Avril -Juin. Schiffer, J ., 1981 `The Changing Post-war Pattern of Development : The Accumulated Wisdom of Samir Amin', World Development, Vol . 9, No . 6 . Shaikh, A ., 1978 `An Introduction to the History of Crisis Theories' in Union for Radical Political Economics, us Capitalism in Crisis, New York, URPE . UNTC, 1978 Transnational Corporations in World Development : A Reexamination, New York, United Nations Centre on Transnational Corporations. Warren, B., 1973 `Imperialism and Capitalist Industrialization', New Left Review, 81, September-October. Warren, B ., 1980 Imperialism: Pioneer of Capitalism, London, Verso .

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57

Capital & Class

WladimirAndreff

The search for a new international economic order has become a fashionable issue. But even the idea of an economic order has scarcely been spelt out clearly . Usually the present crisis is identified as a 'disorder'of the world economy . This hypothesis hides the reality, analysed in this article, that on the contrary, the crisis is a restoration of capitalist order.

58

The international centralization of capital and the re • ordering of world capitalism SINCE 1973, the search for a new international economic order has been a fashionable issue . But the proclamations by political leaders, the attempts at North-South dialogue, and the world summits succeed each other with little consequence, either for achieving this new order, or for defining joint policies for solving the world economic crisis . Furthermore, even the idea of an economic order has scarcely ever been spelt out clearly . Usually, the present crisis is identified as a `disorder' of the world economy . This hypothesis hides the fact that the crisis is, on the contrary, a restoration of capitalist order, and a provisional resolution of its contradictions. The crisis is bringing in its train a return to order, which is coming about by itself, and not on the basis of projects and plans adopted at international meetings . The hypothesis defended in this paper is that the crisis is bringing about a new order which looks very like the old one ; the epithet `new' here indicates a higher degree of centralization and internationalization of capital, a deepening of the capitalist mechanism of unequal development, and the domination of transnational finance capital (TFC), based on ever-closer links between multinational corporations (MNCs) and transnational banks (TNBs) . This hypothesis is sustained by studying the process of the international centralization of capital and its main contemporary effects : the maintenance of the profit rate of TFC, the formation of an international credit economy controlled by the TNBs and concen-

International centralization

59

trated on a few borrowers, and the transfer of the crisis by TFC onto other capitals, wage-earners and the Third World . In passing, our interpretation will be contrasted with other theoretical frameworks purporting to explain finance capital and the internationalization of capital, particularly within the French left .

Centralization of capital is `concentration of capitals already formed . . . transformation of many small into few large capitals' (Marx 1970, p . 625) . It requires only a change in the distribution of existing capitals among the capitalists ; it allows some capitals to continue to develop despite the apparent limits to the rate of overall accumulation . In concrete terms, it is a complex process involving the disappearance and creation of firms through mergers, takeovers, purchases of shares, bankruptcies and the formation of new companies . According to Marx (1966), the falling rate of profit accelerates the centralization of capital : the process therefore speeds up during a period of crisis, particularly because the crisis demands a restructuring of the production system . Through centralization, some firms can acquire more profitable capitals, or diversify into sectors with a high rate of profit (Andreff, 1983) . Firms have disappeared at an increasing rate during the crisis - in France, for example, from 8,865 in 1968 to 20,895 in 1981 . In present-day capitalism, centralization takes place less and less on a purely national basis . A case of centralization is international once it involves a multinational firm (MNC) or a transnational bank (TNB), even if their country of origin is the s ame . US Steel's purchase of Marathon Oil in 1982 is an international centralization of capital, since both firms are MNCS . This is equally true of Credit Lyonnais' purchase of a stake in Hachette in July 1982 . A fortiori, the centralization of capital is international when it brings together firms or banks from different countries . Foreign direct investment is the principle vehicle for this centralization : the great majority of direct cross-investments among the main capitalist countries are carried out through buy-outs or share purchases in existing firms by MNCS or TNBs (Thullier, 1982) . MNCS

In a sample of 373 MNCS, between 1963 and 1974 the American MNCS took over 64 of the 1000 top us firms, and 820 European firms ; and European MNCS completed 92 international centralizations between 1968 and 1972 (Andreff, 1976) . The trend has accelerated more recently . There were 4,612 cases of centralization among European firms between 1973 and 1978 (Jacquemin, 1981) ; in the same period, 623 us firms were taken

The international centralization of capital: profits and crisis

Capital & Class 60

over by Canadian, European and Japanese firms (Khoury, 1980) . In 1979 and 1980, us firms were involved in over 600 instances of international centralization . The growing cross-investment among the principal countries investing abroad should not be viewed as a geographical reconcentration of MNCs, but as a movement of centralization, through which the MNCs redeploy their capital into profitable sectors . Thus, in a number of cases, these centralization moves result in the entry by MNCs into activities which are new for them into new technologies (information technology, etc.) and, for industrial MNCs, into service sectors . Such cases include us Steel's successful takeover bid for Marathon Oil, after the failure of Mobil's bid; Du Pont's take-over of Conoco, after unsuccessful bids by Mobil and Seagram ; Texaco's purchase of one of the largest London foreign exchange dealers; and the absorption of the Solomon Bros . TNB by Philbro, one of the world's leading international trading companies . Many MNCs search systematically for small, innovative firms to purchase. This is how Schering and Standard Oil of California have got into biotechnology, or Exxon into micro-processors and office technology, as also have Volkswagen and St. Gobain (buying Olivetti) . Most of the companies in Silicon Valley are by now controlled by MNCs - Mostek by United Technologies, Signetics by Philips, Fairchild by Schlumberger; others have themselves become MNCs . Of Exxon's 1981 R and D budget, 40% was devoted to biotechnology, office equipment, information technology and new energy sources (solar, nuclear), as against 35% to oil and gas. TNBs

Two further points need emphasizing. First, the TNBs are particularly active in all this : for example, Barclays bought the Banco de Valladolid in 1980; BNP bought the Bank of the West Table 1 : Centralization of transnational capital (number of mergers) 1973 1974 1975 1976 1977 1978 1979 1980 Mergers within the EEC' 997 812 695 731 n.d . 677 n.d . n.d . Acquisitions of us firms by foreign MNCs 1 71 71 83 88 122 188 666 631 Notes : 1) Reported in Jacquemin (1981) ; mergers between firms of different countries . 2) 1973-78, from Khoury (1980) ; for 1979 and 1980 Survey of Current Business, in which the figures include in addition the us acquisitions of the foreign subsidiaries of us MNCs .

International centralization in 1980 and the Banco Lopez Quesada (Spain) in 1981 ; Paribas and Warburg took control of Becker Bank (USA) in 1982 . In France, 12 banks are under American influence (Pastre, 1979) . The centralization process has involved also the purchase of shareholdings by TNBs in MNCs . By fusing together banking capital and industrial capital, such operations create what is often termed finance capital . When TNBS and MNCs are involved, the result is transnational finance capital (TFC). In a study of the 487 leading companies in the world, Grou (1983) finds that in 1965, 64 were controlled by banks, and 13 by foreign companies ; in 1978 , 125 and 42 respectively. (USA)

State restraints Secondly, the international centralization of capital would be more striking still if it was not restrained by state intervention . In the EEC, these activities are strictly regulated and the US Justice Department, the Bundeskartelamt, the French Tribunaux de Commerce, etc ., have prevented a large number of mergers and takeovers attempted by MNCs in the last few years . In the EEC countries, international mergers and takeovers, in the juridical sense, are not allowed by the company laws of the member states ; such operations are thus confined to shareholdings or the creation of joint subsidiaries . As for the Antitrust Division of the us Justice Department, it blocked LTVs acquisition of Grumman, and Mobil's bid for Conoco . In the same way, the Tribunal de Commerce in Paris blocked the takeover of the insurance group Drouot by Bouygues in June 1982 . All this leads MNCs to consolidate direct shareholdings by means of international agreements . The centralization of capital, and agreements of this kind, allow the MNCs of the principal countries investing abroad to conquer large parts of the internal markets of each other's country of origin . The geography offoreign direct investments Another phenomenon increases the extent of the international centralization of capital . Most foreign direct investment, industrial or financial, takes place between the same countries: principally among the developed capitalist countries, and by extension, in the newly industrialising countries (NICs). Over 90 per cent of the overseas activities of MNCs and TNBs is concentrated in these two groups of countries . The degree of centralization is thereby increased, in the home country as well as the host country, as also is the density of transnational relations among MNCs and TNBS. The parallel and linked internationalization of industrial capital and banking capital is a centralizing process. The location of industrial activities

61

Capital & Class 62

controlled by us capital abroad has the same geographical pattern as that of the foreign activities of us TNBs (Andreff and Pastre, 1981) . The former are 49 per cent in Europe, 21 per cent in Latin America, 16.5 per cent in Asia and the Pacific, 4 .5 per cent Africa, and 3 per cent in the Middle East . For banking, the figures for the same regions are 56 per cent, 22 per cent, 3 per cent, 2 per cent. In each area, us capital - banking and industrial - is concentrated in the same countries : Brazil and Mexico in Latin America ; South Korea, Taiwan and Philippines in Asia ; South Africa, etc. With some variations, the same parallel and linked internationalization is also true of MNCS and TNBs from Europe, Japan and Canada . A similar pattern is found if we look at the host countries of transnational capital . The UK is the leading country in the world for the location of foreign industrial and banking capital . Further, eight countries are among the first ten host countries both for TNBs and for MNCS : the UK, USA, West Germany, France, Switzerland, Belgium, Holland, Australia . Among the next in order are Brazil, South Africa, Singapore, Canada, Mexico, Hong Kong, Italy, Japan, Lebanon, S . Korea, Indonesia : all either developed contries, or NICs .

Growing links between TNBs and MNCS This joint internationalization between the same countries involves links based on interest groups, financial participation, interlocking directorates, sources of finance, and the services of TNBS and of MNCS . In particular, the growing indebtedness of the MNCs abroad is to the TNBs from the same country of origin. The TNBs constantly offer new services abroad to MNcs: financing of foreign subsidiaries, placing of medium-term Euro-credits and of Euro-bonds, international management of liquid assets and foreign exchange risks, leasing services, consultation on finance and on computing, and teams of industrial experts capable of giving technical assessments on investment projects which the MNCS ask the TNBs to finance (Pastre, 1979) . The internationalisation of banking capital involves its diversification into industrial activities . This tendency is reinforced by the growth of interlocking directorates linking MNCS and TNBs (Fennema 1982) . Competition among TFCs takes place between financial groups of the same national origin, as well as between those of different countries . National origin has not lost all significance, however, and the hierarchy of TFCs itself remains determined by that of nations within the world economy . Very few studies have tried to demonstrate this in any precise way . Fennema (1982) analyses the personal links among 6,054 directors and managers who hold postions of power in 140 MNCS and 40 TNBs in the twelve main countries investing abroad : of these firms only 22 are isolated

International centralization (having no personal links with any of the remaining 158 firms, at least) . Among the 158 interlocked firms, the density of links is stronger between those of the same country than between those of different countries . However, the density of transnational links grew faster between 1970 and 1976 . This indicates to some extent that during the crisis the development of finance capital and the internationalization of capital are mutually reinforcing. Thus, it seems probable that an international financial oligarchy is in the making - but it is no less certain that it remains divided into national fractions . Maintaining the rate of profit The main consequence of this international centralization of capital is to maintain the rate of profit of the dominant capitals involved . This is firstly because this is how MNCs enter the new growth industries . More generally, centralization is how MNCs withdraw from less profitable or loss-making sectors and at the same time invest in more profitable sectors . The proof of this is that since 1973 the profit rates of MNCs have increased, while those of other firms have fallen . In this period, domestic investment has slowed down in the developed countries, while MNCS have kept up their rate of overseas investment, which bring in high profits (Andreff, 1983) . For the TNBs too, the substantial profits from their international activities compensate for the stagnation or decline in their domestic profits . This accords well with the strategy of the TNBs during the crisis. In a recession period, the banks have excess liquidity because of the reduction in investment to be financed . Part of this is employed in foreign currency trading, speculation and short-term placements in international financial markets (Euro-currencies) . But since during the crisis, the MNCs invest more than other firms, especially abroad, the banks revert again to this clientele, which means that they have to set up in the host countries where their clients have subsidiaries. In addition, banking profits derive from a specific process of redistribution . It is the industrial firms which receive the monetary counterpart of the surplus value created . Banking profit is derivative, in the sense that the banks' contribution to the creation of surplus value is indirect (provision of finance) . Banking profit is not obtained from production, but in the sharing out of total surplus value between capitals (industrial and banking) . The banks have to maximise the connexions they have with industry, in order to draw their share of profit from it through credit relations, influence or control . And, of course, the MNCs are more profitable during the crisis . In this period, the expansion of a bank's capital requires above all that it remains tied to the activities of MNCS .

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Capital C Class 64

An international credit economy

Such an analysis also explains the emergence of the international credit economy . Looking for profitable outlets for their liquid capital has led the TNBs to offer international loans to the deficit countries of the Third World, especially the NIC5, where they can earn a higher real rate of return than in the developed countries (Andreff, 1983, Llewllyn 1982) . In general the proportion of loans on the Euro-currency markets to LDCs has increased ever since the TNBS have had excess liquidity . The Euro-credits obtained by the LDCs went from 8 .2 billion dollars in 1974 to 44 .5 billion in 1979 and 34 .2 billion in 1980. Thus, according to the OECDs financial data, the proportion of the LDCs within total bank loans evolved in the following way between 1974 and 1980 : 1974 28 .7%

1975 54.3%

1976 51 .6%

1877 53 .0%

1978 48.3%

1979 56 .8%

1980 43 .6%

One should add that the LDCs also obtained Euro-credits from Financial consortia : 21 billion dollars in 1977, 37.3 billion in 1978, 48 .0 billion in 1979 and 34.5 billion in 1980 . The LDCs receiving the largest loans from the TNBs were the NICs. Between 1974 and 1978 the biggest Third World borrowers, in terms of the annual average of loans received from private banks (in millions of dollars) were : Brazil 3101 Algeria 882 Mexico 3040 Iran 821 South Korea 1027 Argentina 768 Venezuela 1000 Peru 340 Source : World Financial Markets, Morgan Guaranty Trust Company Between 1978 and 1980 the TNBs issued more than 150 million dollars a year in loans to the following countries : Mexico Brazil Argentina Chile Yugoslavia Algeria South Korea Source : uN(1983)

3231 3018 2215 1087 1019 851 831

Nigeria Philippines Turkey Thailand Colombia Morocco Iran

623 476 473 283 218 183 160

This table shows that most of these Third World countries borrowing large amounts from the TNBs are NICS . The Development Assistance Committee of the OECD has estimated that 14 per cent of all credit in the economy of Brazil

International centralization 65

between 1975 and 1980 came from foreign banks . This percentage was fairly high in the other NICs, for example 10 per cent in the case of South Korea, 11 per cent for Argentina, 13 per cent for the Philippines and 64 per cent for Singapore. Not all the debts of the NICs have been contracted to finance investment; but the TNBS have used this opportunity to diversify their portfolios . A further point (Lapple, 1983) is that during the crisis portfolio as well as direct investments have become very important for the NICs . According to the OECD (1978), portfolio investments in the Third World, carried out mainly by the TNBS of member states of the OECD, grew from 1 .2 billion dollars in 1975 to 11 .3 billion dollars in 1977 . During the same period the flow of direct investments from the OECD to the Third World increased only from 3 .7 to 8 .8 billion dollars. As a result, the proportion of portfolio investments within total net capital exports from the OECD countries to the LDCs rose from 4 .4 per cent in 1970 to 29 .8 per cent in 1978 . A final feature of centralization of capital today is this double concentration of lenders (three quarters of private loans to the Third World are from 24 TNBs) and of borrowers (three quarters of Third World debts held by 11 countries, all NICs) (Brett, 1983) . In 1979 Bouchet wrote : `The countries most indebted to the private banks are those most integrated into the system of international trade, both by their production pattern, and by the way they are financed, which constrains them to export marketable products. On the other hand, the least developed countries are increasingly marginalized, and now form a Fourth World with a very bleak future .' (Bouchet, 1979) . Finally, we should be careful not to see the private transnational banking system as quite separate from the public institutions of international finance . Often enough the TNBs only contribute to the financing of developing countries with the blessing of the IMF or the World Bank, which takes the form of loans conditional on the adoption of various draconian policy measures aimed at correcting the balance of payments . We return to this point below. Hilferding, Bukharin, Kautsky and Lenin all characterized imperialism as the epoch of finance capital . Hilferding (1910) argued that the formation of finance capital was the starting point for the export of capital . And Bukharin (1915) wrote, `World finance capitalism and the internationally organized domination of the banks are one of the undeniable facts of economic reality' (p . 60) . The international centralization of capital, using the banking capital of the TNBS with the industrial capital of the MNC5, is today really establishing transnational finance capital (TFC). In relation to

Transnational finance capital: some theoretical hypotheses

Capital E5 Class 66

the ideas of the early theorists of imperialism, there are two new aspects in the development of TFC: ∎ the already high level of internationalization of capitals (MNCS, TNBs) sharpens the transnational dimension of finance capital, and its expansion into all profitable sectors of the world economy . ∎ the banks played a very active role after 1965, and still more so in the 1970s, because their excess liquidity forced them to look for profitable loans, either by financing the growth of MNCs abroad, or by financing the debts of the NICs . The essence of our theoretical view is that with transnational finance capital, money capital and productive capital are organically linked in their internationalization: international production and circulation are more and more controlled by MNCs and TNBs merged in the form of TFC . This hypothesis goes against Kautsky and his epigones, because within TFC competition continues and gets fiercer during the crisis. This explains why some MNCS (e.g. AEG-Telefunken), and some TNBs (Herrstatt, Franklyn, Ambrosiano) go bankrupt, and why the degree of international centralization continues to rise . This does not mean, as Sweezy and others have argued, that the banks have a dominant role in TFC . We have seen that the centralization and the internationalization of capital are linked and proceed in parallel in the different areas of the world economy. Often it is the TNBs which are forced to look for `points of contact' with the MNCS. But above all, some large MNCs develop and control their own transnational banking networks . This makes competition even tougher within TFC . There are large Swiss banks which are subsidiaries of US MNCS (Dow Banking, Bank Firestone, Bankinvest, Transinfer Bank, Philip Brothers, and the fifth largest domestic bank in Switzerland is Renault Finance . The Schneider group has shares in Belgian, West German and Italian banks, and its own bank, BUE, has subsidiaries in Switzerland, Luxembourg and the USA . The best known example is Dow Chemical, with a network of eight banks covering nine countries .

Theories of the internationalization ofproductive capital The crisis has equally undermined theories of the internationalization of capital and of production by MNCS . One sign of this is the relative absence of new books on this subject since 1975, as against the great amount of theoretical work and publications on the internationalization of capital from 1971 to 1974 (see Andreff, 1984) . Palloix, one of the main protagonists of this approach, has abandoned it now in favour of the view that the international extension of the credit economy is the most adequate form of imperialism during the crisis (Palloix, 1982) . This shift in approach

International centralization

is based on the fact that LDCs have turned increasingly to the international banking system for finance . This is undeniably true, and it is clearly tied to the growth of the TNBs ; but it requires closer analysis . In any case, it does not provide sufficient justification for abandoning the study of the internationalization of capital in production, particularly in those industrialized countries where threequarters of this internationalization takes place . Palloix is not alone in thinking that the banks' financing of industrial development in LDCs over the last decade is due to the emergence of the present crisis; but he adds that direct investment in the Third World is on the decline . Why? Because in the LDCs, `industrial redeployment is blocked by the struggles of the emerging working class' ; whence `international capital prefers to resort to loans rather than direct investment, which only implies the formation of fixed capital, while loans ensure the simultaneous growth of wage labour' (Palloix, 1982, p . 144). This is not the first time that Palloix's analysis has shifted from the sphere of production to that of the international circulation of capital : see, for example, the criticisms of his earlier work by SIFT (1974), Leucatte (1975) and Michalet (1976) . But our approach contradicts this new position taken by Palloix. He offers three arguments to prove his thesis . First, the Third World increasingly has to draw on international bank finance: this is true, especially for the NICs which form an integral part of the centralization of capital . Secondly, he argues that this financing by TNBs `allows an international extension for wage labor .' But so does investment by an MNC in the Third World much more directly, in fact, and not only in the free enterprise zones (or Export Processing Zones) . His third argument is that during the crisis there would be a fall in foreign direct investment. This is quite simply wrong, as we have seen . All the evidence shows (see final section) that it is precisely foreign investment alone that has not fallen, because it is much more profitable . All in all, the international credit economy is not replacing direct investment by MNCs; the two are in fact complementary, interdependent, and both concentrated in the developed countries and the NICs . MNCs in retreat?

In addition, an anti-MNC position has developed at two distinct levels, in the anti-imperialist struggle and in trade union struggles within MNCs . Up to the mid-1970s, this position became increasingly successful even in practice : nationalizations, emergence of the idea of codes of conduct for MNCs, union cooperation between overseas subsidiaries of certain MNCs . In its most apparently radical form (Levinson, 1971), the MNCs become the source of all the problems of the world economy - even of the crisis itself. For others, the internationalization of capital is both the

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68

cause of the crisis, and the means of fighting against the falling rate of profit (de Bemis, 1978) . The common solution is to intensify the fight against multinationals : especially if you believe that `socialism is more than ever the order of the day' and that `our epoch is the age of revolutions' (Palloix, 1982, pp 154-5) . But one could wonder whether, with the crisis, unemployment, and present state policies, such a stance is not contradicted by the facts . All that is left is a hope : `In any case, the tactics of the MNCs continue to generate in various ways a response from nationalist movements in the Third World and from the workers of the world' (Pollin, 1980) . In practice, very few advanced countries are hostile to the installation of MNCS in their territory - and fewer still when governments are preoccupied with unemployment . Some host countries, DCs and LDCs, compete with each other to attract the MNCS . Once established, a state which has welcomed them will not want to see them leave, because of the threat to jobs, and additionally the loss of tax revenue . And when a state sees its own firms setting up abroad, it finds it difficult to maintain a systematic opposition to the incursions of foreign firms. Indeed, the host state may provide direct or indirect aid to MNCS, extending to financial support to avoid the collapse of an important foreign-owned subsidiary, as the UK government did in the case of Chrysler UK in 1976 . But even if all nation-states took a firm line towards MNCS, contradictions would still undermine it. If one state in country A demanded that the local subsidiary of an MNC export more components, while the same MNC's subsidiary in country B was pressed to import fewer components from country A, then soon enough the conflict of national sovereignties would risk being resolved by the MNC itself; or as more often happens in practice, by cooperation between the nation-states and the MNC . In any case, MNCS and nation-states are compelled to cooperate in order to reproduce the conditions required for the valorisation of capital in each national territory, as argued in Andreff (1979) . As for the trade unions, they are concerned if the state encourages the entry of MNCS, and they support it when it seeks to control them, or in cases of conflict . And struggles take place over factory closures, redundancies, and the trend towards the relocation by MNCS in those social paradises where there are no unions . But the union struggle reached its peak of effectiveness between 1970 and 1973, when international mobilization and solidarity among workers could develop quickly . The classic fight took place in 1972 ; coordination among Belgian, Dutch and German trade union representatives, and the solidarity with' workers occupying the Breda factory shown by the simultaneous strike at Wupperthal, carried the day . On the other hand, there was no union action against AKZOs sacking of 10,500 workers in 1975

International centralization

and 1976. In fact, as unemployment rose in all DCS, the unions faced an increasingly painful choice between international solidarity and the defence of jobs at the national level. With rising unemployment shifting the balance of forces in favour of the MNCs, some unions looked for new strategies : Levinson, the president of the International Chemical Workers' Federation, was himself elected to the supervisory board of Du Pont (Germany) in 1978 . More often, unions have increased their national actions in order to bring about intervention by governments in cases of conflict with MNCs. The American unions even supported projects of Volvo and Volkswagen in the US : their over-riding concern was over employment. Thus, although anti-multinational policies remain in force on paper, their practical application has been in retreat, especially in those countries where governments (e.g . those of Thatcher and Reagan) have not regarded full employment as their first priority . Still more worrying are the analyses of the left, Marxist or otherwise . There, MNCs are kept to the sidelines despite their importance. Aglietra, for example, openly admits that there is this gap in his analysis : `It remains no less true that the international expansion of capital forms part of this expanded reproduction (of capital across society), and that a gap is left if this is not studied in detail' (Aglietta, 1979, p. 22) . Others (e.g. Lorenzi, Pastre, and Toledano, 1980), seeking'to avoid attributing to international economic relations the role of a convenient deus ex machina for explaining the crisis,', exclude MNCs also from their analysis by adopting the hypothesis that the crisis is internal to the developed capitalist countries taken as a whole : according to Mistral (1982), `we should avoid an analysis of profitability located directly at the world level', because `to characterize the process of internationalization by referring only to . capital that is already internationalized (MNCs and TNBs) provides a truncated view of the contradictory unity of the world economy' (p .207) . These arguments are used to remove the MNC, the TNB, and the penetration of foreign capital from the analysis of the regime of accumulation in France, and thus also from the definition of `self-centred accumulation' and `the reconquest of the domestic market' . These are the analyses which lie behind the economic strategy of the left in France since May 1981 . The focus of the French Left has thus moved away from the internationalization of TFC (TNBs and MNCs) to another one, concerning the internationalization of national economies' . According to this new idea, internationalization is the international expansion of the regimes of growth and accumulation operating in the US during the course of this century. In brief, the main characteristics of this regime of intensive accumulation are the following : ∎ the constant transformation of the conditions of produc-

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70

tion and the modes of mass consumption, allowing simultaneous increases in productivity and real wages (the so-called `fordism') ; • This 'virtuous circle', productivity-wages, is incompatible with the competitive operation of the market ; it presupposes, on the contrary, markets which are both monopolistic (dominated by big firms) and `managed' (through state intervention), as well as collective bargaining between wage earners, capitalists and the state ; • an ensuing process of monopolistic regulation which involves in turn regulatory mechanisms for real income from wages, effective demand, prices and investments ; • internationalization therefore refers to the international expansion of this regime of accumulation common to the principle industrialised capitalist countries, as well as to the way in which each national economy adheres to the dominant regime of growth by transforming its internal market ; • in consequence, the crisis of the internationalization of economies is seen in terms of the impossibility of renewing the wage-productivity 'virtuous circle' under monopolistic regulation, within the developed capitalist countries . This thesis grew within the Left before it came to power in May 1981 . There is an element of truth in its definition of the regime of intensive accumulation in the developed countries .' But, without going into a full critique of this thesis, we can mention two of its weak points . First, this new conception of the internationalisation of economies ignores the integration of the Third World with the world economy . Second, and more serious, it fails to see that the convergence of monopolistic regulation processes between national economies is largely due to the development of TNBs and MNCs in the developed countries and the NICs, that is to say that this convergence is due to the internationalisation of TFC . Lastly, the reality of TFC points up the short-sightedness of the main idea of the official (government) left in France, which is that the internationalization of capital is the reduction in national differences in the regulating processes of the developed economies. This confuses the effect (convergence of regulation) with its cause (growth of TFC), and is one source of the disappointments suffered in economic policy. This approach, forming the basis for a moderate neoprotectionism, was defined by the left's economists before they came to power as the 'reconquest of the domestic market' . In practice, this means a policy of trying to reduce the ratio of imports to domestic demand . Why? The basic assumption among the left's economists is that this is necessary to stop the increase in unemployment, and to establish a self-sustaining process of capital accumulation in

International centralization 71

France . How? The reconquest of the domestic market requires a selective industrial policy, particularly based on national control over the production of producer goods, which are presumed to form the `core' of Department I in Marx's theory . Instead of the methods of classical protectionism, such a policy relies on a state industrial strategy, whose main weapon must be the public sector, expanded as a result of the new nationalizations . Note that nothing is explicitly said about foreign direct investment, multinationals and the internationalization of capital when formulating this neoprotectionist strategy. However, there have been many examples since May 1981 which show that public, and newly nationalized, enterprises are now leading the promotion of the internationalization of French capital ; and that foreign direct investments are not only welcome, but are strongly encouraged by the French state to spread out into the productive system .' This makes neo-protectioniim ineffective . Such a contradiction relies on what may be called the `benign neglect' by many French left theoreticians of the role of transnational finance capital .

Since 1973 exchange rates have been floating . Is this a sign of disorder? Before the crisis, who would have argued that price movements in a market were a disorder? Marx saw price movements as the result of the `anarchy of the market', and this anarchy as the contradictory mode of reproduction of the capitalist economic order. In terms of this sort of order, exchange rates had been suspended by the Bretton Woods system : now they are integrated again into the logic of the market . The MNCs and TNBs, moreover, are well adapted to floating exchange rates . Today, the TNBs intervene every day in the management of exchange rates, and provide credits to central banks to allow them to replenish their currency reserves .

The banking system It is hardly surprising that bankers are frightened by the risk of a financial crisis hitting the international credit economy . There was a lot of talk about this in 1974 with the collapse of the Herrstatt Bank, Franklyn Bank, National Bank of San Diego, London & County Securities, and several small banks, speculating too heavily on the Euro-currency markets . In 1982, a new wave of fear was provoked by the failure of Drysdale Government Securities, Banco Ambrosiano, Penn Square Bank and Unity Bank and Trust . In fact, dozens of banks have failed every year since the crisis started (The Economist, 1982). It is quite true that the banks were en-

The re-ordering of world capitalism

Capital C5 Class 72

couraged by their excess liquidity to embark on ventures, especially international ones, that were too risky . It is also the case that, if fear turned to panic, they might refuse to grant new credits to the overindebted NICs . But Marxists should not be misled by what bankers say into believing that generalised bankruptcy will follow from the growing debt service ratio to exports of Third World countries (Brett, 1983) . The only important question is whether the international bank credits are tied to real or potential production, in the form of productive investments . Now the loans of TNBs to MNCs are always tied to profitable investments, and those to NICs are partly the same, because these countries still have the fastest growth rates (S . Korea : 6 per cent in 1982) and offer the most profitable investment opportunities . In addition, bank failures have not triggered a general financial crisis, because the big TNBs have always stepped into the breach by taking over the excessively risky loans of the small banks . Most of the big TNBs today are well able to do this again because of their enormous international profits (the Economist, 1982) . All this corresponds to a restoration of the capitalist order by the banking system, as in previous crises (the Great Crash of 1929) : when a crisis restores order in the structures of capital, some capitals (and banks) must disappear. Add to this the renewed strength of the dollar since 1979, the defeat of the `substitution account' proposal at the IMF in 1980, the leading role of American interest rates in the world economy, the reflux of Eurodollars to the USA after the change in us law which allowed the development of off-shore banking (3 Dec ., 1981), and the acceleration of US investment abroad since June 1981 ; and one gets the impression of a world economy reverting to a well-known order, that of transnational finance capital, with US TFC at the top . This has nothing in common with the New International Economic Order demanded by developing countries in the North-South dialogue . The only new feature is a much higher degree of centralization of capital, within an order which remains capitalist, that of competition and the `anarchy of the market' on a world scale . This reordering of world capitalism by TFC leads to the exact opposite of the demands of the working classes in the DCs and in the Third World . This is clear fom two other characteristics of the reordering: first, the domination of TFC over world capitalism makes itself felt in exceptionally high profitability during the crisis ; secondly, the deepening of unequal development leads to divisions within the Third World, and to the impoverishment of the world's population. TNB Profitability There is no systematic evaluation available of TNB profitability. We

International centralization know, for example, that the rapid growth in the international profits of US TNBs has compensated for the levelling out of domestic profits . From 1970 to 1976, the annual growth rate of Chase Manhattan's foreign profits was 17 .8 per cent, while its domestic profits fell (-22 .8 per cent p .a .) ; the corresponding figures for Manufacturers' Hanover were 41 .9 per cent and -6 .6 per cent, for Bank of America 32 .4 per cent and 6 .0 per cent, for Citicorp 31 .0 per cent and 4 .3 per cent, and for Continental Illinois 76 .4 per cent and 7 .8 per cent. Of the 13 biggest US TNBs, only three had a growth in foreign profits of less than 33 per cent a year between 1970 and 1975 (Michalet, 1979) the leaders being Security Pacific (112 per cent p .a .) and First Chicago (97 per cent) . There is no sign that this evolution has slowed down since then : the successive annual reports of the Bank for International Settlements indicate a high level of international banking activity up to the end of 1982 (with the exception of the second quarter of 1981) . As for French banks, their profits grew by 30 per cent in 1980 : the Commission de Controle des Banques attributes a large part of this growth to the increasing weight of banks that are under foreign control, which is simply the counterpart to the growth of French banking networks abroad .

Rising MNC profits during the crisis Looking in detail at the capital invested abroad by us MNCs, and the resultant profits (Table 2), we find that the rate of profit grew during the first phase of the crisis, reaching an unprecedented level in 1973 and 1974 . The 1975 recession caused it to fall back for three years to around 13 per cent, which was still higher than in the 1960s . It then rose again to record levels in 1979 and 1980. The Table 2 : The rate of profit of us capital invested abroad, 1966-80* By area By sector Overall ManuYear Rate DCs LDCs Oil facturing Services 1966 10 .2 7.6 17 .3 10.8 9 .2 11 .0 1970 10 .9 8.8 15 .1 12 .6 10 .0 10.5 1973 16 .3 14.0 25 .3 22 .8 14 .9 13 .1 1974 17 .4 12 .5 39.9 32 .7 13 .1 14.7 1975 13 .4 10.5 25 .5 18.5 10 .7 13 .7 1976 13 .9 11 .5 23 .9 17.7 11 .8 14.3 1977 13 .4 11 .0 22 .9 18.2 11 .4 13 .4 1978 15 .0 13 .3 22 .3 16.9 14 .3 14.9 1979 20 .5 18.0 29.4 36.9 16 .8 16 .2 1980 17 .2 15 .7 22 .2 n. 13 .3 n. * Ratio of the profits of foreign subsidiaries of the us mrtcs to the stock of foreign investment in each year; calculated from Survey of Current Business

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rate of profit on capital invested abroad shows a clear tendency to rise during the crisis. This is in sharp contrast to the tendency of the rate of profit to fall, observed in the main DCs since 1966 . The profit rate of US MNCs is consistently higher in subsidiaries located in LDCs . The fluctuations in the rates of profit earned in DCs and in LDCs are to some extent correlated . Nonetheless, the increase from the initial level is greater in DCs than in LDCs . Note also the coincidence of the years of record profit rates (1973-4 and 1979-80) with sharp increases in the price of oil . In those years, the profit rate of MNCs in the oil sector took off ; but the profit rates of other sectors, manufacturing and services, were also pulled upwards . The increases in the price of oil have had a positive effect on the rate of profit of us MNCs overall, and notably those in the oil sectors Those who talk of an oil crisis should ask themselves : a crisis for whom? This high profitability of their overseas investments has allowed the MNCS to restore their overall profit rates, taking into account the consolidated results of parent companies and subsidiaries, after 1972 . This conclusion is based on a study of the profitability of a sample of 373 MNCs from 11 leading investing countries, including the us ." The average rate of profit of these MNCs weakened in the first years of the crisis, before 1972 . Its lowest level was in 1971 . Since then it has recovered, at least tendentially, up to 1980, with an interruption in 1975 (Table 3) . It is interesting to compare this evolution with that of the firms in the Fortune lists which do not belong to our sample, which consists of 830 us firms and 350 non-US firms . Clearly, these two sub-groups

Table 3 : Rates of profit of MNC of the main investing countries, 1963-1980* Average rate Year of profit US MNCs Non-US MNCs 1963-66 6.4 8 .1 3 .7 1967-70 5.6 6 .9 3 .5 1971 4.4 6 .0 2 .6 1972 4.7 6 .1 3 .1 1973 5 .4 7.0 3 .5 1974 5 .3 7.0 3 .0 1975 4.7 6.3 2 .8 1976 4.9 6.6 3 .0 1977 5 .2 6 .9 3 .2 1978 5 .1 7 .1 2 .9 1979 5 .9 8 .2 3 .3 1980 5 .7 7 .6 3 .5 * Ratio of net profits to net assets for a sample of 373 MNCs . Source: Andreff(1982) .

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outside the sample contain a certain number of MNCs ; but they also include national firms, and for this reason it is worth comparing them . In 1972, the rate of profit of the us firms in our sample was 6.1 per cent, while that of the other 830 us firms was 4.8 per cent ; in 1980, these two rates were 7 .6 per cent and 5 .4 per cent. Also in 1980, non-US MNCs in the sample had an average profit rate of 3 .5 per cent, while the 350 other non-US firms had a rate of 1 .6 per cent only.' Two conclusions follow : MNCs are more profitable than other enterprises in the crisis ; the gap between their relative profit rates seems to have grown during the eight years of overt crisis examined (1972-80) .

The way that MNCs have transfered the crisis onto LDCs has been to create a division among them by accentuating their uneven development . Take the evolution of the flow of direct investments controlled by MNCs in LDCs since the start of the crisis (Table 4). It grows rapidly in the tax havens (which are also off-shore banking centres), under the impact of joint development by MNCs and TNBs . Next comes the NICs, which now take 55 per cent of the investments of MNCs in LDCs: Brazil alone has received 15 .1 per cent of the total 1978 stock . On the other hand, the poorest countries, the least developed countries, have seen their share fall steadily ; direct investments in these countries grew at the derisory rate of 3 .3 per cent a year. To a lesser extent, the same conclusion holds for LDCs at an intermediate level of income . Overall, in 1978, 77 LDCS held 13 per cent of MNC investments, as against 15 per cent for the 7 tax

A new differentiation of MNC investments in LDCs

Table 4: Shares of the stock of direct investments received by LDCs (1967-78) 1971 1975 1978 Annual Growth 1967 Rate 1967-78 68.2 89.3 10.5 Total stock in $ billion 32 .8 43 .3 % shares held by OPEC countries: 27 .7 26.8 22.9 17 .0 5 .3 Tax havens' : 7 .0 9.0 13 .0 15 .0 19.2 43 .6 46.1 55 .0 14.6 NICS 2: 43 .6 (36 .5) (37.0) (40.6) (46.0) (13 .5) (of which 10 in UN list:) 11 .0 10.9 9.5 5 .6 3 .3 Least developed countries' Intermediate LDCS4 10 .7 9.7 8.5 7.4 6.4 ' Bahamas, Barbados, Bermuda, Cayman Islands, Dutch Antilles, Panama, Liberia 2 17 countries: the 10 on the UN list (Argentina, Brazil, Mexico, Peru, Singapore, Malaysia, Hong Kong, Philippines, India, Trinidad), plus Colombia, South Korea, Spain, Greece, Israel, Portugal and Turkey . ' 37 countries with per capita GNP below $400 in 1979 ; 27 are African. 40 countries in all . Sources: Calculated from UN (1978) and OECD (1981).

Imperialism 76

havens, and 55 per cent for the 17 NICs . In 12 LDCs8 the presence of MNCs is insignificant, amounting in total to $219m ., or 0 .2 per cent of the total stock of LDCs, and 1 .6 per cent of the stock in Brazil . Lesotho has received $4m . of investments ; its GNP is $442m. Corresponding figures for Mali are $10m . and $1820m . for Uganda $1Om . and $3712m . Even from the point of view of the host countries, the presence of MNCs is negligible in all the least developed countries, with the exception of Zaire . Now, however it is measured, economic growth has been much faster in the NICs than in the least developed countries or the intermediate group . Between 1960 and 1978, the growth rate of the NICs was 4 .4 per cent p .a., as against 4.0 per cent for the oil exporters, 3 .7 per cent for DCs, 3 .7 per cent for intermediate income LDCs, and 1 .6 per cent for the least developed countries Qudet 1981) . There is thus a correlation between the weak penetration of the LDCs by the MNCs, and their weak relative growth ; and as a corollary, between the accelerated growth of the Nics and the greater presence of MNCs . This correlation is not expected in the theories of under-development (and of imperialism) which hold that the penetration of foreign capital worsens the underdevelopment of the most externally-oriented countries . Even if there is no direct causality between the different level of penetration by MNCs into LDCs and the latter's increasingly unequal development, the statistics show that the development of underdevelopment is in fact linked

to the relative absence of MNCs, not their relative presence . One result is that public development aid only accounts for 2 per cent of the foreign revenues of the NICs, as against 38 per cent for the LDCs as a whole, and 89 per cent for the least developed countries . The latter therefore do not attract TNBs any more than MNCs, and depend largely on public development aid, loans from the IMF and the World Bank, tied eventually to austerity programmes . On the other hand, the TNBs like the MNCs flock to the Newly Industrializing Countries . If there has indeed been a development of the international credit economy, then in contrast to Palloix's argument, it has not been a substitute for direct investments by MNCs; the two are in fact complementary, and concentrated on a few LDCs . Mali and Uganda are not deluged with MNCs, nor with TNB credits, and have to rely almost entirely on aid from international institutions . In addition, the least developed and intermediate LDCs are retaining a foreign trade structure typical of underdevelopment. Essentially, one cannot find any `new international division of labour' between LDCs and DCs, and still less that this results from the actions of MNCs .



International centralization

Hence we can conclude that for transnational capital, there are two Third Worlds ; on the one hand, the NICs, the tax havens and the OPEC countries, to which it is attracted for various reasons ; and on the other hand, the intermediate and least developed countries, which it ignores . This strategy of MNCs and TNBs objectively splits the Third World, and undermines the establishment of a united front against DCs in the definition of a New International Economic Order. Transnational capital thereby contributes to the transmission of the crisis to the Third World, according to a differentiated pattern : abandoning the least developed countries to impoverishment, and imposing on the NICs the logic of a capitalist solution to the crisis . To conclude this article let me emphasise that the international centralization of capital which has accentuated during the crisis has not in any way created the conditions for a New International Economic Order . On the contrary, by reinforcing the links between TNBs and MNCs it has consolidated the power of TFC, having allowed the latter to go through the crisis increasing its profits, by diverting difficulties onto other economic agents in the world economy, and by deepening the uneven development inherent to capitalism. Therefore the international centralization of capital has reproduced a capitalist order which does not have much of a new face. Competition between the MNCS, exacerbated by the recession, and competition between TNBS with excess liquidity has brought with it the international centralization of capital . And yet, competition with TFC has not disappeared. International centralization has recreated competition on a wider scale, with huge amounts of capital opposing each other in the developed countries and in the NICS. At this level the competition has become transnational, with the visible hand of Rockefeller, Morgan, Rothschild, Agnelli, Wallenburg, Worms etc, supplanting, except in newclassical texts, the invisible hand of the competition between independent capitals and autonomous nations . The curious result of this is the appearance of anarchy or disorder in the world economy; an appearance which in fact has concealed the real re-ordering of the capitalism in favour of TFC . The crisis has been above all a calling to order of those who might try to free themselves from it. This hypothesis is confirmed by our previous observation that development is becoming more and more uneven especially between LDCs and is leading to a real division within the Third World and the impoverishment of countries abandoned by TFC ; and this at a time when both the industry and finance of the NICs is becoming more and more integrated within the workings of world capitalism . There is no `new' international division of labour today

Conclusions

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Capital & Class 78

if you accept that the NICs are in reality countries newly integrated into capitalism . Similarly, there is no New International Economic Order as is claimed by the LDCs. The so-called North-South dialogue simply confirms the compromise between the countries dominated by TFC . For example, the majority of Third World countries represented at the Cancun summit were NICS. So what we have is a monologue between the capitalist countries which have reached maturity and countries whcih are in the process of becoming capitalist, that is, the NICs . No compromise is really possible between the reordering of the economies of these countries by TFC and the development needs of the majority of poor countries . It is therefore TFC which has benefited from the apparent lack of world order and from the crisis . Some writers on the Left explain this in terms of secret discussions between technocrats and businessmen from the MNCs and TNBs, along with a few military men and politicians, working together to define the outlines of a capitalist solution to the crisis, at meetings convened by the Trilateral Commission, the Bilderberg Club, the Atlantic Institute and the Dakar Club. IfTFC was really able to draw up a master plan for the world economy then it would be Kautsky who was right among the theorists of imperialism . But I have tried to show that the international centralisation of capital is a spontaneous movement by transnational capitals aiming to safeguard a high rate of profit . So instead of accepting Kautsky's thesis we ought to accept Marx's notion in which competition leads to the centralisation of capital which in turn recreates competition on a larger scale . In capitalism today, this scale is world-wide from the very outset, in tune with Transnational Finance Capital itself. This paper is a revised and extended version of a paper presented to the 1982 CSE Conference on `World Economy in Crisis' . It has been translated from the original French by Hugo Radice .

Notes

1. The underlying reason is probably more political than analytical . Before May 10th 1981, the government often took up a position in which external factors alone were responsible for the crisis . Anxious to stress the opposite viewpoint, the opposition at that time was led to minimize the omnipresence of transnational capital . Clearly, the removal abroad to that part of Paribas' capital which was subject to nationalization led the new left majority to adopt a more realistic view. 2. Notwithstanding variations, nuances and some analytical differences, this view is shared by many economists in the Left such as M



International centralization 79

Aglietta, Y Barou, M Beaud, B Bellon, B Billaudot, H Bertrand, R Boyer, A Brender, B Coriat, L De Mautort, M Fouquin, M Gabet, B Guibert, A Granou, J .P. Laurencin, A Lipietz, J Mazier, J Mistral, C Palloix, J .P. Reiffers, C . Sautter (the latter is it the present time Francois Mitterand's economic advisor) For more details concerning the regime of intensive accumulation 3. and monopolistic regulation, see inter alia Agliettta (1976), Boyer (1979), Mistral (1982 and 1982b) . For our critique of this thesis : Andreff (1982b) 4. A deeper study of these contradictions within the economic strategy of the French Left in power was given at the University of Amsterdam (May 1983) under the title: `Is protection against multinationals workable? Remarks on the economic strategy from the Left in France' (to be published in Dutch, English and French) . This was also the topic of my talk at the CSE Conference (Sheffield, July 1983). On the French Left's economic policy, more broadly, see the author's `Socialist France : protectionism or austerity?', Politics f5Proftt, October 1983 5. Some writers view this as evidence of `complicity' of the oil mNcs in the decision to increase the oil price . Even if this is not the case, the facts show that they had no reason to try to oppose them . The sample was defined using 1972 as base year and is described in 6. Andreff (1976) . The I1 investing countries are : USA, UK, France, West Germany, Switzerland, Canada, Japan, Netherlands, Sweden, Italy and Belgium . 7. In 1972, Fortune only ranked the top 300 non-Us fins, and so no direct comparison with 1980 can be made . 8. Afghanistan, Benin, Gambia, Guinea-Bissau, Lesotho, Mali, Mauretania, Nepal, Uganda, Rwanda, Chad, Upper Volta .

References Aglietta, M . (1979)A Theory of Capitalist Regulation, New Left Books. Andreff, W. (1976) Profits et structures du capitalisme mondial, CalmannLevy . Andreff, W . (1979) 'Les Multinationales face aux Etats-Nations', Les Cahiers Francais, no. 190, Mars-Avril 1979 . Andreff, W. (1982) 'Staat, sectorwinsten en crisis in her wereldkapitalisme', Komma, Amsterdam, Mai 1982. Andreff, W . (1982) Regimes d'accumulation et insertion des Nations dans l'economie mondiale, inJ .L. Reiffers (ed) Economie et FinanceInternationales, Dunod, Paris Andreff, W . (1983) Les multinationales hors la rise, Le Sycamore . Andreff, W. (1984) 'Histoire d'un concept : l'internationalisation du capital', in B . Ducros (ed .) Croissance, ichange et monnaie en iconomie internationals, Economica, a paraitre. Andreff, W. and Pastre, O. (1981) `La genese des banques multinationales et ('expansion du capital financier international', in Michalet (1981) . Bouchet, M. (1979) `L'endettement des pays en voie de developpement et la privatisation de la dette', Colloque de Nanterre 1979, in Michalet (1981) . Boyer R (1979) La crise actuelle : une miss en perspective historique, Critiques de I Economie Politique, No 7-8 . Bukharin, N. (1915) Imperialism and World Economy, Merlin Press, 1972 . Brett, E .A. (1983) International Money and Capitalist Crisis, Heinemann.

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De Bemis, G . (1978) 'Les firmes transnationales et la crise', inL'Occident en desarroi, Dunod. Fennema, M. (1982) International Networks ofBanks and Industry, Nijhoff. Grou, P. (1983) La structure fnanciere du capitalisme multinational, Presses de la Fondation Nationale des Sciences Politiques . Hilferding, R . (1910) Finance Capital, R.K.P. 1981 . Jacquemin, A. (1981) `Concentrations et fusions d'enterprises dans la C .E .E.', Revue d Economse Politique, no. 3 . Judet, P. (1981) Les nouveaux pays industriels, Les Editions Ouvrii res . Khoury, S J. (1980) Transnational Mergers and Acquisitions in the United States, Lexington Books. Lapple, D . (1983) Internationalisation of capital and the regional problem, in J . Walton (ed .) Capital and Labour in the Urbanised World, Sage . Leucatte, C. (1975) `Internationalisation du capital et impbrialisme', Critiques de l'economie politique, no. 19-21 . Levinson, C. (1981) Capital, Inflation and the Multinationals, Allen & Unwin . Llewellyn, D.T . (1982) `Avoiding an international banking crisis', National Westminster Bank Review, August. Lorenzi, J.H., Pastre, O . and Toledano, J. (1980) La crise du XXe siecle, Economica . Marx, K . (1970) Capital, Vol. I, Lawrence & Wishart . Marx, K . (1966) Capital, Vol. III, Progress Publishers . Michalet, CA . (1976) Le capitalisme mondial, PUF. Michalet, C .A . (1979) 'Les banques multinationales : nouvelle vague des multinationales', Les Cahiers Francais, no. 190, March-April Michalet, C.A. (1981) (ed.), Internationalisation des banques et des grouper f nancieres, CNRS Mistral, J . (1982) `La diffusion internationale de i'accumulation intensive et sa crise', dans J .L. Reiffers (ed.), Economic et finance internationales, Dunod . Mistral, J. (1982b) Maitrise du marche interieur, competitive, et redeploiment: principes de politique industrielle pour le decennie 80, in H Bourguinat (ed) Internationalisation et Autonomie de Decision, Ed . Economica, Paris. OECD (1978) Investing in Developing Countries, Paris Palloix, C. (1982) 'Crise et nouvelles formes de l'imperialisme . Economic de credit international et extension internationale du salariat', dans J .L . Reiffers (ed.), op . cit . Pastre, O. (1979) La strategic internationals des groupes financiers americains, Economica. Pollin, R. (1980) The Multinational Mineral Industry in Crisis, Monthly Review, April . SIFT (1974) `Internationalisation du capital et processus productif : une approche critique', Cahiers d Economse Politque, no. I . The Economist, `The crash of 1982', 16 October 1982 . Thuiller, J .P . (1982) 'Investissements croises entre 1'Europe et les EtatsUnis', dans J .L . Mucchielli and J .P . Thuillier, Multinationales europeenes et investissements croises, Economica . UN (1978) Transnational Corporations in World Development: a Reexamination, New York . UN (1983) Transnational Corporations in World Development : Third Study, New York.

Alain Lipietz Translated by M-PAllum

Imperialism or the beast of the apocalypse The order that our mind imagines is like a net or a ladder which has been made in order to reach something . But after that, the ladder must be thrown away as it appears to have been useful but meaningless . The only useful truths are tools to be thrown away . Umberto Eco, The Name of the Rose MY PURPOSE IN this paper is not to present the true theorization of the tendencies at work in the International Division of Labour, from the origins of imperialism up to the present crisis . On the contrary, I would like to begin with a few cautionary methodological remarks and a word of warning against the misuse of some words and concepts that we all use (at least those of us who refer to Marxist theories, or more generally to an analysis carried out in terms of domination and dependency) . Is it not true that, faced with the optimism (or cynicism) of liberal thinkers, we have often tended to present concrete history as the ineluctable working out of a concept such as that of Imperialism? And have we not practiced what Bourdieu has called pessimistic functionalism implying the world is as it is because it has been ordered in the interests of the establishment or according to the necessities of the system? The very notion of `International Division of Labour' (not to mention International Economic Order!) suggests the intervention of some Great Engineer-Master Builder who organizes labour according to some preconceived

This paper starts with a critique of some biases in the theories of imperialism, dependancy and the international division of labour (IDL) such as holism, functionalism and the primacy of external causes. It is suggested that an analysis based on regimes of accumulation and modes of regulation might avoid these pitfalls . Such an analysis argues that a new IDL is being superimposed upon the old IDL with its characteristic divisions between centre and periphery and between manufactured goods and raw materials . The new IDL is developing along a pattern based on the levels 81 of technology and skill within the labour process, and is leading to a dispersion of both the centre and periphery .

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world-wide plan . Depending on our own inclinations and styles, we see this watchmaker's activity as the result of the activities of various readily identfiable subjects, either the Multinationals, the Trilateral Commission or some restless machiavellian ectoplasm such as World Capitalism or the World Economy . Again according to our style or the weight of our experience this approach can only lead to either a dull pessimism of the intellect (`We cannot do anything about it, the system works against us') or to a new kind of opium of the masses (`it will soon collapse under the weight of its own contradictions'). Thus the true spirit ofMarxism is denied (i.e . the concrete analysis of a concrete situation) and with it, the possibility of optimism of the spirit . Nevertheless, in the second part of my paper, I shall try to do what is expected of a researcher : I will present a brief summary of the work I am doing on the main characteristics of the transformations affecting the International Division of Labour today, under the stress of the present crisis' . Obviously, I will then throw all caution to the wind, I will use words like `the old and the new division of labour', `the centre and the periphery', 'fordism', `bloody Taylorisation', `peripheral fordism' and other intrepid conceptualizations . I hope to show however that these constructions can be of some use in our understanding of reality, while at the same time being, in many respects, just fit for the fire .

On methodology

My initial point is to warn my readers against two biases . The first involves deducing concrete reality from immanent laws which are themselves deduced from a universal concept (such as Imperialism or Dependency) . The other side of the same bias concerns analyzing each concrete development merely within the strict terms of such a concept, for example analyzing the internal evolution of each national socio-economic formation like the performance of a musical score under the baton of a world famous conductor whilst conceding that the conductor is not, so to speak, a bad subject .

The beast of theApocalypse An Italian writer, Umberto Eco, disillusioned with many things, but not everything, has just published a remarkable detective story. In this book, William of Baskerville, a Franciscan Sherlock Holmes, solves a mysterious series of crimes in a medieval abbey . These crimes seem to follow each other like the curses of the Apocalypse . Using this pattern, William discovers the murderer and the motive, but he also finds that each crime has its own logic, its own causes, which of course have nothing to do with the Antichrist . The ultimate twist of the novel is that the culprit has in fact convinced himself that he is acting out the scenario of the

Imperialism apocalypse ; at least one of the crimes has been set accordingly and, ultimately, the murderer has actually played the part of the Antichrist (in a very specific way) . William (who is, of course, largely the spokesperson of the great philosopher, William of Ockham) then deduces from that the fruitlessness of general laws and the richness of particular events . What a beautiful amd meaningful story! Have not we, ourselves, with all our conceptualizations, generalizations and dogmatism, invented beasts of the Apocalypse from whose characteristics we have tried to deduce the future development of concrete history? Thus, in the sixties, we predicted that the immutable laws of imperialism would inevitably increase the gap between nations and polarize wealth on one side and poverty on the other . Thereby, we deduced the inevitable succession of stages of development and underdevelopment . Did we not also predict the impossibility of industrial development in dominated countries? But, when in the seventies, Britain declined faster and faster and the United States was undergoing a similar process while the newly industrializing countries (NIC)s were rising from the bottom rungs of imperialism, what could we say? Immediately, new theorizations sprung up and new verses of the Apocalypse were quoted predicting another kind of future just as unavoidable as the previous one . Warren (1980) fished out the old text of Marx on the Railways in India which were going to develop capitalist relations as certainly as productive forces were going to revolutionize relations of production - one of the most memorable blunders of the Great Prophet! Reconceptualizations of history emerged predicting the shift of the centre of the world economy towards a vague and watery point situated somewhere between Tokyo and Los Angeles, with a brand new International Division of Labour born fully clad out of an obscure contraction of World Capital . So, when in 1980 the NICs began to be hit by the crisis as well, those who had remained faithful to the old division of labour like some rusty old grandfather clock could say with a knowing smile : 'We told you so!' Obviously I too, fell into these traps, even all three at once . The last word on this, though, is as Lenin said `History has got much more imagination than we have' . By that, I mean the imagination of the human kind and of the 'objective subject' (Kosik [1970]) who makes his/her history not like a single-minded subject but like a huge body of millions of subjects engaged in struggles, with their victories and their defeats.

The 'habits of history' Is this tantamount to saying that, in the face of the free development of history, no rational knowledge is possible : no universal law, no neccessity, therefore no science, no generality, no

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concept; or to asking like William that if all law limits God's freedom, is it possible to conceive of a necessity interwoven with possible variants? The real William of Ockham said `Yes' . Because on the one hand, God's freedom is subject to a principle of non-contradiction so that not everything may happen ; because on the other hand, God's omnipotence is materialized in its reified form as a crystalized power, or the habits of created nature . Do not be alarmed, what follows is not a lecture on theology . But it is interesting to remember that Spinoza said `God, or if you like Nature', thereby distinguishing between natura naturans and natura naturata while Marx, who knew of `only one science, that is history', underlined that `men make their own history but on the basis of given conditions, inherited from the past' . Therefore, if we firmly retain this dialectical materialism, there is a possible scientific project for social scientists - the study of regularities which establish themselves in human relations as produced by past struggles ; the study of crises in these regularities due to the contradictions which were only temporarily resolved ; the study of changes in these regularities due to the ongoing struggles of the people fighting for or against their freedom. This amounts to saying that our concepts do not drop ready made out of the sky - they are in fact the product of partial systemization of the real, which is itself only partially a system . They can be used afterwards for different concrete situations to identify some general characteristics which they had already clarified . But from then on, they either appear pertinent and can help in the liberation of people oppressed by the habits of history, or they appear inefficient and must be modified if not completely discarded . It also follows that several partial systemization, several concepts can be applied to the same object - no sectarian approach, no fetishism over concepts or even worse over books can be acceptable in the framework of this concrete analysis . It is probably with the study of the system of world-economy that one must be most cautious as this system is only, as Michalet (1976) has quite rightly shown, a process of partial outcomes . As economists, we can only study a few of its aspects, which we flatter ourselves by asserting (not without good reasons) to be determinant in the last instance . I should point out that this cautious way of proceeding was not unknown to our forebears . I have already quoted from Marx and Lenin so now let me quote from the founders of Dependency theory, Cardoso and Faletto (1967) : The concept of dependency claims to give meaning to a series of events and situations which appear conjointly at a given time . . . . In using it, one is trying to establish relation-

Imperialism ships which will explain empirical situations, according to the type of connexion there exists between their internal and external structural components . In this perspective, however, these components can also be seen as a particular type of relationship between groups and social classes and in the context of underdeveloped countries . However, we are unfortunately forced to recognize that the concepts of dependency, modes of production and imperialism soon acquire a logic of their own and rebound on us in the form of systems which now become oppressors, obscuring reality with its specificities, its differences and its transformations . This is why we must not be prevented by some unacknowledged fundamentalism from enriching our concepts by other concepts, particularly those which may explain precisely how reality has become a sufficiently stable object as to be subject to conceptualization . We can then account for its evolutions and specificities . Let us take the case of the capitalist mode of production, a concept that is already quite rich in describing the stabilization of a system of relations between people in given countries at given times . We know its tendencies and countertendencies, some through observation and some through logical deduction . One of the major contradictions of this system is due to its commodity-producing character. I mean that while inside their factories capitalists know how to organise productions down to the most minute detail and manage, given habit and calculation, to establish the 'iron-law of proportionality' (Marx, chap . IXV), they behave in the outside world just as private gamblers - their goods may or may not find a buyer at a price which will produce a profit . This is the famous realization problem. And yet it works except when there is a crisis . In studying how it works one has to produce new concepts. Together with a group of French colleagues', we have proposed those of `regime of accumulation' and `mode of regulation' . The regime of accumulation describes the stabilization in the allocation of the product between consumption and accumulation over a longish period . This in turn presupposes some correspondence between the transformation of the conditions of production and that of the reproduction ofwage-labour and various forms of articulation between capitalism and other modes of production between a particular economic and social formation and the outside world . In mathematical terms, a regime of accumulation is described by a particular schema of reproduction . To exist the reproduction schema must be consistent so that all regimes of accumulation are not possible. Obviously there is no obligation for private capitals to be aligned obediently into a coherent schema of repro-

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duction . What is requred is an embodiment of the system of accumulation in the form of norms, habits, laws, regulating networks, which ensure - by establishing a routine in the behaviour of agents struggling against each other (in the economic struggles between capital and wage-labour and in the competition between capitals) - the cohesion of the process and an approximate conformity with the reproduction schema . This set of internalized rules and social procedures which incorporate social elements into individual behaviour (one could here invoke Bourdieu's concept of habitus) is what we have called mode of regulation : So the dominant regime of accumulation in the OECD countries of the postwar years - a regime of intensive accumulation based on massconsumption - is accompanied by a mode of regulation very different from that of 19th Century Capitalism since it includes contractualisation of wages, a rise in indirect wages, credit-money as legal tender and Keynesian state policies . We have called this monopoly regulation and as a tribute to Gramsci, we have named this type of accumulation combined with this mode of regulation, fordism (Coriat, 1979). We should note that not every mode of regulation can regulate any system of accumulation and that one can find the one and same mode of regulation combiningpartial elements ofdifferent modes . Above all - and this is the most important point - the emergence of a new type of accumulation is not preordained in the course of capitalism . Even if it does correspond to certain noticeable tendencies, the stabilization of a mode of regulation is not the necessary outcome of a system of accumulation emerging from Plato's cave to dictate the laws to us, shadows . Accumulation and regulation are discoveries in the history of men's struggles and they have worked for so long as they have guaranteed some regularity and permanence in the social reproduction . But as Nature is full of oddities like the ornithorhynchus or toucans, which have survived on very low stocks in between the dotted equilibria which scan the evolution of species, so in the same way is the history of capitalism full of short-lived experiments, of reabsorbed revolutions, of undeveloped prototypes and total freaks . Thus there is no point in trying to lay a social formation on the Procrustean bed of a regime of accumulation adapted to a typical situation (fordism for instance) when not only may it not necessarily fit that regime of accumulation but it may not fit any stabilized regime at all; it may be merely in a state of crisis' . Pessimisticfunctionalism

We have just referred to the precariousness of the succcessful instances of capitalism, the scale of the contradictions which have

Imperialism to be resolved before it can reproduce itself, the necessity of finding a system of accumulation and of assembling an appropriate mode of regulation . In short, what we have said about the much more improbable than likely existence of capitalism and its concrete instances must not lead us to think on the contrary that `when it works, it must have been designed for that purpose', or that this mode of regulation was meant to encourage this regime of accumulation, for example like saying that Social Security was invented for the purpose of keeping mass-production going smoothly . One merely ought to say that a regime of accumulation and certain modes of regulation have become stable together because they have allowed social relations to reproduce themselves without crisis for a while . At best, one can apply some kind of a posteriori functionalism at a metaphorical level so to speak, such `it all happens as if' . . as if, for instance, the underdevelopment of the periphery had helped metropolitan capitalism to prosper . This brings me to my second warning. In the theory of international relations probably, more than in any other field, tendencies towards functionalism and even towards intentionalism as the outcome of a kind of holism, are both obvious and damaging . Take Ricardo and the supporters of the HOS theorem 16, for whom the International Division of Labour (IDL) seems to be the outcome of some world summit-conference during which, after proper assessment of relative productivities, collective preferences and initial natural endowments, an optimal allocation of production would have been computed. Each participant goes home afterwards not only convinced of the virtues of free-trade but also delighted with the share which has fallen to his/her country, in accordance with the law of comparative costs and therefore quite happy to apply the agreed specialisation to his/her own country . The great merit of the theorists of Imperialism and Dependency is to have swept away the apologetic nature of this myth, to have underlined that the differences between economic areas, which were undeniable in empirical terns, consisted of differences in wealth and power, and that those who had an interest in the survival and domination of this state of affairs had much more faith in the invisible hand of corruption or in the rather more visible boot to the military than in the invisible hand of the market . Taking up Adam Smith's tradition against that of Ricardo, Marxists and theorists of Dependency' have aptly shown that the existence of the unequal development of capitalism among nations together with the stabilization of a particular structure of exchange have encouraged a very fast rate of accumulation in a few advanced countries, thus resolving the contradictions of the mode of production in favour of capitalism in these countries. The result then is some kind of world-wide regime of accumulation, in relation to

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which the polarization between centre and periphery plays a regulating role . But then, this is only one step away from saying that this regime had been imposed upon dominated countries because it was necessary that certain zones should perform the funaion of resolving the problems of capitalism, or worse still, that one had imposed these relations of domination specifically with the intention of resolving them . To talk of a conscious subject imposing the demands of the centre, or of an immanent world-reality separating the centre from the periphery for the sake of its own functioning just like God separated the sky from the seas, is again merely a matter of style . Needless to say, the step in the direction of functionalism and interntionalism was taken quite boldly in the early days of this type of analysis . Let us stay with the Dependency School and observe the subtle way in which Cardoso (1970) puts his case : There is no metaphysical difference between external and internal conditions. In other words - the internal dynamic of dependent countries would be a particular case of the global dynamic of the capitalist world at large . Yet this global dynamic is not an abstract phenomenon producing concrete effects ; it exists both on the level of singular modes of expression in the "periphery of the system" and in the mode of articulation of international capitalismss . But intentionalism and pessimistic functionalism were exploded immediately by Baran as quoted by Palma (1978) : The decisive factor is that the economic development of the underdeveloped contries is totally antagonistic to the interests of the dominant classes in the advanced capitalist countries . It is not my aim to exonerate the great American and British demons, nor the little French demon for any of the great abstract demons of Capitalism or World-Economy . I am merely saying that we must not confuse the effects with causes and a set of partial regularities comprising a system with an unfolding .system . It is even more misleading to see the formation of the IDL as a system deliberately or intentionally organized, when, to the freedom of History, class-struggles and competition between capitals, which we have referred to above, we must add the compartmentalization introduced by national factors and the sovereignty of states in the reproduction of social relations . The state is in fact the archetypal form of regulation - it is the level at which the class-struggle is regulated, it is the institutional form in which the compromise is condensed . Without this the different groups of the national community would destroy themselves in an endless struggle . To assume that world-capitalism was created fully fledged with a single regime of accumulation with its own modes of global

Imperialism regulation is to assume that flows of regular exchanges, social norms, procedures codified and guaranteed by a single sovereignty and subsequently delegated to local states, have been established all at once on a world-wide scale . It would also be to assume that each compromise and each shift in the relationship of power anywhere in the world, necessarily corresponds to the adjustment of a perfectly homeostatic cybernetic system . This picture is both hopeless and unrealistic . The development of capitalism in each country is above all the result of internal class-struggle, leading to regimes of accumulation reinforced by some forms of regulation backed by the local state . It may well be that in these social formations previous links established with the outside world by some agents (such as trading enterprises or military expeditions) became useful and sufficiently important to play a decisive role in the regime of accumulation . This means that such a socio-economic formation cannot function without this type of link, since it resolves one or more contradictions in its mode of production . Thereafter, such a link shaped the customs of that society and appeared `natural' . Yet all that had happened is that some compatible relations had come together, other combinations could have taken place and history would have been different . What we must do then is study each social formation determining the successive stages of its regime of accumulation and mode of regulation and carry out a concrete analysis of its development and crisis, in which external factors may or may not have played an important role . This is done all the time for countries in the centre but not for those of the periphery which is still treated as a single homogeneous reality, even though it displays such a wide variety of situations . The characteristics of the periphery are still usually treated as mere consequences of the demands of the centre' . Do I mean then that there is no evil intervention leading to the underdevelopment of some peripheral countries and that national systems of accumulation are merely juxtaposed without forming a system? I find myself once more like William faced with the evils of the mysterious Antichrist . If he manages in the end to unravel the threads of the plot, it is only due to his looking for a series ofcauses, of connexions between the signs : and each situation is different. It is true, of course, that each crime is caught up in the contradictions of the old Benedictine institution, insofar as it tended to create the Antichrist . As for the direct intervention of the Devil . . . it is different for every crime . I shall say no more in case the novel is spoilt . It is clear however that this twofold answer applies equally well to the case of Imperialism . There are general contradictions in capitalism (which are not manifested equally and with the same degree of intensity in differing regimes and modes of regulation) . As capitalism functions

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when imperialism provides a solution however provisional to its contradictions and if a particular series of concrete causes have produced embryonic imperialist relations, it is then legitimate to say that imperialism has developed and resolved the general contradictions in the interest of some national capitalisms . Imperialism has not been created in order to resolve them but it has remained in existence and even developed because it has served to resolve them . It may disappear, become modified or persist through habit, if and when other solutions to the contradictions are found, or if and when other contradictions arise. Only to that extent is it right to say that, things being as they are, and History having got into these habits, it has the function of resolving these contradictions . Like the manufacturer of machine-tools who tries to do good business and not belong to Department I, although he also does that, some class-alliances in certain countries have thought it profitable to enter - or have been bullied into entering - into international alliances which have placed their countries in the periphery. It is therefore possible to say that, from the time when centre/perphery relations have become stable, there is a worldwide system of accumulation (or IDL) with very specific forms of regulation (military expeditions, wars, international financial system). But how is it possible in this case to reconcile `national regimes of accumulation' with a world-wide regime of accumulation'? Like in the twin-case of the wave and the particle, these are two aspects of the same thing, depending on the way we approach it. Thus, the `triangular trade system' was at the same time bound up in the Spanish regime of accumulation and with the worldeconomy of the Mercantile Era ; and what I have called `peripheral fordism' applies both to some NICs and to some aspects of the world-economy in the seventies . But in reality struggles and institutionalised compromises take place mainly at the national level, so priority must be given in methodical terms to the analysis of each social formation per se (in its relation to the outside world), or to use the terms of the old debate, to the primacy of internal causes . Can one go as far as saying that some agents, states or companies, knowing that it would resolve problems, have deliberately created or maintained imperialist relations? Yes, but not necessarily. There have been and will be, wars and coups d'etat carried out to preserve markets, to get hold of raw materials and to retain control over poorly-paid labour. Yet to stop at the obvious cases of machiavellian intervention by dominant groups of metropolitan countries to explain the destiny of dominated countries is really to mistake a particular case for a general one, and above all, to consider a particular state of affairs characterized by particular economic relations as the result of intentional action directed by a limited sector towards that specific result . In reality these actions

Imperialism were often aimed at achieving non-economic ends and the results were achieved above all by internal conflicts, through a more or less coercively imposed consensus, around a choice favouring a certain type of accumulation . In each particular case, this choice would lead the given social formation towards a specific place which is not predetermined in the hierarchy of nations, and which, however stable it may look and however coherently it may function is only the product of historical accident . An approach in terms of demands of metropolitan capitalism tells us nothing about the success of North America, Japan, or Prussia nor about the failures in Latin America and nothing on the respective destinies of Australia, Canada and Argentina and it probably misleads us totally on the case of Canada and Argentina . This argument does not apply of course to colonies - these territories without an independent state apparatus and subjected to the policies of the metropole and functionally linked to the demands of a dominant metropolitan group -but it does apply to all formally independent states in which the class-struggle was relatively autonomous . Such is the case of the former colonies in Latin America, as early as the beginning of the 19th century, and in some British Dominions - Canada and Australia in particular - towards the end of the 19th centry. Significantly enough, when my honourable colleague A.G . Frank raised this question, he first used an apocalyptic turn of phrase ('As early as in the 1820s, Bolivar and Cunning formulated the historical process which Latin America was going to go through, if not because of Providence, at least because of the development of world capitalism') moving later to the more precise language of concrete analysis, showing in great detail, the key role played in the defeat of the national bourgeoisie that was primarily interested in the development of productive industry by the liberal bourgeoisie that was import-export oriented . What would have happened if the former had not been defeated? There might have been a Prussia, or a Japan in Latin America . But then, what has the development of world capitalism got to do with all this? Nothing but it is a striking concept, summing up for us the result of concrete processes but in no respect is it a cause determining the destiny of anybody in particular . The IDL and labels Nonetheless, even if no immanent destiny condemns such and such a nation to such and such a place in the IDL, the immanent contradictions of capitalism often discover (let me underline the accidental quality of this process) a temporary solution at certain times, by inventing some deviations and differences betweenvariout national social formations in the regime of accumulation . During these periods, even if places have not been allocated in advance, the

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field of available places is there, with a range of compatible national

regimes of accumulation . The dominant classes in different countries have their various strategies ; some (dominant) dream of banishing the others (dominated or still autonomous) to the peripheral status already devised in other circumstances, while the latter develop strategies which can - depending on the state of the internal class-struggle - achieve dependency or autonomy . But the point is that they cannot all be dominant at the same time . We are not now trying to let in through the back door the ghost of world capitalism which we had chased out through the front door . I reiterate that what happens to form a system, and which we can intellectually identify as such because of its provisional stability, must not be seen as a finalized structure, an order established in order to be coherent. Of course it is coherent. If not, international confrontation would erupt and that would be the end of all talk of system. This consistency is merely an effect of the interaction between relatively autonomous processes, of complementarity and antagonism temporarily stabilized among various national regimes of accumulation . Therefore, the centre/periphery relation, to use a common concept, is not a direct relationship between states or territories within a single process . It is rather a relationship between various processes, between more or less introverted or extroverted regimes of accumulation . This relationship between processes is regulated by the constraints of compatibility to those which regulate the processes of capital valorization in a schema of reproduction : the world-production of equipment goods must be equal to the world-demand for such goods and so on . As we know, the schemas of reproduction which are most useful in resolving the contradictions of capitalist economy are not those where each country produces and exchanges the same things . There is therefore an unequal allocation of social labour and of its products between different countries. That is what is called the IDL, but we can see now how deceptive and deliberately confusing a term it is whether it be apologetic or derisory, like that of real socialism. When we talk of the IDL, we suggest that labour is distributed internationally according to the iron laws of proportionality like that principle of organizational optimality which prevails inside capitalist production units. The IDL is in fact much more akin to the division which exists between capitalist units, with some kind of order (the famous schemas of production) but also with its unruly arbitrary competitions, its generalized warfare, its dirty tricks and power-games . In the same way, the real division of labour results from attempts by some nations to control others or to set themselves free from them and from the relentless efforts of internal classes to form alliances or to abandon the strategy of an

Imperialism independent domestic industry . This is in no respect a necessity of World-Capitalism (apart from the fact that capitalism does require some regular distribution of labour) but instead only a kind of discovery or better still confluence of resistance to or adoption of these discoveries . Admittedly as we will see some monopoly economicofinancial groups do try to deploy themselves in the sphere of unequally developed nations (or regions), by fragmenting the work process across pools of labour with different wage-relations (conditions of sale and use of the labour force) . They organize a geographical division of labour quite consciously among themselves, and the general adoption of this practice strengthens the new IDL . One must not conclude however that the organisational efforts of the multinationals are the only factor in the new IDL . In reality, this arena can only be structured because the multinationals' plans coincide with the ambitions of the dominant classes in some national states to play the export-substitution strategy, which corresponds, as we shall see in a moment, to several types of internal accumulation (bloody taylorisation, peripheral fordism) . The collected essays of Michalet (1976) show that the formation of a new IDL was not in fact the motive for the dislocation of some sectors of the productive process by multinationals. More often than not, it was quite simply because the capitalists of the centre were trying to bypass customs barriers which had been set up by some peripheral country to sell off in that country their manufactured goods in accordance with the logic of the old IDL . A final point needs to be made on the objective character of places in the field of the unequal development of national social formations . It is relatively easy to define it in stylistic terms following the conceptualization which has helped to describe the field - `centre of the Economic World', `developed country', `underdeveloped country', `exporters of raw materials', `introverted' or `extroverted' countries, 'under-imperialisms' NICs' and so forth . But it is much more difficult - and very often dangerous - to stick such a label on any given country or worse still, to describe that country on the basis of the label that has been given it by others or that it has given itself. For one thing, the `field' itself varies as it follows the modifications in the systems of accumulation of the various countries (and therefore the dominant international system) . This not only means that two systems can change places, or to use Wallerstein's (1974) and Braudel's (1979) phrase, `the centre of the world economy' moves from country to country . The very texture of the field varies - the centre once used to be a town (Venice, Amsterdam) and later a country (England, the United States of America) . But why not several `countries' why not a

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network, rather than a single centre? Why must we necessarily find a predecessor to England or a successor to the United States ? But more fundamentally, reality shows that the field is almost a continuum of situations, of local systems and of modes of insertion into the world economy . Some countries seem to be typical of a type of internal accumulation and of a mode of insertion, and it is by comparison with these typical cases that one tends to classify the other nations . Once this classification has been made (although there is never any agreement about the exact allocation of countries between categories), one tends to think that these abstract categories determine each country's specific characteristics. So, Argentina is put in the same category as a banana-producing Republic of the West Indies $, because they both export raw materials, and then Canada's case becomes awkward. In fact, as for social classes in Boltanski (1982), it is not possible to draw demarcation lines between nations on the basis of some characteristics determining their position in international relations . Indeed there are typical cases, there are centres and peripheries par excellence, and similarities brought out either by a theoretical analysis or by a joint decision - as in the case of the OPEC countries, the Group of 77 or the NICs . When such a classification is in common use, it acquires an objective reality, if only because those classified together tend to look for alliances among fellow-countries of the same category in order to preserve their common interests, although these reactions may well be challenged by other characteristics which determine other alliances . It is of course important to take into account this phenomenon of political solidarity, experienced by those who appear to share a roughly similar lot . But it would be disastrous to abandon the results of concrete analysis for a label, and to embark on metaphysical debates as to which category this or that country belongs, simply because one thinks that it is rather extroverted, it exports so much raw materials or so few industrial goods . It would be even more disastrous to deduce from the category in which it has been placed, the main characteristics of a country, to model policies on that category, to wear blinkers to the point of excluding from the reality of the country all the elements which don't fit the box in which it is meant to be . Beware of labels, beware of the IDL - and let us pay more attention to the actual workings of each country, what it produces, for whom, which forms of wage-relation it has, which successive systems of accumulation it has had and why. Let us also be very cautious when we cast a net over the world to try and capture the relationships existing between the systems of accumulation of various national social formations .

Imperialism Equipped with all these warnings, I shall now endeavour to make some sense of this tale full of sound and fury and drenched in blood and mud . I shall only deal briefly with the invention and diffusion of capitalism, the expropriation of land, the hard-labour of bloody legislation, the re-invention of slavery and serfdom, strikes, wars and so on . . . . Birth of capitalism from commodity-relations . The history of capitalism must be understood not as the development of a structure but as the bold expansion of its social relations from its own fertile soil of commodity-relations developed on the margins of preexisting relations of production . Little by little, floating like lumps in a sauce on the so-called natural economy and bound to it by commodity-relations capitalist relations congealed and formed real centres of capitalist production . In their historical surveys of the birth of capitalism Braudel (1980) and Frank (1977) have illustrated vividly for the period between 1500 and 1800 the relativity of the territorial notions of centre . At the outset of the Middle Ages material production all over the world was essentially carried on in a non-commodity fashion . Trade which was conducted almost exclusively at long distance, only mobilised a very small portion of this production and was directed towards the dominant classes . Some centres of these trade networks embarked on the transformation of the metals, spices and textiles involved in these exchanges thereby developing a waged labour-force which represented only a small proportion of their customers . Therefore, these towns as centres of the world economy floated on the margins of tributary empires or feudal kingdoms . During the 17th and 18th centuries, the economic miracle consisted in the transition from `city centres' to national economies and the crucial switch from Amsterdam to London . Around trading centres and metropoles the market economy and the waged labourforce grew sufficiently to create a territorial economic space principally geared towards consumption and accumulation . Thus, from world trade capitalism developed its own wage-labour and then a home-market for its own manufactured goods . Towards the end of this mercantile period, reasonably well-structured exchanges appeared between firms and between firms and wage-labour making it possible to begin talking seriously of regimes of accumulation . Thermostaticfunction of the periphery or the old IDL These centres on the whole tended to remain dependent on the non-capitalist outside world whether this happened to be inside or without the capitalist nation-states . A priori, there was no guarantee that the circuit of exchange between capitalists and

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wage-labour should complete itself, especially when firms took piecemeal decisions about increasing their output . The completion of the circuit of capitalist reproduction remained uncertain and improbable . Accumulation was then mainly extensive (increase in production without changes in the labour-process) interrupted by some intensive waves of development (radical changes in products and labour-process brought about by industrial revolutions) . Regulation was of the competitive type : wage-labourers having practically no access to capitalist products sold their labour power on a day to day basis, firms which could not really control the market adjusted to demand through competitive prices and money was based on the commodity - gold . There was very little state intervention . Under these conditions the major problem was the search for new markets in the countryside and among artisans inside the country, in less developed centres (hence the technological gradient radiating from England) and finally in the outside world during the mercantile period . The theories of imperialism have been formulated on that historical basis of extensive accumulation with competitive regulation in the first countries to be industrialised. In fact, we find the earliest expression of these theories in Adam Smith's work. At its most basic the emergence of relatively complex forms of manufacturing cooperation allowed by capitalist wage-labour immediately guaranteed an absolute advantage in terms of productivity over all other modes of production . But an increased social demand did not follow this extensive capital accumulation in the countries which were undergoing this type of growth. So this lack of demand had to be compensated from the outside, which was done easily because of the absolute advantage just metioned . During this period, the outside world first acted as a market for finished goods that could not be sold on the home market . And as soon as commodity-production and wage-labour were sufficiently developed it became a direct market for capital investment . The outside world was also a reserve from which capitalism could draw what it could not produce but could transform (raw materials) or help to reproduce (labour force). In this type of regime of relations between centre and periphery the periphery effectively played the part of (and was conceived as) a thermostat. The capitalist machine of extended reproduction could not be completed within the centre . The outside world supplied it with a source of both labour and raw materials and of markets. Once more, I must stress that this centre/periphery relation was first a process before it became a structure of unequal relations. Or, more exactly, there was a structural link between two types of

Imperialism

processes : in the centre, an increasing interconnection of processes of production was taking place in a more and more clearly defined schema of reproduction while units of capitalist production in the periphery were developing according to a pattern determined outside the periphery called `extroversion' . Obviously at some stage in the process, the extroversion of a nation-state becomes almost irreversible and deeply ingrained in its social relations . We have already said how important it is to analyse class struggle in the periphery in order to account for this irreversible move towards peripheralisation . However in the sky of the Apocalypse, the Beast has now appeared : the initial IDL between the centre which manufactures goods and the periphery which exports raw material . But this was not really a division of labour . If it had been able to do so the centre would have produced everything without any imports . In fact, capitalism developed only where essential raw materials as coal and iron existed. Furthermore, during its early period European mercantile capitalism used to pay for the products of Eastern handicrafts with raw materials, first its own and later with Latin American gold. The fact that during the 19th century the periphery specialised in raw materials was only the result of an exclusion of the capitalist manufacturing sector. It was another discovery to realise that what remained (raw materials) was profitable for metropolitan capital to exploit in alliance with a fraction of the local bourgeoisie in search of monopoly rent and the overexploitation of local labour under the mere semblance of a wagerelation 9. Other discoveries proved promising : the transfer of capitalism, its factories, its wage-labour and its modem farms, to settlement colonies where capitalist accumulation could amass its first funds by exporting raw materials . It was possible to do anything with raw materials but it would have been dangerous merely to export them. The question was then to decide whether it was better to spend lavishly the profits in buying goods from the centre, in buying machinery or in enlarging the basis of the wage-relation and therefore starting a self-centred process of accumulation even if it meant protecting the emergence of this productive power (List) against the invasion of free-trade . And the answer depended once more on the state of the internal class-struggle in which naturally the traces of the colonial past in the social structure (the famous habits of history) were of great importance . In these early days it was already difficult to categorise Chile, Argentina and Uruguay and some dominions . Elsewhere, numerous countries which had never been colonised were left out of the IDL . . . and Japan had already decided internally during the Meiji period to challange the centre . The transition within the centre to a new system of accumulation was to impose a brutal choice .

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The transition to fordism Between 1918 and 1945, developed capitalist countries invented a new system of accumulation with a new mode of regulations : fordism . As a mode of capital accumulation it is based upon the constant upheaval of the labour process such that the workers' know-how is incorporated into the automatic features ofmachinery . This system of intensive accumulation combining a rise in apparent labour productivity with an increase in the per capita volume of fixed capital presupposes that the body-movements of the old craft-worker have been systematized through the methods of scientific management called taylorism . But this fantastic increase in productivity (b-7 per cent a year against 2 per cent during the previous century) only aggravated the question of markets which reached a climax with the Great Depression of the thirties. The `discovery' of the post-war years was to adjust mass demand to the rate of growth in productivity by linking wages and productivity . This adjustment provoked a dramatic change in the lifestyle of wage-earners, by normalizing it and even integrating it into capitalist accumulation itself (Granou, Baron, Billaudot, 1979) . It took the form of a network of institutions which stabilised the increase in nominal wages (collective bargaining, the Welfare State and so on) but also gave the major firms of leading sectors a monopoly over the productive structure by allowing them to control their prices more or less independently of the fluctuation in demand . But all this required a change in the role of the State and the development of credit-money. This revolution did not take place overnight. Under the leading role of the United States'° new norms of production, consumption and wage-regulation were invented or adopted with more or less success . The uneven spread of intensive accumulation (Mistral, 1982) worked wonders in Northern Europe, Japan, Australia, Canada and New Zealand . But because of the strong resistance of its working-class and the weight of financial capital that was too heavily internationalized to be interested in this kind of internal revolution, Britain missed the Fordist train and therefore began to be excluded from the centre . Argentina, one of the richest and most developed countries in 1945, missed it too because of the resistance of its workers and of the decision by its ruling-class to continue to rely on export-oriented agriculture . It is even more interesting" to see how a sub-fordist strategy of import-substitution failed in some dominated countries . It has been shown (Lipietz, 1982A) that this failure was not due to the American warden's refusal to industrialise the periphery but mainly to the insufficient transformation of the internal social

Imperialism relations : the import of technical norms from the centre had not been followed by a corresponding wage-relation and the local elites were too fragmented a market. The virtuous circle of intensive accumulation could not get going and the differences in productivity between the centre and periphery increased . Be that as it may, the centre/periphery relationship could not but be radically changed by the invention of fordism . As the system of intensive accumulation and monopoly regulation was being established in the economic spaces of the centre, the thermostat was progressively losing its importance in providing outlets, while gaining importance in terms of resources (oil, labour-force . . .) . Indeed with a system of accumulation based on mass-consumption, capitalism had temporarily resolved the question of markets on an internal basis . One could even say that the exports of manufactured goods to the periphery were only just covering the cost of raw materials . The share of exports in GNP of each centre country fell progressively from the beginning of the century until the sixties . Then it began to increase again but mainly between blocs within the centre (USA-Canada, EEC) : the scale of mass-production required larger homogeneous economic spaces and needed to transcend national frontiers . In the same way, international investment flowed back from the periphery to the centre : capitalist concentration and centralization followed the unification of the markets for manufactured goods and the endogenous growth of the markets of the centre .

Appearance of peripheralfordism and the new IDL In the mid-sixties, at the climax of central fordism, the importance of the periphery in world trade for manufactured goods was almost nil . Export of these items to the periphery had fallen to 2 per cent of domestic production in the EEC and to 0.8 per cent in the USA! If the opening of new markets had been the cause of imperialism and of the imposed stagnation in the periphery then the centre did not need the periphery any longer . . . . Over the same period the imports by industrialised countries of manufactured goods from underdeveloped countries was negligible (less than 0 .2 per cent). Yet it was from that angle that the periphery was to regain its importance . The regime of fordist accumulation had just stumbled across the other major contradiction in capitalism, the falling rate of profit. The formidable mechanization introduced by fordism was no longer producing sufficient rises in productivity . The organic composition of capital was rising and increasing pressure on the rate of exploitation in the centre woould have reopened the problem of markets which the monopoly wage-regulation had

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resolved . New sources of surplus-value therefore had to be found in order to increase profitability . They were to be found in the NICs (Newly Industrializing Countries) . The historical process of spread and integration of capitalist relations was relaunched during the sixties by a combination of two factors : The first factor was linked to the internal logic of fordism and to its hitherto latent crisis. Fordism had involved a segmentation of the productive process into three levels (Lipietz 1977) : i) conception, organisation of methods and engineering having become virtually autonomous; ii) skilled production requiring skilled labour; iii) unskilled operations and assembly in principle requiring no qualifications . It was then possible to split these three levels into three geographical regions and to spread the productive circuit of fordist branches to three pools of unevenly skilled and unevenly paid workers . This relocation of skilled work had already been tried out inside the centre and it spread during the sixties to the countries of the periphery most adjacent to the centre where hourly wage-rates were considerably lower and working-class organisations weaker (Spain, Korea, Mexico and to some extent, Eastern Europe) . So a new vertical division of labour with different levels of skills within each industrial branch was being developed over and above the old horizontal division of labour with its primary (agriculture/mining) and secondary (manufacturing) sectors . This redistribution of industrial work was a kind of extension of fordism, a re-organisation of the system of accumulation itself and not the form of a new relationship between the system and the outside world . But a second factor was needed in that these countries had to have authoritarian regimes and ruling-classes ready to play the export-substitution card . This choice implied a clear autonomy of the State not only from the overexploited classes but also from the ruling-classes linked to traditional exports or to the home market (Salama, Tissier, 1982) . Without going into the detail of specific national examples we can identify two typical schemas : a) bloody taylorization This involves the relocation of well defined and limited segments of branch circuits to States which had a very high rate of exploitation (wages, duration and pace of work) and the reexport of goods mainly to the centre . The free zones and, in the early days, the Asian workshop-states, (HongKong, Singapore), provide the best examples of this kind of strategy which mainly affected the textile and electronic industries . The jobs were on the whole taylorized but not highly mechanised . The cost of imported plant was therefore very low and this industrialization which mobilised women workers principally could

Imperialism

incorporate the know-how and sense of discipline that women had acquired through patriarchal domestic exploitation . It was bloody in the same sense as Marx uses to describe the legislation of the early metropolitan capitalism. It added the modem techniques of anti-labour repression to the centuries-old exploitation of women . From the point of view of the theory of accumulation and regulation, these industrial processes must be considered as productive segments relocated from the metropolitan regime of accumulation with practically no effect on the growth of world social demand . Such a model was extremely fragile . Social tensions very rapidly developed and the local dominant classes having had to concede wage-demands, had to resort quickly to more sophisticated forms of socioeconomic regulation and adopted a richer system of accumulation called peripheral fordism . Moreover, the insertion of these very low-waged segments into the central system of accumulation created competition for outlets with the equivalent segments in the centre, thus provoking sectoral and regional crises in the old industrial countries : these countries responded with protectionist measures . Thus the Multi-Fibre Agreements which had originally been meant to organise access of central markets to exports from the countries controlled by the multinationals, the third time round became a barrier to these exports (Marty, 1982)! One can measure here the superficiality of the functionalist analysis and the very relative strength of the supposedly satanic multinationals . b) peripheral fordism Whether it was the legacy of the oldstyle import-substitution policies, the outcome of an exportsubstitution programme based on bloody taylorisation or any other specific reason, in the seventies in some countries a conjuncture of autonomous domestic capital, relatively numerous urban middleclasses and an embryonic skilled working-class occurred . This conjuncture made it possible for a number of states to embark on a new strategy which we have called peripheral fordism . I must underline once more the political nature of this choice as it was bound up with the internal class-struggle which had conferred on the state a real autonomy from the traditional dominant classes as the cases of Korea, Mexico, Brazil, of the Opus Dei Spain and of Gierek's Poland, show in their different ways . Why have we called it peripheral fordism? We think that it is an authentic fordism based on intensive accumulation combined with market-expansion but it remains peripheral to the extent that, in the world-circuits of productive branches, jobs and production corresponding to skilled work-processes and above all engineering remained outside these countries on the whole . Secondly it is so to the extent that the markets correspond to the combination of a local

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urban middle-class market with partial access by workers of the fordist sector to domestic appliances and exports towards the centre of these goods manufactured at low cost . So, the growth of world social demand for durable goods and particularly for household goods, was anticipated but not institutionally regulated on a national basis which would have been calculated on the productivity increases of the local fordist branches. We must not forget that, under this term of peripheral fordism, a wide variety of regimes of accumulationt 2 is possible . The ratio of exports of manufactured goods to demand in the home-market varied from 4.1 per cent in Mexico to 25 .4 per cent in Korea (in 1978) : in each particular regime of accumulation the proportion of final internal demand on the home-market to importsubstitution and to re-export of industrial goods varied enormously. This in turn indicates the big differences which existed in the mode of regulation and above all in the wage-relation, the forms of hegemony of the dominant classes and so on . . . . Nevertheless, one must restrict the use of peripheral fordism to the countries where the expansion of the local market (for manufactured goods) played a real part in the national system of accumulation . This stresses the fact that South Korea, which is still described sometimes as a workshop-state (which it was between 1962 and 1972) with bloody taylorisation in relocated segments of labour-intensive industries, has long since left that stage . Reduplication of the IDL The emergence of these countries with a peripheral fordist system and the financial accumulation of liquid assets in some OPEC countries have burst the periphery apart and have produced the reshuffling of the hierarchy which is taking place at present . The periphery has never been a homogeneous whole but the new factor is the increase in the flow of goods as in the old division of labour between the NiCs and the countries which have remained exporters of raw materials or those without any resources. In all everyday fordist goods industries or typical branches of intermediate products (such as steel) and even for engineering products, the NICs have become extremely competitive and are competing against central industries for trade with these countries . Consequently we find triangular exchanges of raw materials, emigration and manufactured goods developing entirely within the South . It is significant to note that NIC's exports to the South are altogether more regional, more sophisticated and capitalist than their exports to the centre . So, as the years go by, the old!DL is being recreated, but this time within the ex-periphery . The NICS are beginning to exert technological domination over these markets

Imperialism

since, although in climbing the ladder they have not yet reached the highest rung of world-technology, they now export not only professional equipment at low prices but also engineering products . However in global terms their share of Department I and even of Department II of the fordist IDL is still very small . While Korea exports 4 per cent of its machine tools it still has to import 65 per cent to satisfy its home-market . We can even witness a reduplication of the new IDL . As higher wages in the first wave of NICs make them less competitive in the re-export strategy based solely on bloody taylorisation and as import quotas are being applied against these goods in the centre, these countries are organizing with multinationals a second stage of bloody taylorization directed towards what a recent report of the OECD Observer (November 1982) has called the second wave of developing countries exporting manufactured goods : Malaysia, the Philippines, Thailand and even the People's Republic of China . This reduplication of the division of labour or this deployment of the world-circuit of productive branches in the NICs is superimposed upon the old relation between the manufacturing centre and the raw material exporting periphery but it is still a long way from forming a world economy ordered around a hegemonic centre ` s. Beside the fact that the War of Succession for the United States is still being fought between Europe and Japan and that state capitalism of Eastern European countries plays a special role in this system, the Third World is today like a constellation of special cases . They are characterised by vague regularities, fragments of an accumulation logic which fit more or less well together and flows which come and go after a few years without having established a stable mode of regulation at a global level . . . . The regulation of this bric-a-brac was based in the seventies on a recycling of an increased amount of credit based on dollars held abroad and deriving mainly from the OPEC surpluses . The NICS financed their industrialization not so much through the investment of multinationals as from loans coming from private sources on the international financial market" . These loans were granted on the trust that peripheral fordist accumulation, seen this time as a world-wide regime of accumulation, would work. In fact, in the seventies the NICs rate of growth reached 10 per cent a year benefiting from the final residue of expansion which Keynesian policies were achieving in the centre while the centre itself was using the demands of NICS for industrial equipment as a boost to its own productive sector. But the newly hegemonic role of monetarism in the centre and internal factors of crisis in the NICs' system of accumulation have provoked the total collapse that we know today and which I have analysed elsewhere (Lipietz 1982A and 1982B) .

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Scattering of the centre What about the centre while this is happening in the periphery? The crisis of fordism also provokes a scattering of the centre although this is rather less important than in the case of the periphery. By the late sixties, the industrial countries through the spread of intensive accumulation had adopted similar norms of production and consumption" . But this similarity itself became a factor of crisis when it destabilised the hegemony of the USA: in 1971 the devaluation of the dollar marked the beginning of a trade war . But if one could identify a cause of this trade war it was the fact that, by the mid-sixties, trade in manufactured goods between countries of the centre had started to rise again as the extension of the terrain of technological and commercial activities had stimulated mass-production and an increase in the ratio of exports and imports to GDP. In turn this growing opening up of national economies served to destabilise country by country the monopoly regulation of fordism. The regulation of wages linked to productivity became not only the main variable which controlled the delicate balance between the theoretical rate of profit and the growth of the internal markets but also the determining factor in the competitiveness of a country . Therefore, the greater the openess of an economy the more problematic wage-regulation became . All increases in real wages not only put pressure on export-prices (price-effect) but also increased the need for imports (quantity-effect) : this would not matter if both real wages and productivity had been increasing at the same rate in the various countries. But, when governments and employers began to put pressure on real wages, to make up for the drop in profitability resulting from increased fixed investment, each national capitalism started to look for markets outside the domestic ones that their own austerity measures had destroyed . Be that as it may, from 1973 the oil rent had to be paid for with increased exports . And in order to become more competitive yet more pressure was exerted on the wage-cost of each manufactured item. It is unclear whether increased external market outlets offset internal losses but it seems certain that the global number of outlets tended to decrease. So stagnation set in and it became more difficult to earn the market rate of return on fixed capital and indirect wages expenditure . The rate of profit fell once again and accumulation and productivity slowed down : the virtuous circle had become a vicious circle . However, the contradictions created by the trade war and its austerity measures did not hit all countries uniformly for the degree of openess is not the only parameter to consider in relation to international trade in the centre . There is a wide range of imports

Imperialism

and exports in the countries of the centre and each local economy may be more or less specialised : it may be more or less specialised in the productive sector or equipment goods in the central regime of accumulation, or in production in Departments I, II or III in the actual division of labour of the classical branches of fordism, more or less in declining branches, or in expanding ones where new norms of production and consumption are being determined . In fact, a country which had become specialised in assembling everyday consumer goods could only adjust prices in international competition either by adopting a low exchange rate or low wages and would then have to compete dangerously with NICS . On the other hand a country which specialised in equipment goods and had modes of organisation which were determining new norms of productivity would not be as exposed to this constraint either because it could flood the world-market with new consumer goods due to large differences in productivity, or because it enjoyed a monopoly over a number of vital equipment goods. Therefore we can see that during the present crisis the countries of the centre are diversifying in their evolutions not so much because of their degree of openness (in any case the openness of countries' markets is an obstacle to their regulation and bear in mind that the American and Japanese economies are the least open) as because of their varying achievements in terms of the production of important capital goods and of the mastery of highly skilled activities and of decisive technological developments . But these endowments do not drop out of the sky . Adaptation and specialisation are determined as ever by a host of factors including the internal social structure, the class-struggle and compromises, the habits acquired during the fordist phase of growth concerning wage-relations, labour-skills, the extent to which technological change is introduced through negotiation or conflict, the relations between big firms and subcontractors, research and industry, industry and banking, state-intervention and so on . . . I hope that I have succeeded in showing that, apart from the extreme cases of countries whose extremely low level of capitalist and technical development has condemned them from the start to escape domination only by radically breaking away from the norms of so-called development, no external destiny or general law of capitalism can dictate to any particular country its place in some preordained division of labour. Unless, of course, we mean by external destiny the weight of the past ingrained in the social structure and the internalisation of the norms which seem so successful in the models of development of other countries ; or unless we mean by iron laws the deliberate acceptance of the rules of free-trade and the free interplay of market-forces . . . . For it is precisely on the basis of given conditions, inherited from the past that peoples and nations make their own history.

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This article is an elaborated version of a paper presented at the Ottawa Conference on Canada and the New International Division of Labour, 28-30 January 1983 . 1 am grateful to the editors of Capital and Class for their editorial work .

Notes

1. See Lipietz (1977), (1981), (1982A) ; Cepremap (1980) . 2. See Aglietta (1976), Cepremap (1977), Boyer and Mistral (1978), Lipietz (1979). 3. Flexibility of concepts : one can say that an economy is in serious crisis when its mode of regulation does not any longer guarantee stable accumulation . But since the world carries on during a crisis (as for instance it has since 1973) why not also talk of a regime of crisis, as some talk of dependent development? The main thing is to dispose of a concept as soon as it is wom out. 4. See their interrelationship in Palma (1978). 5. Note here how realism of universals becomes holism and therefore implicitly suggests functionalism as well as a de facto primacy of external causes . 6. Apart from Lenin in his fundamental book, Development of Capitalism in Russia, Otninami (1979), and Hausmann (1981) are the first to deal explicitly with dominated countries' own system of accumulation and successive modes of regulation . 7. Early on in my research on space (Lipietz, 1973), I noted how varied, variable and relatively independent the topologies and spatial characteristics of each socio-economic formation and their articulations can be when I adopted a schema (regional framework/national social formation/multinational bloc) rather similar to the World Economy carefully and subtly described by F . Braudel at the beginning of his Temps du Monde but not always adhered to by his followers . So the typical configuration of the World Economy centred on England during the 19th century seems to have become universally applicable to all concrete situations (except maybe wars of succession) . Instead of trying to look for a centre between Japan and California, would it not be better to leave Wallerstein and prefer Braudel and his Mediterranean World under Philip II or even the twelfth century when early capitalism had no backbone other than the network of fairs in the Champagne area? 8. Or, more globally, can the whole of Latin America with Africa and Asia be placed in the bag of underdevelopment . If an Argentinian traveller believes that Mexico is underdeveloped what would an inhabitant of Mali say on arrival at Buenos Aires? 9. Depending on the situation, labour will be exploited in a capitalist way or in a sometimes unbelievably pseudo-precapitalistic way. Exporting capital can either be national or external (i.e . central) : it does not change peripheral characteristics much . One normally reckons that a tradesurplus corresponds to the transfer of value from periphery to centre and thus increases the profit-rate in the centre . But this can only in fact aggravate the problem of realisation . It is true that the prospect of high profits is the motive for individuals investing their central capitals in the periphery, but it would be an exaggeration to suggest that the plundering of the Third World may have had a major quantitative influence on the rate of expansion of the centre and even more so to say that it was the function of the



Imperialism periphery to do so . Qualitatively of course, it was vital to appropriate raw materials which unfortunately were in short supply in the centre but the fact that these raw materials should have been available in the periphery is purely coincidental. And in any case valuable raw materials do not exist everywhere in the periphery. 10 . The term American cultural imperialism was used in that respect. Between 1945 and 1960, imports of American machines, as part of the Marshall and MacArthur plan for Europe and to Japan, were accompanied by the import of fordist norms of consumption, work-organisation and of trade-union agreements. Boltanski (1982) has shown that the latter kind of imports were a pre-requisite to the Marshall Aid Plan and that at the time France, for instance, was considered by the States as intermediary between an advanced and an under-developed country . But as soon as fordism took off in these countries one could no longer speak of periphery in the case of France, or even less so in the case ofJapan or Italy. Italy's case is even more remarkable than that of France (which was considered between the two World Wars as one of the main world powers) or that ofJapan which had after all in the early thirties sided with Germany against the USA in the war of succession for England's place and had in fact already been, in the face of general opposition, very close to victory in the Asia-Pacific Ocean zone . In such an example one can measure the relativity of such notions as semi-periphery etc . . . They can only apply to regimes of accumulation which are in the process of diffusion and can therefore coexist with metropolitan characteristics from a diplomatic or military point of view, or from the point of view of an obsolete regime of accumulation as is probably the case with the USSR . 11 . Because of this failure of the transition to fordism during the fifties and sixties people believed that the old IDL would last for ever . However, even if the pursuit of development failed in Latin America it succeded more or less in Italy (apart from the Mezzogiorno of course) . And what about Spain? 12 . This expression, however questionable, is again a tribute to the eponymous company which initiated this type of practice - the Spanish `Ford Law'. This codified how much output was to be re-exported and how much was to remain in the home market in the case of assembly-lines which received some of their components from other central European countries (thus violating the old protectionist barriers) and actually one of the first illustrations of this strategy . (Cepremap, 1980) . 13 . This dissolution shows how inappropriate the metaphor of the American Empire was. World wars have been needed to bring down the Austrian Empire and the Hungarian and Turkish Empires to destroy the British and the French Empires : these were based on the explicit sovereignty of one state . On the other hand the American Empire worked thanks to a combination of explicit and implicit forms of hegemony. Some were brought down by struggle and others by the autonomous dynamic of national regimes of accumulation (see Arrighi, 1982). 14 . The share of these loans in the contribution of external capitals has risen to 82 per cent in the case of Korea. One must admit that such practices cast doubt, if not on the functionality, at least on the intentionality (on the part of the centre) of relations of dependency . 15 . State capitalism in Eastern European countries is not discussed here except maybe obliquely in the reference to Poland as a NIC. The following remarks are based on the Cepremap report (1980) .

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Capital & Class 16. A single-country, two-commodity and three-factor trade model named after Heckscher, Ohlin and Samuelson . (Editor's note) .

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References

Aglietta M. (1976) Regulation et crises du capitalisme, Calmann-Levy, Paris . Amin S . (1973) Le developpement inegal, Editions de Minuit, Paris . Arrighi G . (1982) 'Une crise d'hegemonie', in Var . auct. La crise, quells crise?, F. Maspero, Paris. Boltanski L. (1982) Les cadres, Minuit, Paris . Bourdieu P . (1980) Lefons de sociologic, Minuit, Paris . Boyer R ., Mistral M . (1978) Accumulation, inflation et crise, PUF, Paris. Braudel F. (1980) Civilisation materielle, economic et capitalisme, A. Colin, Paris . Cardoso F .H. (1974) `Theorie e la dependance ou analyses concretes de situations de dependance?', L Hommme et la Societe n°33-34, 2e semestre. Cardoso F .H ., Faletto E. (1967) Dependanciay desarrollo enAmerica Latina, Siglo XXI, Mexico, 1969 . Mimeo ILPES, Santiago du Chili, 1%7 . C . E. P .R .E.M.A .P . (1977) Approches de ('inflation: l'examplefranfais, rapport au Cordes par Benassy J .P ., Boyer R., Gelpi R .M., Lipietz A ., Mistral J ., Munoz J., Ominami C ., Paris, mimeo. C .E.P.R.E.M.A .P . (1980) Redeploiement industriel et espace economique, rapport a la Datar de Lafont J., Leborgne D ., Lipietz A., public dans Travaur et recherches de Prospective, n°85, La Documentation Frangaise . Coriat B . (1979) L atelieret le chronometre, Paris, Bourgois . Eco U . (1982) Le nom de la rose, Paris, Grasset. Granou A ., Baron Y., Billaudot B . (1979) Croissance et crise, Maspero, Paris . Frank A .G. (1977) L accumulation mondiale 1500-1800, Calmann-Levy, Paris . Frank A .G . (1978) L'accumulation dependante,, Anthropos, Paris. Hausmann R. (1981 A) State Landed Property, Oil Rent andAccumulation in the Venezelan Economy, PhD Thesis, Cornell University. Kosik K . (1970) La dialectique du comet, F. Maspero, Paris. Lipietz A . (1973) 'Approche theorique des transformations de 1'espace frangais', mimeo CEPREMAP . Public dans Espaces et Societes, Novembre 1975, Anthropos . Lipietz A. (1977) Le capital et son espace, Paris, F . Maspero, edition augmentee 1983 . Lipietz A . (1979) Crise et inflation : pourquoi? Paris, Maspero. Lipietz A . (1981) Vers une mondialisation du fordisme? intervention au Symposium International de Sfax (Avril 1981) . English translation : New Left Review, Number 132,1982 . Lipietz A . (1982A) `La crise du fordisme peripherique', intervention au Colloque Problemes de la reprise internationals et NoEl. Mimeo CEPREMAP 8225 . A paraltre dans Les Temps Moderns . Lipietz A . (1982B) `Derriere la crise : la tendance a la baisse du taux de profit', Revue Economique n'2, Mars . Marty C . (1982) 'Les arrangements concernant le commerce international des textiles', Revue de la concurrence et de la consommation, 3b trimestre .

Imperialism Marx K . (1867) Le Capital, livre I . Michalet C.A . (1976) Le capitalisme mondial, PUF, Paris . Mistral J . (1982) `La diffusion internationale inegale de !'accumulation intensive et ses crises', J.L . Reiffers ed., Economie et finance internationals, Dunod, Paris . Ominami C . (1980) Croissance et stagnation au Chili : elements pour !'etude de la regulation daps une economie sous-developpee, These Univ . Paris-X, mimeo . Palma G . (1978) `Dependency: a formal theory of underdevelopment or a methodology for the analysis of concrete situations of underdevelopment?' World Developmentvol. 6, Number 7/8, July-August. Salama P ., Tissier P. (1982) L'industrialisation dans le sous-developpement, Maspero, Paris. Warren B . (1980) Imperialism, pioneer of capitalism, New Left Books, London.

an international quarterly journal volume 9 numbers 1, 2

David M . Rasmussen, editor BOSTON COLLEGE 9 :1

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The national economy : a Keynesian myth? The ideology of the managed economy gave labour in the industrialized countries the illusion of control . It seemed that the national patch in principle could be controlled - full employment, rising real incomes and expanding welfare systems could all be attained by skillful direction of the State . The most extreme example of the ideology was in Eastern Europe, where workers were supposedly invited to exchange guaranteed material conditions . . . for a complete withdrawal from any political role . The decade of the seventies was most instructive in showing why that guarantee could not be offered . Not only was `socialism in one country' impossible, so also was `capitalism in one country' . -Nigel Harris,

This article argues that the capitalist world economy is now so thoroughly integrated across national boundaries that an autonomous national economic strategy is no longer possible.

Of Bread and Guns (1983), p . 237 .

• THE INTERNATIONALIZATION of capital re-emerged as an issue in the political economy of Britain during the mid-1960s, as politicians and trade unionists became aware of both the growing penetration by us firms in Britain's industrial economy, and the resurgence of capital exports by British industry and finance . Since then, the left has viewed multinational companies (MNCs) and banks as a sort of transnational, cosmopolitan corporate elite, whose pursuit of self-interest in an increasingly unified capitalist world economy undermines the ability of govenunents to manage individual national economies, and the ability of organized labour to bargain successfully with company management . The apparent contradiction between the 'international' and

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the `national' in contemporary capitalism has been analyzed by many socialist writers : the most important contributions in Britain were those of Robin Murray (1971 a, b) . Murray examined the ways in which `territorial non-coincidence' between capital and the state undermined the powers at least of weaker states; in response to this, Warren (1971) argued that the state was reacting by developing new powers and policies, in close relation with nationallylocated capitalist enterprises regardless of their ownership . As the decade progressed, socialists turned their attention to other matters, notably to essentially separate analyses of capital (including especially the process of production or `labour process') and of the state (including its `relative autonomy') . In the emerging discussion of socialist economic strategy, which culminated in the unfolding of Labour's Alternative Economic Strategy, the problems posed by MNCs and by inward and outward movements of capital were certainly recognised ; but the assumption - in line with Warren's view - was usually that such problems could be dealt with by applying the standard instruments of national economic policy : tariffs, exchange controls, direct interventions in industry and finance . Such instruments might be disavowed by Tory and Labour governments subservient to international capitalist interests, but a socialist government could rapidly and effectively deploy them as part of an overall AES. In Britain, and even more so in France, the left thus adopted a `national' solution to the contradictions posed by the growing weight of MNCs. This response seemed all the more justified by the rampant and generally banal cosmopolitanism of the world of big business . The reassertion of national sovereignty offered socialists the possibility of appropriating `the nation' as their own, and overcoming the perennial marginalization of socialist thought in the national culture . It also linked up with the romantic identification of the left with national liberation struggles in the Third World : after all, they too were fighting against `imperialism' . The viability of the Alternative Economic Strategy has been fiercely debated . Most of the disagreement has been political, rather than economic : since the AES combines a strategy for restoring national sovereignty with a strategy for socialist transformation, a host of questions arise about the political process by which the latter is to predominate in the long run . One way or another, these questions are discussed in the familiar terms of accepting or rejecting the `parliamentary road to socialism', or more generally, of designing labour movement structures and processes which will resist both the corporatist blandishments of the state, and the economic and cultural power of the capitalist class . The central preoccupation of the last few years has been with the `crisis of labour', viewed in terms of political strategy . It seems

Keynesian myth? to be assumed that once we have found the correct route to political power, the implementation of the economic policies of the left some version of the AES - will be subsumed in the subsequent political process of assuming class power : the key will lie in the political mobilization of the working class . I would not deny the importance of such issues, but it is deeply disturbing that economic analysis is now so marginal to the great political debates of the left : surely any serious political programme of the left must be founded on a serious analysis of the economic circumstances of the day, covering trends in all aspects of capitalism that impinge upon political processes. In this paper, I propose to ask a question that is fundamental to the viability of a national economic programme like the AES : is the national economy a proper object for socialist strategy? My hypothesis is that the capitalist world economy is now so thoroughly integrated across national boundaries that an autonomous national capitalist strategy is no longer possible ; and further, that neither in the capitalist class, nor in the national state, can the left find partners for an alliance powerful enough to mount a reformist economic programme on a national basis . Some people will no doubt see this as self-evident . Others evidently regard it as complete nonsense. In a recent article in New Left Review, Michel Aglietta offered a prognosis for `World Capitalism in the Eighties' (Aglietta, 1982) . Aglietta begins by firmly identifying the `internationalist' analytical approach with the political right : `The main currents of thought on world economic problems can be distinguished from one another, amongst other things, by the precise importance they attach to the national dimension . For neo-classicists, as well as for supporters of the `globalist' ideology propagated by the multinationals and transmitted by the communications media, there is a oneway process of the unification of economic relations . The absolute primacy accorded to the private subject over all forms of collective organization encourages a view of the nation as a mere historical remnant .' (p . 5). Is Aglietta going to follow a more balanced and realistic approach? No : he goes to the other extreme : `This article starts from different premises . In contrast to the neo-classical demarche, it bases itself on the primacy of the national dimension and regards the world economy as a system of interacting national social formations .' (p. 6) . The focus of his analysis is therefore on why and how one nation exercises hegemony over others . He proceeds to a historical and comparative analysis of different hegemonies, their rise and

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fall, and of the different national `regimes' that developed during the rise and fall of the us hegemony after 1945 ; and much of this detailed analysis is sensible and pertinent. But, as a consequence of his choice of approach - the `primacy of the national dimension' the prognoses offered by Aglietta at the end are wildly at variance with each other, and in measuring their relative probability (what will be the new pattern of hegemony among nations) he is reduced to superficial political forecasting . There is scarcely any reference to economic trends at the level of capitalist strategies (automation, relocation, diversification), or to the critical role of banking capital since the end of the post-war boom : in parallel, there is no reference to labour, either, which faces the dismal prospect of putting its political weight behind an avowedly capitalist revival programme (p . 41). If, like Aglietta, you assume that capitalism is constrained to `fracture' only along the boundaries of nation-states, then the consequences of internationalization (e .g. for the US payments balance in the 1960s) can only be interpreted as disorder ; and a way out of the crisis must involve first and foremost the stabilization of national economic orders (national currencies, industrial strategies, etc), and on that basis a new international order (hegemony) . If, on the contrary, you adopt the view that capitalism is not thus constrained, but can `fracture' along other lines as well, then the undermining of national economic regimes can be interpreted as the re-establishment of capitalist order in the world economy, as Andreff (1984) argues. More generally, it is possible then to centre your analysis firmly on the appropriation of labour power by capital, and not on the politics of nation-states. To return to my hypothesis : in the rest of this paper I do not offer any conclusive proof, nor do I offer a more `realistic' economic programme for the left . I am concerned mainly to debunk the concept of national economy, and to open up debate once more on the political implications of the internationalization of capital . In the next section I look at some general arguments, theoretical and historical, about the relationship between national economies and the world economy in capitalism . The third section takes up the reference to Keynes in the paper's title, and looks at the circumstances in which the national economy became the pre-eminent field of state economic policy in the Keynesian era . Section four looks at the internationalization process since 1945, and its consequencs for the structures and dynamics of the British national economy. The last section returns to a critique of the AES based on the preceding analysis, and a brief consideration of alternative strategies .

Keynesian myth?

The attachment of the left to a `national' perspective on capitalism has deep and diverse roots . The social democratic version, with its roots in Fabian and liberal economists like Hobson, and developing in the 1930s in the writings of G .D.H . Cole, Dalton, Cripps etc ., is sufficiently close to Keynesianism to be subsumed in the discussion of Keynes in the following section . The revolutionary socialist version, rooted in Leninism, offers a different and more ambiguous analysis of the relation between the nation-state and the capitalist economy. Bukharin on Imperialism

The most systematic exposition of the theory underlying Lenin's polemical Imperialism : the Highest State of Capitalism was offered in 1915 by Bukharin, in his Imperialism and World Economy . Their common political perspective was firm attachment to international revolution, despite the almost universal retreat of social democracy into nationalism in 1914 ; and, as the theoretical basis for this internationalism, a firm rejection of Kautsky's view that imperial rivalries could be transcended peacefully by 'superimperialism', with the major capitalist powers calling a permanent truce and dividing the world up among themselves . Imperial rivalries, for Lenin and Bukharin, created rather the preconditions for international proletarian revolution : but for this political perspective to be more than just an opportunistic response to the Great War, they had to show that imperial rivalries were endemic to capitalism . Given Lenin's more immediate political aims, it was Bukharin who made the more systematic effort to prove this case . Bukharin set out two general historical tendencies of capitalist development, which he termed `internationalization' and `nationalization' . The former tendency creates and develops the capitalist world economy, defined as a `system of production relations and, correspondingly, of exchange relations on a world scale' (Bukharin, 1915, p. 26) . This is analyzed in terms of the evolution of an international division of labour, the growth of productive forces, transport and communication, foreign trade, capital movements, and the institutional forms governing all these activities . However, `the process of the internationalization of economic life is by no means identical with the process of the internationalization of capitalist interests .' (p. 61) . For the most part, indeed, it is accompanied by fierce competition between national capitalist classes, which is based on the simultaneous but conflicting world capitalist trend of `nationalization' . This trend consists in the growth of monopoly, cartels, trusts and finance capital within the boundaries of individual states ; and the associated national economic policy weapons, in particular tariffs . The competition between national capitalisms is examined in the

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world market for products, in the world market for raw materials, and in the field of foreign investment : all this leads to the conclusion that the necessary outcome is inter-imperialist wars : `The fighting force in the world market thus depends on the power and consolidation of the "nation", upon its financial and military resources .' (p. 109) In the third section of the book, Bukharin then goes on to present imperialism as the reproduction of capitalist competition on a larger scale . Concentration and centralization of capital on a world scale, and competition within the world economy, take the form of struggle between national `state capitalist trusts', aided by the economic and military might of the state . The expansion of capital outside `its' state can only be secure if the state itself expands through colonial and other annexations . For Bukharin, then, the tendency of `internationalization' was dominated and moulded by the tendency of `nationalization' : this was the material basis for his and Lenin's political critique of Kautsky. Imperialism itself was not a logical, unavoidable necessity: it was a policy of finance capital based on these economic relations, and on the consequential disposition of class forces . Now there is no logical obstacle to a peaceful 'ultra-imperialism', any more than there is a logical obstacle to the reduction of the working day to necessary labour time (p. 134) : but such a permanent truce would require a comparative equality of positions on the world market, and of economic policies, which must be maintained dynamically - in short, an end to uneven development. What is far more likely, argues Bukharin, is that the working classes, who bear the burden of financing war, will finally recognize that their interests are diametrically opposed to those of capital. At present (1915) they are tied to the ideology of `workers' patriotism', which is supported by the transfer of surplus from the colonies ; but they will come to realize that international socialist revolution would both remove the burden of war, and open up the boundless potential of the world economy which is at present constrained by the narrow policies of finance capital (pp . 161-70) . In the early 1970s, writers analysing the internationalization of capital from a Marxian perspective argued that the development of MNCs, especially after 1945, had in some sense tipped the balance between `internationalization' and `nationalization', so that Bukharin's conclusions had become questionable . Bukharin himself had recognized in passing the possibility of a `solidarity of interests' based on the possession of collective property by capitalists of various countries (p . 62), but he overlooked the logical possibility that interpenetration of capitals could take place which would `denationalize' state power : `If, however, the process of internationalization is such as to

Keynesian myth? demand increasingly a minimal denationalization of state power, with firms as distinct from states being the vector of internationalization and its organization, then we have a much more complex situation, in which states represent both national capital and all national capitals operating internationally .' (Picciotto & Radice, 1971, p . 44) . This might provide the basis both for regional cooperation or fusion (the EEC), and for at least minimal cooperation on a global scale. The predominant conclusion in these debates was that the post-1945 'super-imperialism' of the USA was being succeeded by a period of relatively unstable inter-imperial rivalries, in which the cross-investments and other inter-dependencies of the big powers precluded inter-imperial war, or indeed the formation of closed imperial blocs . The analysis of Rowthorn (1971) in particular has proved to be remarkably prescient in this respect . In the next two sections I shall take up some of these conjunctural issues in relation to the British economy, but first I want to reinforce the critique of Bukharin with some historical and theoretical arguments . To start with, a close reading of Bukharin's work reveals a perspective on imperialism that is both highly abstract and curiously ahistorical. There is little discussion of either the emerging role of the state, or of international trade, or indeed of the development of capitalism out of earlier modes of production : national economies are simply seen as forming component parts of world economy in capitalism . But the detailed argument strongly suggests that, if only for reasons of geographical location, the national economy forms the prior basis for the development of modern political forms, including the state, and that this is why, historically, `nationalization' dominates `internationalization'. However, the history of capitalism suggests on the contrary that capitalist relations of production emerge in and on the basis of a world economy, `within which statehood arises and consolidates itself(Von Braunmuhl), 1978, p . 167) . It is in those arenas of economic life that escape the suffocating embrace of feudalism local trade in manufactures, and long-distance trade in luxuries and raw materials - that early forms of capitalism take root ; it is through the latter in particular that the commercial empires of the 15th to 18th centuries rise and fall. Only within the context of mercantilism and absolutism does `national capitalism' take root and then at first only with enormous difficulty and in the most propitious circumstances (ie in England) . Bukharin ignores the entire history of capitalism prior to the mid 19th century . It is only against Britain's economic and military hegemony that the `national capitalist economy' becomes the primary framework of capitalist development, first in the USA and then in continental Europe . Once the industrial revolution has shifted the

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focus of international trade to the reproduction of manufacturing industry - supplying its raw materials and selling its products then the particular contours of a given national economy, including the main directions of its state economic policies, are mainly determined by the way in which capital in a particular national economic space is integrated into the world economy . Then, and only then, is there the necessary economic and political basis for the pre-eminence that Bukharin accords to the tendency of 'nationalization', which he generalizes in space and time largely from the German experience after 1870 .

The State There are also important problems raised by Bukharin's analysis concerning the role of the state, which were not satisfactorily dealt with in the debates of the early 1970s . Murray and others analyzed the functions of the state, and the way in which the state forms the locus of contradictions between `nationalization' and `internationalization' . Poulantzas (1975) argued that supranational public institutions represented the interests of internationalized capital as regards economic policy, while nation-states represented the interests of national fractions of capital - a position that it is in fact implicit in Murray (1971 a) . Fine and Harris (1979) conclude sensibly enough that `there exists a complex structure ofnational and international capitalist state apparatuses, some of which are more distanced from the site of class struggles (the national social formation) than others. Those which are more distanced are more freely able to pursue the class interests and class positions of the dominant bourgeois fractions than is the national state. Because they have mechanisms (laws, treaties, agreements) for enforcing policies onto their constituent national states this structure of international institutions is able to exert what appears as an outside pressure on national states in favour of the interests of internationalised capital .' (p . 160) . But there the debate stopped . Analyses such as that of Aglietta (1982), discussed above, revert to a simple identification of the state with the interests of national capital . The contradictions of state economic policy, for example between reflation to secure economic growth and social peace, and deflation to impose the discipline of the market, reflect more or less faithfully the contradictions of national capital (in this case, between realization and the rate of exploitation) . Analyses of the state, however, suggest that the relation between the capitalist class and the state is much more complex - as indeed Aglietta himself argues in A Theory of Capitalist Regulation (1979) .

Keynesian myth?

If there is one central `economic role of the state', one basic principle, it is that the nation-state ` . . . is the guarantor and regulator of the conditions necessary for the reproduction of capital . . . and at the same time also the apparatus for the repression of national labour power' (von Braunmuhl, 1978, p. 176) ; in brief, the management of labour for capital . Translating this general principle into questions of form and function, let alone specific policies, can only proceed through concrete analysis : but nevertheless generalizations are offered as an intermediate stage (eg the rise of the welfare state, the military-industrial complex, incorporation of labour, etc) . The problem is that such generalizations have, during the last hundred years, appeared to point in one direction only : towards an increasing role of the state. If `territorial non-coincidence' and the `political opportunism' of internationalized capital undermine the coherence and effectiveness of the economic policies of particular states, the assumption is that other states, or public supra-national institutions, will have to assume the functions of the state which these `weakened' nationstates can no longer perform . This is implicit in Fine and Harris (1979), and other writers who adopt the concept of `state monopoly capitalism'. Murray (1971 a) explicitly allows that certain functions can be performed by capital itself, but the general conclusion drawn is that because `necessary functions' of the state have been undermined, the consequence is a breakdown of international economic order, interpreted as a symptom of capitalist crisis . In the conventional view, the contradictions are then accentuated, because capitalist crisis normally encourages further state intervention . Block (1980), for example, sees a sharpening contradiction between capital and the `state managers', the professional legislators and civil servants who perform the necessary functions of the state . `Normally', the latter regulate the market anarchy of capitalism, modifying the system to increase its viability ; but the growth in the role of the state has recently neared a `point of no return' beyond which the overall dominance of capital would be seriously undermined . Hence, in the present crisis (since the demise of the postwar boom under US hegemony), capital has launched an offensive against the state, forcing `free market' policies in place of `state' policies via the fiscal crisis of the state . The obvious objection to this analysis is that the central conflict in the capitalist mode of production is seen as being between capital and the state, rather than between capital and labour . But it is not enough to insert `labour' into the analysis on an equal footing, forming as it were a triangular disposition of social forces. As Vajda (1979) persuasively argues, the tendency of Marxists to accord to the proletariat an `objective role in history',

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regardless of its subjectively differentiated interests, is more often than not just wishful thinking. Rather, it is necessary to highlight the evolving patterns of domination by capital over labour, and how the state (or more generally, public authorities) fits into this . The increasing role of the state over the last century should be seen not as the inevitable consequence of the `socialisation of production' or the `concentration and centralization of capital' (an `iron law' of capitalist development), nor as the unfolding of some equally inevitable `state principle', but as the consequence of an ad hoc accretion of state functions, arising from a sequence of conjunctural pressures on capitalist class rule (Polanyi, 1944) . From this perspective, the `weakening of the state', caused in part by the internationalization of capital, and appearing most strongly in the imposition of nearly universal deflationary policies, does not signal an approaching crisis of the state, whose outcome can be only revolution or apocalypse . It signals, rather, a complex process of restructuring of the class relations of capitalism, similar in scope to the changes of the inter-war period, but with no mechanically determined outcome as far as the role of the state is concerned . Indeed, as Gamble (1979) argues, it is by no means clear that the state is being weakened, even in the extreme case of `Thatcherism' : it is simply playing a different part in the social process . Furthermore, internatonal `state apparatuses' do not necessarily represent the only alternative to the national state as a vehicle for the class rule of capital, or `fractions' thereof . Above all, a critical examination of two key features of Bukharin's classic analysis - the primacy of the national economy, and the increasing role of the national state -suggests that there are no general, universal laws of national economy, nor of national economic policy, in the capitalist mode of production . If so, then a concrete, historically-founded explanation is required for the emergence of the form of national economic policy which we call Keynesianism.

Keynes and the National Economy

In orthodox economic theory, the idea of the nation-state as an `economic actor' is taken for granted . The elision of individualistic economic behaviour and self-interest into a presumed collectivity is most evident in international trade theory ; but it is also a central feature of Keynesian macro-economics . It is true that modem welfare economics has debated at great length the concept of a'social welfare function' which is implicit in the proposition that governments can pursue an `optimal' macroeconomic policy; the conclusion is that no such social welfare function can be defined in operational terms . A very different critique of the Keynesian concept of the state has come from the

Keynesian myth? `economics of politics' school, a growing body of generally rightwing, anti-collectivist political scientists and economists who postulate that possession of state power is itself the object of competitive behaviour, and that the exercise of state power is always aimed at serving particular interests, rather than `national welfare'. Evidently, too, Marxist theories of the state also deny that the state can pursue a general national interest, and theorists of bureaucracy can explore the complexities of the mediation of state interest by the institutions that implement state decisions . What no-one seems to question, however, is the foundation of the Keynesian approach in a delineation of the national economy . The constituent elements of the General Theory are economic aggregates - output, employment, investment, consumption, etc . or synthetic averages - rate of interest, real wage, money wage level, price level : in either case, these are defined and measured over a given geographical-political space, that of the national economy . Further, distinct aggregates - imports, exports, capital flows - and averages - exchange rates, terms of trade - are defined and measured to capture all economic transaction between national economies . The existence of a unique yardstick of measurement, the national currency, is also taken for granted . I am not concerned here with the connection between Keynes' theory and the development of national income accounting as such : Tomlinson (1981) has pointed out that the definition and measurement of economic aggregates was proceeding independently of Keynes' ideas, with the same objective of increasing the efficacy of government economic policy, both in Britain and the USA . Nor am I arguing that Keynes was the first economist to take the national economy and national economic policy as the object of his analysis . The point is that Keynes developed an economic theory of the national economy, in which abstract propositions are formulated in terms of a coherent set of economic aggregates . He identified the erroneous aggregation involved in Say's Law ('supply creates its own demand'), which was the foundation of what little the neoclassical economists had to say about the level of aggregate economic activity : but rather than offering an alternative process of aggregation from theorems of individual economic behaviour, he deployed `common sense' in correcting the neo-classical aggregation error in an ad hoc way, showing how uncertainty, misinformation, and unfounded expectations can generate `perverse' economic consequences . The result is a series of abstract propositions concerning the determinants of consumption, investment, etc ., which have no systematic foundations in a theory of economic behaviour . Furthermore, detailed reading of the General Theory shows clearly that Keynes accepted the central postulates of the

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neo-classical theory of economic behaviour, in particular the marginal productivity theory of distribution and the subjective theory of value . It is not surprising, then, that the dominant school of Keynesian economics has succeeded in reconciling Keynes with neo-classical economics, the better eventually to bury him . The abstract propositions in Keynes' theory deployed economic aggregates to explain the quantitative economic conditions of particular economies. The importance of this is that the basic ground of neo-classical economic theory is not the individual economy, but the individual market . After Keynes, economists can make theoretical propositions about economies defined empirically in geopolitical terms - which have the same theoretical status, the same measurability, the same behavioural foundations, and the same methods of testing and proof, as the more conventional theoretical propositions about markets . The national economy is privileged in Keynesian theory for the purely practical reason that the nation-state system defines geopolitical space with the necessary features convenient for the theory : a common currency, common laws, and shared institutions, both private and public, which provide the `common sense' to justify the attribution of homogeneity to `consumers', `investors', the `public sector', etc . Why was Keynes so intent on producing a `general theory' of economic aggregates? One reason is undoubtedly that by the 1930s, government economic activity had expanded so greatly that the government found itself politically obliged to develop coherent economic policies, and this required an appropriate analytical apparatus. Keynes drew together strands of current economic thinking on business cycles, monetary policy, and the price-level ; his major contribution being the concept of effective demand as the primary determinant of the level of employment . Under the urgent pressures of war, this theory was explicitly adopted by the state for the purposes of economic management . A second reason was surely that Keynes grasped more clearly than anyone else the full political implications of the failure of capitalism, and saw the urgent need to restore its functioning; he believed first that a correct theory would lead to correct policies, and secondly, that enlarging the functions of government was `the only practicable means of avoiding the destruction of existing economic forms in their entirety and . . . the condition of the successful functioning of individual initiative'. (Keynes 1936, p .380). The requirements of economic polity

For our purposes, however, it is more important to focus on the conditions required for Keynes' theoretical apparatus to be employed effectively in economic policy (see Tomlinson 1981) . One aspect of this is certainly the role and weight of the state in

Keynesian myth? economic transactions : for example, the development of effective monetary policy requires not only the existence of a central bank with a monopoly of note issue, but also that the government is a significant borrower ; and the management of effective demand proved to be most effective when wartime emergency powers gave almost unlimited control over resource allocation . But equally important is the extent to which the state has effective jurisdiction over relevant economic transactions, and the extent to which these transactions form a coherent national economy . Tomlinson (1981, p .78-9) regards the abandonment of the gold standard in 1931 as an essential precondition for the pursuit of Keynesian policies, but though he alludes to the `high level of integration with the world economy implied by adherence to gold' (p .79), he does not consider the `level of integration' as such . Keynes himself was under no illusions about the importance of this factor . In an article entitled `National self-sufficiency' (Keynes 1933), he argued that when the world economy was in disarray, it threatened the stability of every society, and this necessitated and justified a `transition towards greater national selfsufficiency and a planned domestic economy' (p .767). The central argument is that the intelligent organisation and management of a modem industrial economy, on the basis of non-economic as well as economic values, will yield more benefit to society than the full-blooded application of economic self-interest on a world scale . The necessary changes in the economic system require a transition to a more self-sufficient national economy: but in any case, the shift to the tertiary sector and other non-traded goods (e .g. housing) means that economic expansion will in future be primarily domestic . Keynes was not endorsing any and all nationalist economic policies, by any means, and he insists that the transition to greater national self-sufficency must not be imperilled by doctrinaire `silliness', excessive haste or political intolerence . Yet it is clear in this article that Keynes believed that the central long-term policy conclusion of the General Theory - maintaining investment through reduction in interest rates and extended public expenditure - could only be practicable in a more `self-sufficient' national economy . For example : ' . . . the transformation of society, which I preferably envisage, may require a reduction in the rate of interest towards a vanishing point within the next thirty years . But under a system by which the rate of interest finds a uniform level, after allowing for risk and the like, throughout the world under the operation of normal financial forces, this is most unlikely to occur . Thus for a complexity of reasons, which I cannot elaborate in this place, economic internationalism embracing the free movement of capital and of

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loanable funds as well as of traded goods may condemn my own country for a generation to come to a much lower degree of material prosperity than could be attained under a different system' (Keynes 1933 pp 762-3) . In the General Theory itself, Keynes scarcely mentions international economic matters . The notes on mercantilism in Ch . 23 are at least compatible with the views of the 1933 article, and in a brief passage in Ch . 24 ('Concluding Notes) he argues that effective domestic policies for full employment would reduce the pressure to win foreign markets which, in his view, was a major economic cause of war (1936 pp 383-4) . What is certain, however, is that in the period from 1931 to 1950 such a transition to `greater national self-sufficiency' did in fact take place, thereby creating the material basis for Keynes' policies . Bob Rowthorn notes that as far as Britain's foreign trade was concerned, the share of the domestic market for manufactures taken by imports fell from a peak of 24 .2% in 1931, to 20 .9% in 1929,11 .3% in 1937 and 4 .7% in 1950 (Rowthorn 1982 p . 25-6) . Under the impact of Imperial Preference (the Ottawa agreements of 1932), British trade shifted significantly towards an exchange of British manufactures for primary products from the Empire, and this continued as a deliberate strategy under the Attlee government after the war . But equally important was the rapid decline in the importance of overseas investment . In 1931 Britain abandoned the gold standard ; thereafter, low interest rates kept short-term money away from London, where the greatly reduced volume of savings meant that less funds were available for investing abroad ; the result was that international investment ceased to dominate the affairs of the City and to dictate economic policy . The accumulation of debts during the war, and the precarious state of the balance of payments during reconstruction, prevented any significant recovery in overseas investment until the 1950s-and then the renewed investment flows were largely to the Commonwealth (Kenwood & Lougheed 1983, p .268) . The fact that this increased self-sufficiency was the consequence of economic crisis and war only confirms the appropriateness of Keynes' position in 1933 - granted that it was imperial rather than national self-sufficiency . On the other hand, the resolution of crisis and war paradoxically created conditions which not only rendered Keynes' economic prescriptions unnecessary, but also totally undermined their relevance . The years from 1930 to 1950 saw a historic defeat for the labour movements of much of the advanced capitalist world, and elsewhere the effective containment of those movements . This factor, coupled with the emergence of the United States as the hegemonic power in the capitalist world economy, laid the basis for the post-war boom which invalidated, or at least postponed, the

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prophecies of Keynes . Capitalism acquired a new lease of life without the euthanasia of the rentier : indeed, the rentier, in shape of us financial interests, played the most crucial role in establishing the post-war order . Such an interpretation is very sharply at variance with the generally accepted view, both among Keynesians and on the political left, that the post-war years saw a fusion of Keynesianism and social democracy in which `consensus' economic policies were responsible for full employment and prosperity . As far as the international aspect is concerned, where there is less dispute, a recent article by Brett, Gilliat and Pople (1982) demonstrates clearly that the us forced a commitment to multilateralism, convertibility, and the specific institutional form of the IMF, upon Britain as a condition for the 1945 loan which replaced Lend-Lease . Both Keynes and Dalton, then Chancellor of the Exchequer, regarded the alternative of bilateralism and even greater austerity as unacceptable, and this view carried the day . The crisis of 1947 was resolved in a more ambivalent way, retaining what remained of international controls and domestic planning, but Brett et . al., argue that Labour's continuing commitment to `liberalisation' meant that by 1951 when the Tories returned to power they could rapidly dismantle these policy instruments and fully integrate into the 'American-dominated liberal capitalist alliance' (p. 138). Whatever alternative course of events might have followed from successful resistance to the American demands, it has usually been accepted that in the context of world-wide adoption of national Keynesian policies, the acceptance of the us-dominated international economic order was not in general harmful, even to the economic conditions of the working classes, at least in the advanced capitalist countries . Certainly, high levels of demand and investment in these countries were mutually reinforcing, and as in the years before 1914, international trade and capital flows acted as an accelerating factor. But it is very doubtful whether credit for this can be laid at Keynes' door, let alone associated directly with the theory and policy prescriptions of Keynes . First, whatever may be read into Keynes by 'post-Keynesians' or 'left-Keynesians', it is abundantly clear that for Keynes it was only the existence of a systematic and substantial deficiency of effective demand that required a qualitative expansion of the role of the state . Secondly, while there was an expansion in the role of the state, it was not undertaken in order to avoid such a deficiency of demand, but with quite different economic and social objectives . Thirdly, it can be argued that full employment as a policy objective has in practice been consistently subordinated to `sound finance' . Duboff (1977) charts this in the evolution of us domestic economic policy after the war ; Apple (1980) extends the critique to

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Capital & Class 126 cover a wide range of OECD countries throughout the `post-war boom' ; and Tomlinson (1981) points out that as soon as genuine `deficit financing' - the classic Keynesian policy instrument - was tried in Britain in 1975/6 it was blocked by the financial institutions in the money markets . The argument of this section can be summarized as follows . Keynes provided both the analytical apparatus and the economic/ political justification for resolving the inter-war crisis of capitalism by state management of the national economy . The economic introversion of the 1930s and 1940s created the material basis for such a policy in Britain . American foreign economic policy then forced the acceptance of `internationalism', and the post-war boom eliminated the need for Keynesian remedies . We are now in a position to assess the relevance of the Keynesian approach in the present period .

The Boom and After: the Disintegration of the UK Economy

During the postwar boom, the economic introversion of the previous twenty years was rapidly and fully reversed . Throughout the period, the growing openness of the UK economy posed constant problems for government economic policy . The `vicious circle' of relatively slow economic growth, creeping inflation and low investment produced regular balance of payments crises, exacerbated by capital outflows and the costs of Britain's continuing role as an imperial power, and by the priority given to the defence of the value of the pound . Despite the persistence of near-full employment and steadily rising living standards, Keynes' warning of the possible costs of internationalism (quoted above) appears prophetic . The postwar boom ended in the late 1960s . The general causes of the end of the boom have been examined in great depth, particularly by Mandel, Mattick, Itoh, Arrighi, etc . The main underlying causes cited by these authors include the stagnation of industrial productivity and growing worker resistance in the advanced capitalist economies, contradictions in the role of the dollar, the rise of European and Japanese industry, setbacks to imperialism in the Third World, and so on . For our present argument, we are concerned with the consequences of the boom and its ending for patterns of internationalization and for economic policy in Britain . The internationalization of the British economy One major turning point was clearly the collapse of the Bretton Woods system in 1968-72, thoroughly described by Parboni (1981) : the dollar lost its role as the lynch-pin of the international monetary order . The outcome, however, was not a new international monetary order of a comparable kind, based on

Keynesian myth? agreed procedures and public institutions, but rather continued international monetary `anarchy' . Attempts to revive Keynes' concept of a `central bank of central banks', which could combat world recession by expanding international liquidity and permitting extensive deficit financing by national governments, have never achieved significant support within capitalist circles . Instead, capitalist leaders of all nationalities have supported a free market approach : international flows of funds increasingly went through private financial institutions (the internationalization of private banks) ; the role of the International Monetary Fund became more than ever that of enforcer of financial discipline through deflation ; and the system of floating exchange rates, far from allowing greater autonomy to national governments in economic policy as many economists proposed, in practice served as a means of destabilizing those governments which attempted alternative policies . Should we infer from this that American hegemony is now exercised as much through the international marketplace as through international institutions? After all, during the boom the interests of internationally-oriented us hegemony were undoubtedly served by the institutions set up under us hegemony - not just the IMF, the World Bank and the GATT, but also NATO and other `defence alliances' and indeed (at least initially) the EEC . Equally, it was us private industrial firms, and then banks, that fostered and dominated the growth of the international markets that outgrew those institutions, such as the Eurodollar markets . In that case, surely the logical conclusion is that a policy of economic recovery from the crisis should be on a national basis (or maybe European), repudiating us capital's hegemony both in the marketplace and in the institutions? Would not a return to `greater national self-sufficiency' allow us to break the deflationary constraints imposed by the IMF and the international bankers, and restore British (French, German, European . . .) manufacturing industry? But the association of Us hegemony with internationalization is only part of the picture . As Murray, Rowthom, Mandel and others established firmly over ten years ago, the `international' capital that has directed the international markets has not only been American, but also notably British, and more recently German, French, Japanese, etc; today it is even South Korean, Brazilian, Mexican, Indian, Soviet (Andreff 1982, pp38-46) . In Britain in particular, this process has gone so far, together with a rapid centralization of capital, that the only group of large business enterprises that are plainly national are those in the public sector : there are no longer any significant nationally-limited capitals. The most recent Labour Research surveys of the overseas production, exports and overseas employment of the top 50 British manufacturing companies provide a striking picture of how far these firms now

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depend on overseas assets, labour and markets . In 1981-2, overseas production accounted on average for 44 per cent of sales (up from 39 per cent in the previous year), while exports accounted for a further 12 per cent (same as in 1980-1) ; allowing for imports of overseas output, perhaps half of their total sales are now in foreign markets. For almost the same group of firms, nearly 39 per cent of employment is now overseas, up from 33 per cent three years earlier (LabourResearch, April 1983 pp.97-9, May 1983 pp.123-5) . The increase in overseas production has been particularly rapid in the engineering and electrical/electronics sectors ; but these have some way to go to catch up with the chemicals/ pharmaceuticals sector, in which overseas production accounts for 53 per cent of sales, and exports a further 17 per cent, while 53 per cent of employment is also overseas . Table I presents the figures for the largest firms in each of six sectors. The lifting of exchange controls in 1979, coupled with the impact of North Sea oil on the UK balance of payments and the value of the pound, has given a new lease of life to British overseas direct investment, which was being challenged in the 1970s notably by Germany and later Japan . Perhaps more significant than the overall figures (up 40 per cent to £5 .1 billion in 1981-nearly half in the US) are the endless reports in the financial press of major UK firms locating their most significant investment projects overseas . Examples are BOO (British Oxygen), which since the acquisition of the US firm Airco in 1978 - and with it the highest paid UK executive, Mr . Dick Giordano - has raised the share of its investments located abroad to 73 per cent in 1980 and 83 per cent in 1981, including a £70m . investment shifted from Consett to South Carolina (Guardian, 26/1/82) ; and motor components firms such as GKN and Lucas which have also expanded in the US while cutting back in the UK (by 32 per cent and 20 per cent respectively from 1979 to 1982) .

Table 1 : Overseas production, exports from the uK and overseas employment- selected firms, 1981/2 Firm Sector Total sales, % produced % exported % employ,in. overseas from UK ment overseas . production icr chemicals 6,432 46 23 46 GEC electrical 4,949 35 22 23 ABF foods 2,969 37 1 n.a . Reed paper 1,866 18 6 20 GKN engineering 1,855 43 10 48 Courtaulds textiles 1,789 33 21 22 Source : LabourResearch, April 1983 and May 1983



Keynesian myth? A particularly striking feature of the outflow of capital since 1979 has been the surge in portfolio investments, that is the purchase of shares and other securities issued abroad, by UK financial institutions . Table 2 shows the net acquisitions of UK and overseas company securities by life assurance companies and pension funds, which are easily the most important investing institutions. Taking all non-bank financial institutions as a whole, net acquisitions from January 1980 to June 1983 totalled £9 .1 billion of UK company securities, and£10 .4b . ofoverseas company securities . To this picture of ever-growing capital investments abroad now dwarfing the flows of foreign investments into the UK -we can add the declining competitiveness of UK-located manufacturing industry, with average import penetration up from 24 per cent in 1977 to 30 per cent in 1983 (Monthly Digest of Statistics ; British Business, 25/11/83) . This completes the familiar picture of UK economic decline, with capital going in search of higher profits elsewhere . The key factors in the recent acceleration of this combined process would appear to be : • the already high level of internationalization of UK capital, allowing a swift response to . . . . • the ending of exchange controls, and the high value of the pound, which reduced the cost of acquiring assets abroad and simultaneously reduced the competitiveness of British-based manufacturing.

Table 2 : Investments by uK financial institutions, 1979-83 (cash value of net acquisitions) Total UK company Overseas company investments securities securities % of % of £tn . ,fin . total £m . total (a) Long-term funds of insurance companies 1979 4,480 685 15 107 2 1980 5,026 743 15 507 10 1981 6,165 924 15 709 12 1982 6,590 1,620 25 1,011 15 Jan - June 1983 3,341 651 20 607 18 (b) Superannuation funds 1979 5,598 1,503 27 455 8 1980 6,476 2,180 34 1,424 22 1981 6,848 1,887 28 1,566 23 1982 6,630 1,952 29 1,735 26 Jan -June 1983 3,794 761 20 912 24 Source : Financial Statistics, cso, October 1983, pp .84-5

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Policy

responses on the left: the role of the City

The first policy response to these trends is aimed at the poor competitive performance of the UK manufacturing sector. Increased import penetration, declining employment in the sector, persistently low relative levels of investment and productivity growth, are all summed up in the concept of `deindustrialization', and lead to policies of import controls and the planned reconstruction of British manufacturing (see e .g . Singh, 1977) . Rowthorn (1982) points to some serious flaws in this approach . First, the UK economy no longer requires such large imports of foodstuffs and industrial raw materials, and therefore no longer needs to generate a large surplus in trade in manufactures . Since we continue to export a high proportion of our manufacturing output despite `deindustrialization' (25 per cent in 1977, 27 per cent in 1983), and we now have an energy surplus, we can replace imports of raw materials and foodstuffs with imports of finished manufactures, and thereby enjoy a higher living standard, deploying our own resources to much-needed improvements in housing, health, education, etc . The neo-mercantilist doctrine of cutting imports at all costs simply reduces the standard of living . Nonetheless, the problems of accomplishing a transition to a different productive structure, coupled with the need to repair the material damage of plant closures, industrial dereliction and the neglect of infrastructure, are sufficient justification for a massive state investment programme, which would include the selective regeneration of the manufacturing sector - for example, to produce steel and other materials for construction uses . Even in the absence of a policy of reducing imports or their growth, such a programme of planned resource allocation would require significant planning of trade and international capital movements . This leads to the second main direction of policy response on the left, which links the need for domestic expansion with the evidence of massive capital exports, and more particularly with the role of the City of London . Now political hostility to the City has a long pedigree, and not only on the left. Keynes, though a shrewd and extremely successful investor in the City, not only regarded the rentier as a parasite whose activities directly contributed to the persistence of mass unemployment; he also had a strong personal and moral antipathy to the primacy of purely financial motives . It is not surprising that in the 1930s socialists were quick to applaud when Keynes laid the blame for deflationary policies and the `Treasury view' at the door of the City . In addition, both the Balfour Committee of 1929 and the Macmillan Committee of 1931 criticized the City's excessive concern with overseas finance, and with short-term rather than long-term gain . There is no question that until recently the financial inter-

Keynesian myth?

ests of the City were distinct, and even detached, from those of domestic industry . Evidently, they were not unrelated, for the success of British manufacturing from the mid-19th century up to 1914 depended critically on the efficient financing of world trade, on the dominance of the City and the pound in world money markets, and above all on the creation of new markets - often indirectly rather than directly - by the export of capital. But the accumulation of capital in industrial enterprises had been selffinanced to an extraordinary degree . While the industrialization of the US, Germany, France, etc ., depended on the mobilization of credit on a massive scale through innovative financial institutions leading to the emergence of the forms of finance capital studied by Hilferding-the market dominance and slow-but-steady growth of British industry allowed a sufficiently high rate of internal accumulation, supplemented by family and local resources . The deposit banks remained tied to short-term trade credit, overdrafts, etc ., while the institutions of the City - merchant banks, discount houses, Stock Exchange - dealt with the financing of governments and overseas trade and investments . Pollard (1983, p .9) reports that in the years before 1914 only 10 per cent of real industrial investment was financed by issues on the London Stock Exchange . In the inter-war years, it was then precisely the declining international position of British industry, coupled with the challenge of New York and the dollar to London and the pound, that led to suggestions that the City should supply long-term funds to domestic industry. But can the City-having failed to respond to such pleas -be held responsible for the poor investment and growth performance of British-located manufacturing, either by reason of their detachment from domestic industry, or by their preference for overseas investment? On the first point, it seems clear that the distance between the City and British industry in general has been greatly reduced . Industry has tended to rely more on external funds, drawn both from the financial institutions (long-term) and the now highly centralized banking system (short- and medium-term) . The financial sector itself is moving rapidly towards the breakdown of the traditional divisions between deposit banking, merchant banking, broking, insurance, financial management, etc ., towards the financial conglomerate . In the process of centralization of industrial capital through mergers, financial institutions play a key role as the bearers and managers of market forces, determining the reorganization of industrial assets on a massive scale, and exercising their rights as owners or as creditors . There is also a growing trend towards the merging of industrial with financial capital, both in the formation of venture capital firms, and more spectacularly in moves by conglomerates into finance (e .g . BAT Industries' bid for Eagle

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Star Assurance) . In short, there is no longer any institutional barrier to the involvement of the City in domestic industry . What remains is the criterion of profit: as long as the City is free to earn higher profits, with appropriate allowance for risk, by placing investments elsewhere, then it will choose not to invest in domestic UK manufacturing . In the absence of exchange controls, and with increasingly sophisticated foreign exchange and international money marker the City's long associations with overseas investment and trade inane will continue to impart a certain bias, simply because these are the market areas where the City has the greatest knowlege and experience : but this bias is declining. I therefore share the conclusion of Coakley and Harris (1983) that the City does not starve domestic industry in favour of overseas investment, except on the basis of relative profitability. What is more : the growing internationalization of Britishowned manufacturing firms is intimately linked to the international strength of the City . Whereas in the case of us overseas expansion, banks followed industry (partly because of state controls over banking which have only recently been lifted) in the case of the UK, industry has been able to use the strength of the City to expand overseas - especially in the period since 1979 . From the standpoint of a policy for shifting resources to investment in British-located manufacturing, it is the joint and complementary practices of both British-owned industry and the City that must simultaneously be reversed .

In search of the British economy A policy of national reconstruction cannot, therefore, be promoted by the old fantasy of an alliance between labour and industrial capital against the City . More than that, there do not even seem to be any significant sectors or `fractions' of industrial capital which might be interested in such a policy . The clearest evidence for this was in 1980-81, when every attempt to interest capitalist circles in a policy of reflation - by Tory `wets', for example - collapsed, because of outright opposition to the controls on international transactions that would have had to be imposed. In the 1930s, a significant section of British industrial capitalists espoused national reconstruction and a 'corporatist' industrial philosophy despite their already substantial overseas interests ; today they grumble, but they all espouse the `Treasury view' of Mrs. Thatcher and the IMF, the bankers, etc . Does this mean that for the capitalist class in Britain the national economy is no longer of interest? Clearly British multinationals remain largely British in ownership (but note Dunlop ; foreign takeovers such as Charter Consolidated's capture of Anderson Strathclyde ; and the astonishing fact that the Kuwaiti

Keynesian myth?

Investment Office owns some 10 per cent of all the share capital of British quoted public companies) . They also have some bias towards Britain, as Coakley & Harris note (1983 p.178), because they tend to use sterling and to take decisions in London. Furthermore, despite the trend shown in Table 1 above, they still remain far more oriented to the British market than to any other single national market, and more so than foreign-owned (e .g . us) multinationals. And finally, given that their objective is profit, then if Mrs . Thatcher's policies restore the profitability of investments in Britain, they will respond . But the question still requires a clear understanding of what we mean by the national economy, and on this neither Coakley and Harris (whose concern is after all with the City), nor any of the protagonists of a `national' approach to reconstruction, have offered any guidance. To start with, it is odd that Marxist economists have so little to say about material processes ofproduction when discussing accumulation, crisis, international trends, etc . Despite all the interest in the labour process, there remains a huge gap between studies of specific labour processes (in particular industries, or as abstract trends), and the analysis of capitalist production as a whole . Andreff (1976) and especially Palloix (1977, 1978) have attempted to link the use-value categories of departments (means of production, means of consumption), and specific industrial sectors, with the value analysis of crisis, and the results are not very convincing, and all attempts to use Marx's schemes of reproduction for the analysis of crisis have also, for reasons that are by now well-known, proved fruitless . The result is that generally discussions among Marxists about concrete economic trends fragments into what might be called (a bit unfairly!) `microeconomic' and 'macroeconomic' - the car industry, as against the economy . In material terms, the economy is a motley collection of use-values and of workers possessing different labour skills, organised into units for the production of different goods and services. The means of production are physically arranged in collections of fixed assets appropriate to the production of specific goods or services, and various raw materials and intermediate goods which are transformed, using these fixed assets, into goods and services. The ownership of the means of production is mostly vested in firms (not individuals) which organize the process of production; but connexions between firms through exchange (markets) are also essential for the process of production to proceed, and such connexions play a central role in determining the physical composition and disposition of the means of production. The British economy therefore consists materially of all the use-values and labour within the geographical boundaries of the

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British nation-state . This immediately raises the question : what about those use-values that happen to belong to non-British firms or persons? - which gives us the material dimension of Robin Murray's `territorial non-coincidence', when taken together with British ownership of use-values abroad . But surely this is a trivial problem? Why not simply sell off the latter, buy up the former, and thus restore the integrity of the British material economy? This, however, precisely ignores the material form of these use-values, and how they are organized in the production process . The means of production form a complex whole, in which various often highly specific use-values, under different ownerships and locations, are brought together. The development of the international division of (concrete) labour has ensured that British engineering firms employ German-made machine-tools, made from Swedish-made special steels, which in turn required British steel plant, Norwegian hydro power, etc . This is why the disruption of international trade presents not only a financial cost, but a real resource cost in adjustment : new sources of supply must be found . Once the disruption has taken place, as in 1929-33, `greater national self-sufficiency' can make sense; but it could not do so beforehand, and far less so now than in the 1930s . Furthermore, it is equally the case that accumulation and innovation, allowing for the turnover time of fixed assets, and of course the intervention of the entire process of value- and surplusvalue-creation, constantly transform the ensemble of use-values in production . And this is where factors of location and organization the disposition of the material resources - critically influence the path of capitalist development in any given nation-state, defining the material form of the national economy, and influencing also the patterns of class relations, state policies, etc . Rosenberg (1976, chs . 1,9) describes how industrial manufacturing in the USA developed through patterns of technological stimulus and response, running vertically through customer-supplier links . For example, the manufacture of bicycle hubs required the precision drilling of hardened steel, which led to the developmment of the oil drill in which the cutting edge is cooled and the chips removed by a lubricant . This innovation was then available for a wide range of uses in the machine and vehicle industries . Such innovation linkages were crucial in the development of the diversified and flexible US machine-building industry, which laid the foundations for the mass-production national industrial economy after 1914 . Clearly, in so far as the pattern of such vertical linkages (both within and between firms) is confined to the nation-state, these external or spillover effects will have their main impact on the development of the means of production on a national basis, inducing in particular a close technological intergration between differ-

Keynesian myth? ent sectors of industry . In terms of this model, the productive structure of the British national industrial economy today has become disintegrated. Because the organization of production and exchange no longer privileges links within the nation-state, customer-supplier links no longer function to integrate the national industrial economy . The dynamic effects of product or process innovations are dissipated, stimulating users or suppliers in other countries as much as in Britain . British-owned MNC5 source equipment from abroad, rather than stimulating its development in Britain ; while successful British equipment manufacturers depend more on overseas than on British demand . This material impact of internationalization has been largely overlooked in discussion of the effects of MNCS ; and yet it provides, I think, a plausible explanation of the linked patterns of British outward (and inward) direct investment, and of trade in manufactures . When a British MNC invests abroad, the initial effect on exports is likely to be favourable, as the Reddaway Report (1968) found - the firm takes its suppliers with it . But it soon applies profit-maximizing principles to the sourcing of inputs for all its activities, and becomes aware of lower-cost (higher-quality) sources in its new location . Since the main target of British investments have been the us and Europe, this will lead in the longer term to the displacement of British suppliers by Us or European suppliers. Even if British suppliers are competitive, specialization will ensue, and with higher outward than inward investment, the net result will be an adverse trade balance, but in fact this will have been exacerbated by poor productivity, product quality, etc. Collecting direct evidence for this process, and measuring its consequences, clearly requires considerable research . But there is much indirect evidence . Ietto Gillies (1982) summarizes recent research which shows a sharp growth not only in intra-firm international trade (among subsidiaries of the same MNCs), but also in intra -industry trade, in which specialization in foreign trade among the advanced industrial countries has increasingly been not between, but within sectors (even when these are quite narrowly defined) . The statistics I have already quoted concerning the resilience of UK manufactured exports also support the thesis . In the dynamic sense, if the thesis is accepted, the British industrial economy no longer exists as an economic unit : the reproduction and renewal of its material basis is no longer autonomous, but closely integrated into other national economies . Gerbier (1982), in describing what he calls the 'Irelandization' of the UK, points to `the destruction of the remaining coherence of the British productive structure', leading to the 'banalization' of the economy; he describes this in terms of the fall in industrial production, the collapse of particular sectors, rising unemployment,

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capital exports, etc . He concludes that the trend is towards the `globalization' of the British economy via the free market. The conclusion from this section is that such trends are deeply rooted in the material production structure of the British economy, and are not simply questions of policy choice by private or public decisionmakers.

Conclusions: Consequences for Left Strategy

The original question posed in my introduction was : is the national economy a proper object for socialist strategy? The main conclusion of section two was that this question could only be answered in concrete terms, for a particular nation-state at a particular period. The third section argued that the dominant concept of the national economy in Britain since the 1930s was due to Keynes, and was appropriate to the period of economic introversion from 1930 to 1950 . Section four argued that since 1950 the British national economy has become not only internationalized in the sense of exchange and ownership of assets, but has also disintegrated in the sense that it no longer contains a coherent, selfsustaining industrial core . As a consequence, there are no significant capitalist interests or `fractions' which would support a recovery strategy based on national economic reconstruction, and breaking with the present unconstrained economic internationalism. Evidently the national economy still exists, but in its present material form, economic organization and social control (or ifyou prefer, the disposition of both forces and relations of production), there is little that can be done with it in isolation . The left has to recognize this, and modify the Alternative Economic Strategy accordingly . But in what direction? First, the strategy could be internationalized in various ways . Supporters of the AES will answer that of course it would be better if the left in other countries (in practice, other EEC countries) also developed parallel economic strategies ; and of course joint efforts both on the shop floor and through government powers, would be needed to control MNCs. But at present this is something tacked on to the edges of a national strategy, rather than being seen as an essential precondition of an effective strategy . The left should unconditionally drop its opposition to the EEC and seek to build a European workers' movement; it should put far more effort into shop-floor internationalism through trade union organization, despite the tremendous difficulties of bargaining in a period of world-wide recession; and it should systematically challenge the chauvinism that is so prevalent in our political culture . At the moment, this is clearly a minority viewpoint, but recent proposals by Stuart Holland (1982) and others have, I think, far wider support in the labour movement than is presently realised .

Keynesian myth?

It may be objected that this is far too long-term a strategy . In that case, let us explicitly recognise that we are proposing `national self-sufficiency', and that we accept the costs involved in a radical and detailed restructuring of the industrial economy (its physical assets, organization and ownership) required to construct a selfsustaining national economy again . This requires, however, that we confront the second major modification required in the AES, namely in its politics, and the relation ofits economics to politics . If there is no basis for a class alliance around national economic reconstruction, then a strategy for class struggle has to be offered here and now, and not just in some distant future when the `progressive forces' have got sufficient leverage through control of the state to tip society over into socialism . In the field of economic policy, there must a decisive break with Keynesianism as it now stands . It is true that many mainstream orthodox economists, who were beguiled by monetarist thinking as a solution to the intractable problem of inflation, have been repelled by the apparent consequences of monetarist policy, and returned to the Keynesian camp . But in practice this is a bastardized, gutless Keynesianism, which makes so many concessions to the monetarists that it can offer only an amelioration of the desperate problem of unemployment. Not only does the mainstream shun import controls (except general duties, which are no different really from a reduced exchange rate) and comprehensive industrial planning, but they also accept that, in Callaghan's immortal words to the 1976 Labour Party Conference, `you cannot spend your way out of a recession'. Keynes must be turning in his grave . An economic policy that breaks with contemporary Keynesianism must make a frontal attack on private ownership . It needs to be hammered home that present mass unemployment is not the inevitable result of `new technology' or `world recession', but of the private ownership of the means of production, and the present attempts to `roll back' the state and the organized labour movement. Since there are no potential allies in `industrial capital', there is no reason why nationalization should be restricted to the City - it should extend across all large-scale industrial production . The present ascendancy of capitalist ideas has made public ownership highly unpopular : the public image is of bureaucratic state control, offering no benefit to workers or consumers . This should compel us, not to abandon the concept, nor to postpone it to some future time when it will (miraculously) be acceptable again, but to develop it as a positive alternative . This is why the renewal of `municipal socialism', the fight for industrial democracy, the development ofindustrial cooperatives, etc ., are so important as well as the defence of the present public sector . The TUC/Labour Party

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Liaison Committee set the agenda in its 1982 report, Economic Planning & Industrial Democracy : a Framework for Full Employment, but as its critics from the trades councils showed, in their conception local and shop-floor initiatives were basically appendages to a national economic planning system (Joint Trades Councils, 1982). Similarly, nationalization of the financial sector does not answer the question of how a public financial sector should be organized, as Coakley and Harris admit (1983, ch.10), but democratizing the control of non-profit-making institutions (building societies, pension funds, mutual insurance companies, friendly societies) can surely be combined with municipal initiatives (local enterprise boards) and a state-owned deposit banking and investment banking system . As for the objective of full employment: in a democratically planned economy, there is no reason why any but frictional unemployment should persist. The moral and economic case for full employment was made most forcefully by William Beveridge in Full Employment in a Free Society (1944), one of the bibles, we are led to believe, of Keynesianism . Conscious of the potential conflict between the maintenance of full employment, which depended primarily on the state's economic policies, and the preservation of the freedom of private ownership, he wrote : `Whether private ownership of means of production to be operated by others is a good economic device or not, it must be judged as a device . . . . On the view taken in this Report, full employment is in fact attainable while leaving the conduct of industry in the main to private enterprise, and the proposals made in the Report are based on this view . But if, contrary to this view, it should be shown by experience or by argument that abolition of private property in the means of production was necessary for full employment, this abolition would have to be undertaken' (Beveridge, 1944, p .23) In the context of far-reaching extensions of public ownership, democratic planning, and local and shop-floor initiatives, choices could realistically be made concerning the degree of national economic integration to be aimed for . Even if `the nation state is just about through as an economic unit', as Kindleberger put it (1969, p .207), then it still remains an essential political unit within which social choices are made, in the context of a common culture and political tradition . But the need to develop a viable national politics of the left does not mean that the labour movement has to continue being trapped in a politics of economic nationalism. Rather, the construction of an alternative economic strategy should provide a framework both for challenging more directly the class character of our present political economy, and for developing as rapidly as possible an internationalism of labour to challenge the internationalism of capital .

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An earler version of this paper was presented to the CSE 1982 Annual Conference in Bradford, and on several other occasions : it originated in the work of the CSE Working Group on the Restructuring of Capital . I am particularly grateful for comments and discussion to Gerard de Bemis, Teddy Brett, Andrew Gamble, John Hillard and John Willoughby.

Aglietta, M. (1979),A Theory of Capitalist Regulation, New Left Books Aglietta, M . (1982), `World capitalism in the eighties', New Left Review no . 136, Nov-Dec . Andreff, W . (1976), Profits et structures du capitalisme mondiale, CalmannLevy Andreff, W. (1982), Les multinationales hors la rise, Le Sycomore Andreff, W. (1984), `The international centralization of capital and the re-ordering of world capitalism, Capital f5 Class no.22, Spring Apple, N. (1980), `The rise and fall of full employment capitalism', Studies in Political Economy no .4, Autumn Block, F . (1977), The Origins of International Economic Disorder, University of California Press Block, F . (1980), `Beyond relative autonomy : state managers as historical subjects', Socialist Register von Braunmuhl, C . (1978), `On the analysis of the bourgeois nation state within the world market context', in J . Holloway and S . Picciotto (eds), State and Capital, Edward Arnold Brett, E.A., Gilliatt, S . and Pople, A . (1982), `Planned trade, Labour Parry policy and us intervention : the successes and failures of post-war reconstruction', History WorkshoP3'ournal no .13, Spring Bukharin, N . (1972), Imperialism and World Economy (1915), Merlin Coakley, J . and Harris, L. (1983), The City of Capital, Blackwell Duboff, R . (1977), `Full employment : the history of a receding target', Politics and Society, vol .VII no.1 Fine, B . and Harris, L . (1979), Rereading Capital, Macmillan Gamble, A. (1979), `The free economy and the strong state : the rise of the social market economy', Socialist Register Gerbier, B . (1982), `Le Royaume-Uni et la crise', mimeo Harris, N. (1983), Of Bread and Guns, Penguin Holland, S . (1982), `New strategy for Europe', New Socialist NovemberDecember Ietto Gillies, G . (1982), `International production and trade : the case for focusing on their complementarity', mimeo Joint Trades Councils and Joint Forum of Combine Committees (1982), Economic Planning Through Industrial Democracy Kenwood, A . G . and Lougheed, A .L . (1983), The Growth oftheInternational Economy 1820-1980, George Allen & Unwin Keynes, J.M . (1933), `National self-sufficiency', The Yale Review vol.XXII no.4 Keynes, J .M . (1936), The General Theory of Employment, Interest and Money, Macmillan Kindleberger, C .P . (1969), American Business Abroad, Yale U.P .

References

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Murray, R. (1971 a), `The internationalization of capital and the nation state', New Left Review no .67, May June (also in Radice, 1975) Murray, R. (1971b), `The internationalization of capital and the British economy', The Spokesman, April Palloix, C . (1977), Proces de production et crise de capitalisme, Maspero/ Presses Universitaire de Grenoble Palloix, C. (1978), Travail et production, Maspero Parboni, R . (1981) TheDollar and its Rivals, New Left Books Picciotto, S . and Radice, H . (1971), `European integration, capital and the state', Bulletin of the Conference of Socialist Economists, vol.1 no.1, Winter Polanyi, K . (1944), The Great Transformation Pollard, S . (1983), The Development of the British Economy 1914-1980, Edward Arnold Poulantzas, N . (1975), Political Power and Social Class, New Left Books Radice, H. (ed .) (1975), International Firms and Modern Imperialism, Penguin Reddaway, W.B . et al. (1968), Effects of uK Direct Investment Overseas: Final Report, Cambridge up . Rosenberg, N . (1976), Perspectives on Technology, Cambridge up Rowthorn, R. (1971), `Imperialism in the seventies - unity or rivalry?', New Left Review no.69, Sept. -Oct . (also in Radice, 1975) Rowthorn, R. (1982), `Britain and Western Europe', Marxism Today, May Singh, A. (1977), `UK industry and the world economy : a case of deindustrialization', CambridgeJournal of Economics, no.1 Tomlinson, J . (1981), `Why was there never a "Keynesian Revolution" in economic policy?', Economy and Society vo1.X no .1, February TUC/Labour Party Liaison Committee (1982), Economic Planning and Industrial Democracy: a FrameworkforFull Employment, TuC/Labour Party Vajda, M . (1979), The State and Socialism, Alison and Busby Warren, B . (1971), `The internationalisation of capital and the nation state : a comment', New Left Review no. 68, July-August (also in Radice, 1975)

A F Rainnie

Combined and uneven development in the clothing industry : the effects of competition on accumulation

The author asks why the clothing industry is still dominated by small technologically backward firms . Using Marks and Spencer as an example, he refers to classic criticisms of the labour process debate and to Braverman in particular. Rainnie argues that even when the importance of accumulation is recognised, still only one of the factors in making up the drive to accumulate has been considered - the extraction of surplus value . Other contributors to the debate have tended to ignore the implicatons of competition in translating the process of accumulation into an inexorable demand placed on each individual capitalist.

141

Clothing industry 1974 of Harry Braverman's `Labor and Monopoly Capital" opened the flood gates to release a seemingly endless outpouring of contributors to what is now characterised as the labour process debate . The importance of Braverman's work was not simply that it forced a re-examination of an area that had remained for too long under investigated: it was that, as Tony Elger stressed z, Braverman had reinstated capital accumulation as the fundamental dynamic determining the development of the labour process under capitalism . Braverman's thesis has, however, not been without its critics, not least for the reason that, in developing his deskilling theory he tends at lose sight of accumulation and all its components, as the motor of capitalism. The problem starts with Braverman's failure to analyse forms of work and relations at work in the premonopoly capital stage in any systematic way . This leads to his well documented,' idealistic view of the extent and form of early nineteenth century skill, a preoccupation which results in the belief that , new methods and new machinery are incorporated within a management effort to dissolve the labour process as a process conducted by the worker and reconstitute it as a process conducted by management" . It is however questionable whether there ever was a moment even during capitalism's infancy when the labour process was totally conducted by the worker. Even skilled workers (let alone the mass of unskilled workers) had found their expertise effectively subordinated to capital accumulations . Nevertheless Braverman's fixation with craft control leads him to view the `separation of hand and brain' as `the most decisive single step in the division of labour'6. Such a move was forced, firstly, by the necessity to reduce the value of labour by substituting simple for complex labour and, secondly, by the necessity for THE PUBLICATION IN

j

the capitalist to recreate the labour process under his own control . The outcome of this analysis is the failure for which Braverman has been most heavily criticised . In a work entitled `Labour and Monopoly Capital', organised labour is really only notable by its absence . This is something of an exaggeration . Labour does figure . But, the only labour determined block to the development of the labour process is craft workers' control of the labour process . And once that obstacle is overcome, working class resistance as a factor influencing the development of the labour process is relegated to minor, peripheral status . Once the monopoly capitalism stage is reached and companies are large enough and (for Braverman following Baran and Sweezy) protected from the tendency for the rate of profit to decline, they can afford to apply Taylorist work reorganization practices, and apparently successfully overcome craft control of the labour process . Monopoly capitalism is then left free to sweep uncontested through all areas of society. Braverman then characterises the development of capitalism as `a decline from the homogeneously skilled working class of the twentieth century' 6 . Braverman views the development of capitalism as a simple success story . It is the working out of immanent tendencies once craft resistance is overcome . The problem is that it is not possible simply to identify the pattern of capitalist development in its, apparently, most modem or advanced form, and construct a theory around that'. Because Braverman does this, his analysis, as Elger has pointed out, does not `lead to any extensive discussion of the forms of extraction of surplus value and the exigencies of accumulation', because Braverman assumed, (after establishing the impulsion of capital towards the real subordination of labour), that this took the form of a simple process

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144 of degradation of craft skills . Counterposed to this, Elger argues that an alternative form of analysis must incorporate firstly a recognition of the complex character of the transition from formal to real subordination of labour process to capital, and secondly the complex reaction of labour to these developments ". He concluded that what was necessary was : ` . . . a historically located theorisation of the transformation of the capitalist labour process within which deskilling may be located as a tendency . Such a theorisation . . . would explicitly locate the forms of transformation in the labour process in relation to phases of valorisation and accumulation, and trace their articulation with class relations beyond production ." Certainly the sort of problems that Elger raised have been confronted from a variety of view points in the intervening few years" . But the purpose of this paper is to argue that even when the importance of accumulation as the motor that drives the development of capitalism is recognised (or as Marx would have it'Accumulate, accumulate! That is Moses and the prophets! 12), only one of the factors that makes up the drive to accumulate has been considered . Briefly, commentators have concentrated on the extraction of surplus value and the various forms it takes. They have tended to ignore the importance of competition in translating the processs of accumulation into an inexorable and uncontrollable demand placed on each individual capitalist . Now, it is certainly true that one of the factors that distinguishes capitalism from other modes of production is surplus value . It is, 'the specific economic form in which unpaid labour is pumped out of direct producers"' . However as Marx went on to argue 'capital exists and can only exist as many capitals"' and the sphere of 'many capitals' is that of com-

petition . Furthermore, 'the influence of individual capitals on one another has the effect precisely that they must conduct themselves as capital . 75. And it is this factor that forces the extraction and realization of surplus value to appear to be an externally imposed necessity beyond the control of the individual capitalist . Marx is more elegant in describing this drive . . . .in so for as he (the capitalist) is capital personified, his motivating force is not the acquisition and enjoyment of use values, but the acquisition and augmentation of exchange values . . . . As such, he shares with the miser an absolute drive towards self-enrichment . But what appears in the miser as the mania of the individual is in the capitalist the effect of a social mechanism in which he is merely a cog . 16 This is all fairly straight forward . But the point of stressing the importance of competition in accumulation is two fold . Firstly, without such an understanding it is difficult to account for the uneven development that capitalism exhibits. And secondly, the effects of uneven development are an important factor in influencing the development of the labour process . Furthermore as Elbaum et al" have argued, competition between capitalists may constrain them from restructuring the division of labour. I shall try and develop these points during the course of an examination of the development of one sector of the clothing industry .

The small firm as `survivor' It would be a mistake to assume either that capitalism developed simply and straightforwardly as a result of the working out of tendencies immanent within it or that this process involved the destruction of all seemingly 'outdated' forms of production. Marx, in Capital Vol . 1 puts forward

Clothing industry three epochs of capitalist development, petty commodity production, capitalist manufacture and modern industry. And, as Samuel 18 has argued they appear, initially, to be chronologically and analytically distinct. Braverman takes this approach, poses monopoly capitalism as the ultimate phase in this process and views it as all encompassing. However, as Samuel goes on to pointout, Marx in his chapter on modern industry emphasises that modem industry incorporates older systems of production rather than supercedes them . This is important because the tendencies toward centralisation and concentration that capitalism exhibits, fuelled by the drive to accumulate and the effects of intermittent crises, have lead some commentators, Braverman included, to equate capitalism as a whole with the interests and achievements of its most modem characteristic - monopoly capital. The History Workshop Journal commented in an editorial in 1977 on the tendency within economic history `to present the relationship between leading sectors and small scale production as if it were a relationship between the essential and the contingent . . .For, as long as the mid-Victorian economy is thought of in terms of a division between a `modern industrial sector' and an array of 'preindustrial' `survivals' (always on the point of extinction, but still miraculously there a generation later), the effect will be to marginalise the latter'. The tendency to marginalise 'survivals' is just as dangerous when examining the clothing industry in the late twentieth century, particularly when, as is the case in the clothing industry, small firms dominate . In 1976 the sixty largest firms employed only fifteen per cent of the labour force . Two thirds of the labour force worked in firms employing less than two hundred people, twice the average for manufacturing industry as a whole . Not only are the majority of the companies in

the industry small, they are also relatively 145 labour intensive . They employ technology that has not advanced significantly in fifty years . The Clothing Economic Development Council have summed up the situation as follows :The garment industry has for the last century been dominated by the sewing machine which is a relatively simple, cheap and long lived tool. As a result, entry to the industry has been, and still is, easy; a few hundred pounds of capital being sufficient to purchase second-hand machines and the necessary raw materials, and to make profits if a market could be found . Even the last requirement has been relatively easy to meet because of the diversity of products demanded of the industry . 20 . The outcome is that, of machinery in use in the industry, 95 per cent of sewing machinery and 90 percent of pressing equipment is still of the straightforward, single operator-controlled type .I' . How has this position arisen? Why is the clothing industry still dominated by small technologically backward firms? To find the answer it is necessary to briefly examine the development of the industry over the past 150 years .

The development of the clothing industry Discussing the development of the factory system in mid-Victorian Britain, Raphael Samuel has commented that it is not possible `to equate the new modes of production with the factory system . Capitalist enterprise took quite different forms in, for instance cabinet making and the clothing trades, where rising demand was met by a proliferation of small producers . . . One thousand needle women made the fortunes of Nicoll, the Regent Street sweater . . .' 22 .

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Despite the invention of small hand operated sewing machines by Elias Howe in 1846 and an improved version by Singer in 1851 the take up was slow. This has been put down to the relative complexity of the operations involved and the difficulty of cloth as a medium to work with 28, but this is, at best, only part of the answer. In the mid-nineteenth century, the response to market competition and to unstable markets was `exceedinglyvarious' 24. Two factors produced enormous seasonal shifts in the level of demand in the clothing industry. Firstly the London `season' for the top end of the market and secondly a pronounced seasonality in working class clothing purchases. Approximately one third of the male work force's jobs were seasonally affected, from here developed a tendency to purchase clothing in the summer when the docks, the building trade and so on had relatively high levels of employment. Then they were pawned in winter. The seasonality in some sectors reinforced the same tendency in others . The outcome was that the clothing trade was one of the most severely affected by seasonal fluctuations in demand . This was reflected in the demand for labour, (even as late as the 1880's). Numbers employed in a slack week formed the following proportions of those employed in busy one : 50-60 percent among milliners and 80-90 per cent among shirt makers" * The general problem was that seasonality produces a labour supply in excess of normal needs so that seasonally recurrent peaks of production can be met . This is, of course, unless the labour is limited . Where . . . the supply of labour was plentiful, and in some cases, even unlimited, as it was in . . . the semi-skilled or unskilled parts of the building, furniture, clothing, footwear and food and drink trades, the employer had little incentive to maintain a continuous level of employ-

ment . . . Moreover . . . the existence of this surplus pool of labour, always at hand, removed all necessity to iron out irregularity of production and enabled the employer to vary his work force, solely in accordance with the dictates of demand . This accentuated the advantages of small scale production, because of its greater flexibility, and where choice existed, minimized the advantages of fixed capital. 26 If there is any doubt that the supply of labour took on all the appearances of being infinitely elastic, Samuel records that the number of `needlewomen' rose by some 300 per cent between 1841 and 1861 . The reaction of a particular group of workers, particularly to the slump of the 1870's, to these fluctuations in demand and employment served only to increase competition and exacerbate an already unstable market situation . Both Booth and Mayhew 27 record that `the more ambitious workers' set up as small masters on their own, needing little capital to do so. This was a response to the wild fluctuations of, rather than an increase in, demand. It did little to alleviate the irregularity in employment . The reliance in low level technology was perpetuated by the possibility of increasing productivity with hand technologies, either by improved tools, increased exploitation, or both . This was particularly imporant as far as the clothing industry was concerned . `In outwork productivity was increased by `sweating' screwing down piece-rates so that earnings could only be made up on the basis of unpaid family labour. This was the very principle of expansion in the clothing trade . . .' 28. If the family was to survive, the extent of casual or seasonal employment amongst men necessitated all members of the family working . But the glut of unskilled female labour and the possibility in the case of outworking of drawing

Clothing industry in all members of the family as unpaid labour combined to drive down the level ofwomen's earnings . Intense competition, coupled with an ability to rely on a ready supply of cheap labour, partly explains the slow take up of the technology which did exist. Faced with fluctuating demand, a ready supply of labour, and a seemingly endless stream of small scale competitors, it made sense for the capitalist to keep the labour process labour intensive and as cheap as possible . Another important factor was that the early, relatively crude, garment-making, machinery was really only suitable for heavy clothing . The upshot was that men's suits and overcoats were the principle machine-made products of the clothing industry until well into the twentieth century . By contrast, up until the first World War women's and children's wear was still largely made up by hand . Child labour in the home continued to exist and helped to perpetuate this system . A Factory Inspector's Report for 1907 commented that `it was a strange sight to see the girls pouring into the streets carrying large bundles' 24 . Visiting some of their homes she found children, who she thought ought to have been at play or asleep, stitching linen collars . The women's clothing sectors remained relatively unaffected during the inter-war period, although the industry as a whole continued a relative decline that had begun pre-war . In terms of employment, 580,900 were employed in 1923, but only 390,000 in 1969 . However, this decline should not be taken as an indicator of performance . New machinery and processes introduced in the inter-war period go some way to accounting for the decline 10, though these changes were largely concentrated in the mens outwear sector' 1 . During the inter-war years, there did develop, however, particularly in relation to the outerwear sectors, a relationship

that did, and still does, have an important effect on the structure and development of the whole clothing industry . This is, the relationship between retailers and manufacturers. Advances in production coexisted with the expansion of retail outlets and both consequently fuelled each other's development. This relationship, by providing reliable markets, allowed manufacturers long and consistent runs . It enabled them to increase the scale of their operations and begin to iron out fluctuations in demand for labour. The outcome was such that a Board of Trade report on the industry, published in 1947, stated that the expansion of retail outlets had led to a revolutionising of manufacturers' methods of production . The report went on to note, significantly, that for the first time factory production had become more profitable than production based on either home workers or sweatshops 32 . Plant argues that the clothing trade, perhaps more than any other sector of manufacturing industry has been caught up in `the revolution in the distributive trades which has transformed our shopping habits ' 3 J . By 1976 large retailers accounted for fractionally under 50 per cent of clothing and footwear sales . By 1979 large multiple retailers accounted for some £2,595 million of the £5,119 million turnover in the retailing of textiles, clothing and footwear 34 . Yet this development has not been a totally happy experience for the producers of the goods that the multiples sell :No doubt the customers have benefited from the economies in retail distribution that these changes have brought about, and the world clothing industry has increased its sales, taking one country with another, but, for the independent garment manufacturers faced with heavy production costs in a Western Industrialised country the advent of the new sales

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Capital & Class 148 outlets has not been an unmixed blessing . The clothing industry as such has found itself squeezed between the raw material producing sector (mainly the textile industry) and the distributive sector . 35 It is certainly the case that, since the Second World War, the rise to their present-dominant position of the large retail outlets has had a crucial effect on the development (or non-development) of a significant section of the British clothing industry . As they rose to predominance large retailers inherited, in the case of light clothing at least, an industrial sector characterised by numerous small, highly competitive units. The sector, because of fluctuations in demand and fashion, intense competition and, therefore, ease of entry and exit, preferred to rely on cheap intensive female labour rather than on high level capital investment . The long, predictable recurrent orders that the Marks and Spencers of this world provide, could have changed this situation, but did not . Why this did not happen is crucial to an understanding of why the clothing industry is still characterised by tiny competing businesses .

Dependency in the clothing industry That the major retailers have an important determining effect on the performance of the British clothing industry can be readily seen by examining the trade journals . Commenting on the situation in December 1979, when a High Street price war seemed imminent, Manufacturing Clothier (MC) warned gloomily that :-

• The move towards a price war among clothing retailers his autumn must necessarily feed back to the suppliers . Value and cash flow are again taking precedence over margins and profitability and the strains on balance sheets are likely to emerge before long. 36

• A month earlier, and concentrating on the women's wear sector, that had survived better than most, the same journal was stating that :• The £2,500m women's wear market in Britain stands at the threshold of a prolonged price war that must be a matter of serious concern for clothing manufacturers . For the only real losers from the price war will be the manufacturers squeezed between rising input costs, wages and overheads and downward pressure on output prices from retailers ." Now, it could always be claimed that this was simply the industry raising a hue and cry, trying to forestall attempts by retailers to cut margins . However, other observers have commented differently . The Clothing Industry Productivity Resources Agency noted that :From the firms visited it was clear that this sector (ladies' and children's light outerwear) of the industry is typified by numerous small entrepreneurial businesses each working hard to satisfy their customers' needs while squeezed between, on the one hand, large fabric suppliers, and on the other powerful retail groups . 38 The extent to which the manufacturers feel themselves to be under threat can be gauged from the fact that the 1982 Annual Convention of the London Association of Clothing Designers and Executives, discussed only one major industry. One speaker accused retailers of `asking the U .K . manufacturer for the impossible including such things as three weeks delivery and prices which were unrealistic' 39 . The name of Marks and Spencer is reported to have cropped up at regular intervals during the convention . Given the company's market position, this is hardly surprising. . . . according to financial analysts, Marks and Spencer is nearing saturation point in Britain . The company already has a store

Clothing industry on virtually every desirable High Street in Britain, and its 14 million shoppers a week represents almost 25% of the population . The tills ring up £I out of every £7 spent nationally on apparel, and in some garments, the business covers more than half the market. 40 It is not just in clothing and textiles that Marks and Spencer have such power . More than eight hundred firms supply Marks and Spencer and :Some, particularly on the food side, take care to ensure that only a minor slice of their output goes to Marks and Spencer. But most sell their soul to St. Michael on the basis of no more than a batch-bybatch contracts. 41 Marks and Spencer purchase practically 90% of their clothing requirements within Britain 42. AH Lambert, the company's senior Merchandise Executive, explained why he thinks the company adopted this policy in the following terms :Selling British goods is our policy because British made can be well and efficiently made . Our customers can then buy what suits their taste at prices to suit their pockets, with confidence in our high standards of make and finish . . .It means jobs for our own staff and for the 200,000 others who work at our suppliers. This policy is the life blood of the UK clothing industry since we buy around a fifth of everything it produces . 43 It is, to say the least, a very important part of the clothing industry . Sales of British-made clothing, until March 31st 1982, totalled £1,094m . Manufacturing Clothier commented that `Truly, as never before, Baker Street is the heart, brains and will of the British clothing industry' 44. Given that they are locked into what has been described as `the western world's most rightly controlled factory-to-shop system'4S, manufacturers' reaction to

Marks and Spencer is, to some extent, ambivalent. A managing director of a company, two-thirds of whose turnover is with Marks and Spencer, outlines the positive side of the relationship :. . . with Marks and Spencer and with their support, we have successfully ridden out all the economic storms which have blown with monotonous regularity over the 45 years of our trading relationship . . . despite all the ravages of the past decade, we have continued to operate at full strength . We have not closed any factories, we have not declared any redundancies, and we have experienced only a limited amount of short-time working." The advantage of a predictable link with a major retailer is that it provides long production runs . Scratching around for small orders can be disastrous . One North East clothing manufacturer outlined :We've got cash flow problems, our customers can be helpful, but they do put restrictions on, like everything this year at last year's prices . You end up holding stock for the stores . . . you cannot blame them it's a fact of life . . . we were caught short after 15 years growth . . . we went all over the place, getting all sorts of orders, just to keep ticking over, but small orders equals no profit . 47 The squeeze is still on from the retailers . The predictability of orders and the extended length of runs has gone, and with it profitability. Despite the difficulties of scratching around for small orders, it is equally clear that, despite its obvious attractions, attachment to a major retail outlet does have serious drawbacks . Another clothing owner/manager summed up the situation succinctly and bitterly :When you've got all your eggs in one

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150 basket, and they pull out, you've lost your contracts. They've got you and they know it. 48 Returning specifically to Marks and Spencer, the industry recognises that the company is tough. Yet reactions vary from benign views of the company as simply hard, to very bitter reactions indeed. An example of the first type of response can be gathered from management journals :Traditionally, M & S has played benevolent dictator to its suppliers, giving them exact specifications for an acceptable item - the number of stitches to an inch, the number of inches in a hem - and rewarding them with huge orders that allow long production runs . 49 An even more rose-tinted view along the lines of the `benevolent dictator' approach was taken by another trade journal . It specifically attacked the notion that Marks and Spencer exert any undue influence over small clothing manufacturers :The partnership between Marks and Spencer and its UK clothing suppliers is misunderstood by those outside the industry who like to stick a 'love-hate' label on the relationship . Rather, the relationship has similarities to the traditional address by a Sergeant-Major to his new recruits `You play ball with me and I'll play ball with you'. The relationship stemming back to the other. Yet, in return for the sizeable orders placed, suppliers have to accept disciplines that would be considered quite beyond the pale by other clothing manufacturers. The company's devotion to the most minute detail is unparalleled ." There are people both within and outside the industry who would disagree with the hale and hearty military metaphor . Companies are expected to jump to Marks and Spencer's tune, giving a free run of their factory to inspectors and

switching production runs if a line is not selling fast enough. When production begins, two perfect specimens are removed, one retained by Marks and Spencer, one by the producer . The slightest deviation is rejected by Marks and Spencer, and their inspectors tour production lines with great regularity . The Investors Chronicle, in their 1979 review of the clothing industry were rather more circumspect regarding the effects of Marks and Spencer on their suppliers:. . . even where UK manufacturers are managing to hold their share of the market, they are often doing so at the cost of reduced margins -because of tight cost controls by retailers, notably Marks and Spencer." The Sergeant-Major's discipline is even more severe than some would have us believe! It is hard to be benign or complacent about the relationship when your company is on the receiving end of a change in Marks and Spencer policy . The experience of the late 1970's and early 1980's has brought the advantages gained from multi-sourcing into clear relief:The pleasures and pains of being a Marks and Spencer supplier are being writ large as the survivors of Britain's ragged textile industry reveal their latest trading figures . Always a hard taskmaster, M & S is being increasingly choosy and in the last few months has axed several of its suppliers, forcing some to close . . . . The losers are the small companies, some of them part of larger groups, but mostly independents, particularly clothing manufacturers, which are regularly collapsing into the statistics of company failures . 52 The same article goes on to comment that in better times an element of sentimental attachment might have persuaded M & S to keep some suppliers open . It doesn't happen in the price-war climate of 1982 . Quoting a manager of a company

Clothing industry closed as a result of losing an M & S order, `working for M & S is no sinecure' and `in this business small is not beautiful, it is vulnerable'. The article argues that the situation is unlikely to change as M & S concentrate on getting the best quality at the best price from its suppliers . It is . important to realise that Marks and Spencer's attitude to their suppliers is not the product of some warped personalities in the purchase departments . It emerges from the way the company adapted and responded to competition in the high street over time . The control and flexibility that a large number of dependent suppliers allows M & S gives them the ability to respond rapidly to changes in demand for a particular item, or to clear out of whole areas very quickly, relatively cheaply and painlessly . The effects on small suppliers of any change in Marks and Spencer's policy can be illustrated by the problems the company faced in 1979 . . . .M & S did not prove immune to the recession that hit retailing last year (1979) . . . Textile sales, accounting for nearly 70% of total M & S revenue actually fell in volume by about 5%, the first such decline in the company's history . In the financial year ending last March (1980), the pretax profit of £173 million on sales of £1,668 million compared with £166 million on sales of £41,473 million in 1979 - a drop in margins from 11 .3% to 10 .4% . 53 The problem was, that as a reaction to competition from other retailers selling cheaply (British Home Stores for example), Marks and Spencer had attempted to move 'up-market' to higherquality and higher-priced goods . But as the recession bit harder, the demand for silk blouses, cashmere coats and so on simply did not materialise . Criticism abounded at the time . Marks and Spencer were accused of having `ivory tower'

management, so concerned with computerised stock and cost control that they failed to foresee the effects that an ever deepening recession would have on consumer spending 54. The company, however, did respond rapidly and dramatically . They slashed £11 million off their prices in the first unscheduled sale for 20 years . They accompanied this with a promise to keep price rises down to 5 per cent for the following year. This, despite an expected 12 per cent increase in general clothing prices. The effects of this switch were still being felt in 1982 :. . . change in merchandise policy decided at Marks and Spencer in late August 1979, has continued to reverberate down to succeeding months. Move in emphasis away from middle and highticket areas towards middle and lower areas, accompanied by rationalisation in product lines and followed a year ago by thinning of suppliers' ranks . 55 Even for these companies that retained their contracts, the shift in policy, accompanied by immediate price cuts and restrictions on long-term price increases, had a drastic effect on margins . This is hardly surprising given that Marks and Spencer demanded that their suppliers shoulder half the burden of the price cuts." However the trade journals argued that the situation was ambiguous :Outwardly, the change in mechandise policy appeared to be at the expense of suppliers since prices were either reduced or unchanged . But the success of the changed merchandise policy has depended crucially on increased volume at the easiest pricing point to maintain or increase sterling sales value . The interim figures at the halfway stage last October (1980) observed that clothing prices had increased by only two per cent in the first half . . . clothing prices are not the same as this time last year. ,

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The argument seems to be that increased pressure on margins was to be counterbalanced by increased volume in orders . However, there is no doubting that the pressure on small clothing manufacturers was intense . Obviously the relationship between Marks and Spencer and clothing suppliers has a determining effect on the performance of an important fraction of the clothing industry, both in the long term and particularly at times of changing retailers' policy . It is important to realise that Marks and Spencer are not the only outlet on which clothing firms become dependent . Nevertheless, the choice is restricted . Half the retail sales in the United Kingdom are handled by no more than a dozen chains, although the exercise of searching for outlets can throw up alternatives . As one manager explainedWe work for the Ministry of Defence . . . we have done civvy, Marks and Spencer, Littlewoods, C & A and so on . At first it was fifty-fifty, Ministry of Defence and civvy, we did not like all our eggs in one basket, but we got more orders, so now we are 100% Ministry of Defence .511 Once an alternative arises, as the manager pointed out, there is a seemingly inexorable process that leads to dependency on a single outlet . This process is exacerbated by what one commentator has described as the `uncontrollable concentration of distribution which confronts small or medium-sized businesses' 59 . Obviously the activities of outlets such as, for example, BHS, Littlewoods, Mothercare and Marks and Spencer have effects on each other, the reverberations of which echo through their respective suppliers . There seems little likelihood of a quick end to the battle for market share amongst retailers, and the repercussions of this conflict can be extremely serious :For U .K. suppliers to both M & S and

other High Street firms, the intense battle for market share on the High Street has often wiped out profit margins at a time of demand depressed by the destocking recession." The situation is further complicated by the entry of new retailers in recent years (ASDA, Tesco, Hillards, etc .) . Though these newcomers have a relatively small share of the market, the growth in their sales has been enough to absorb whatever increase there might have been in the market overall. The outcome has been that `The multiples . . . have no alternatives but to fight for market share through shaved net margins" I . Shaved net margins for the retailers, translates into this year's goods at last year's prices for the manufacturers . In this situation, it is not only short-term policy changes, or medium-term recession but also the long-term process of dependency that go a long way towards explaining the `backward' nature of the labour process in small firms . Briscoe argues that :. . . the profitability of investing in modern machinery depends first on whether the machines themselves can be worked continuously enough, which in turn depends on whether long runs and shift working can be achieved . Second, it depends on whether the structure of the industry can be adjusted to exploit fully the economies of scale of plant . 62 Long runs can, and do, exist but they are open to changes in fashion, policy changes by retailers, recession-reduced consumer expenditure and so on. The advantages to the retailer of multisourcing of production, for the producer means that while the market is unpredictable and there exists a relatively accessible supply of cheap versatile labour, there is little or no incentive to invest in high technology. Therefore, although Marks and Spencer claim that its six-point re-

Clothing industry tailing philosophy contains within it the aim to:. . . encourage our suppliers to use the most modern and efficient techniques of production and quality control, taking advantage of the latest developments in science and technology. 63 - the chances of realising these aims are limited. NEDO 64 reported that the characteristics of buyers of advanced technology in the clothing industry were :1) a sales turnover of more than £1 million and with more than 250 employees . 2) more than one manufacturing establishment . 3) long runs of more than one weeks duration. The intense competition that exists between the producers for retailers orders, the ease of entry 65 into and exit from the industry (armed only with a few hundred pounds and some second-hand sewing machines), fashion changes, demand fluctuations, the buying policies of competing retailers, all militate against the development of the three factors necessary for technological investment . In such a situation it is hardly surprising that the development of the labour process seems to have been frozen . The reasons advanced by management 66 for not introducing machinery are illuminating - runs are too short, frequent changes in fashion and loss of flexibility . Given these conditions the continued reliance on cheap and very flexible female labour as the central pivot of the labour process should come as no surprise .

Conclusion Of course there is nothing particularly new or startling about an analysis that emphasises the advantages accruing to a major capital of a subcontracting relationship with a myriad of small suppliers . Andrew Friedman67 summed up the ad-

vantage in one word - flexibility . In this 153 case he argued flexibility has two elements to it :First, alternative sources of supply will make it easier for firms to maintain a desired level of output when faced with difficulties of labour relations or mistakes in co-ordination. Second, alternative sources of supply will make it easier for firms to adjust desired output when faced with fluctuations in final product demand. This element of flexibility becomes particularly important when selling in an oligopolistic industry where firms will be reluctant to alter prices because of uncertainty concerning the reaction of competitors and because of the damaging effects which retaliatory reactions might have . 68 The similarity of this analysis of subcontracting in the British car industry, with the situation outlined in the previous section of this paper must be obvious . To take one simple example . A large proportion of the costs of Marks and Spencer's disastrous up-market move were borne not by Marks and Spencer but by the suppliers who lost contracts, and ultimately by the workers in those factories where jobs disappeared . Even in those companies where contracts were retained, the `this year's goods at last year's prices' effect will have hit hard at profit levels and bonus systems alike . The important points, certainly as far as this paper is concerned, are, firstly, that one cannot understand the importance of dependent small suppliers to Marks and Spencer unless it is accepted that, despite their size and domination of the UK clothing market, Marks and Spencer are not immune to the effects of competition, particularly in an economic crisis . Secondly, the large retailers did not initially create the small suppliers, they grew to predominance during the long post-war boom, on the back of a situation that they inherited . The clothing industry

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154 had always been characterised by small units, for reasons outlined in an earlier part of this paper. The rise of the large retailers, and the advantages they gained from having a large number of dependent suppliers, simply ensured that this situation would continue . It should not, however, be assumed that the Marks and Spencer small supplier represents a totally unique situation . Well aware of crisis and competition, other industries have looked at Marks and Spencer's position. Sir Adrian Cadbury commented in 1981, that if the economic outlook for the foreseeable future was to be characterised by instabilty and severe competition, the costs would have to be cut and a greater degree of flexibility acquired to cope with fluctuatingdemand . To achieve these aims means reversing the trend of the last twenty years towards large centralised organisations . We will want, in future, to break these organisations down into their separate business units and to give those units freedom to compete in their particular markets . Large companies will become more like federations of small enterprises - not because `small is beautiful' but because big is expensive and inflexible . . . I would expect tomorrow's companies . . . to concentrate on the core activities of their business, relying for everything else on specialised suppliers who would compete for their custom. 69 It is in this light that some of the spate of management and/or employee 'buyouts' should be viewed . It is no accident either that British Telecom managers view the advantages of competitive supply of subscriber equipment and services in terms of developing a Marks and Spencer type relationship with suppliers . 70 The point to note is that it is competition, experienced by the large units, that fuels the drive to building dependent relationships with small suppliers .

Thirdly, and most importantly, this situation has dramatic consequences within the four walls of the small clothing factory . For the large retailer, the existence of an individual small supplier is not of any great consequence . The existence of a number of them is . Competition between suppliers to gain the relative security of guaranteed long run orders from retailers, is, therefore, intensive. But, this very competitiveness, allied with the unpredictability of orders, has repercussions on the organisation of the labour process, as Coyle explains :. . . in the clothing industry a characteristically low capital investment contributes to the industry's hand-to-mouth existence, whilst, at the same time, narrow profit margins, a changing product and highly competitive markets often militate against further investment . It is still true that if wages can be kept at rock bottom levels, small procedures can be very competitive and profitable." Unpredictability and a high degree of competitiveness, ease of entry to, and exit from, the sector are not conducive to labour saving capital investment. Particularly when use can be made of a readily available supply of cheap and poorly organised72 female labour. Having stressed the importance of competition and cheap female labour in determining the development of the labour process, there is (at least!) one very obvious gap in the analysis . That concerns the effects of foreign competition, made economically viable by the exploitation of very cheap labour. The I .L .O . has argued that between 1963 and 1978 the industrialised countries moved from a position of being almost self-sufficient in terms of clothing production to a situation where, by 1978 they were running a collective deficit of $11,000 million 73 . This is obviously something of which both Marks and Spencer and their suppliers



Clothing industry are well aware . As Management Today commented:While Marks and Spencer's zeal, not only to buy British, but to sell British abroad, is praiseworthy, not even the most optimistic executive considers it a major factor in the company's future growth . 74 This can only serve to increase the pressure on small British clothing firms in terms of containing costs, particularly wage costs . However, Marks and Spencer still dominate the British industry and that is why I have concentrated on that relationship, merely noting the effect of foreign production as a strategy open to Marks and Spencer and therefore a sword of Damocles suspended over British suppliers . The point that I am attempting to stress is that in Britain the continued reliance on cheap female labour and low level technology is understandable only within the context of the large fine-small firm relationship . Furthermore this relationship is only understandable if one accepts that competition has an important role to play for both parties within, to use Elger's phrase, the `exigencies of accumulation' . Finally, therefore, the particular form that the extraction of surplus value takes within small clothing firms is only understandable if competition is restored to its rightful place as a crucial determining factor in fuelling the drive to accumulate .

Notes and references I. H . Braverman, 'Labour and Monopoly Capital', Monthly Review Press, 1971 . 2. T. Elger, 'Valorisation and Deskilling: A Critique of Braverman', Capital and Class 7, 1979. 3. See e .g. (1) D . Stark, 'Class Struggle and the Transformation of theLabourProcess, Theory and Society, 9, 1980. (2) C . Littler, 'The Development of the Labour Process in Capitalist

Societies', Heinemann, 1982. 4. H . Braverman, 1974, op . cit ., p.170. T . Elger,1979, op. cit., p.63 . 5. 5. T . Elger,1979, op. cit., p.63 . 6. D . Stark, 1980, op . cit., p.94. 7. See M . Haynes, 'Capitalism - Marx's time and ours', International Socialism, 19, 1983 . 8. T. Elger,1979, op. cit ., p .62 . 9. ibid ., p.65 . 10. ibid ., p.88 . 11 . See for example D . Lee, Skill, Craft and Class : A Theoretical Critique and a Critical Case, 'Sociology Vol . 15, No .1, February 1981 . 12 . K. Marx, 'Capital' Vol . I, Penguin Books, 1976, p.742 . 13 . K. Marx, 'Capital' Vol.111, Penguin Books ,1976, p .791 . 14. K. Marx, 'Grundrisse', Penguin Books, 1973, p.414. 15 . ibid ., p .657 . 16 . K. Marx, 'Capital'Vol .I, p .739 . 17 . B . Elbaum (et al), 'The Labour Process Market Structure and Marxist Theory' Cambridge Journal of Economics, 3, 1979 . 18 . R. Samuel, 'Workshop of the World' History Workshop Journal, 3, 1977 . 19 . History Workshop Journal, 3,1977, p .2 . 20 . Clothing Economic Development Council, New Technology and the Clothing Industry', NEDO, 1971, p.6. 21 . ibid., p.16 . 22 . R . Samuel, 1977, op . cit., p.8 . 23 . R . Plant, 'Industries in Trouble', I .L .O., 1981, p .56. 24. R . Samuel, 1977, op. cit. 25 . Figures from G . Stedman Jones, 'Outcast London' Penguin, 1976 p.41 & 46 . 26. ibid ., p .42 . 27 . Cited in G . Stedman Jones, op . cit., p.42-3 . 28 . ibid ., p .49. 29 . Quoted in A Coyle, Sex and Skill in the Organisation of the Clothinglndustry , In J. West (ed), 'Work, Women and the Labour Market, R.K .P . 1982 . 30 . See D . Aldcroft, 'The Inter War Economy', Batsford, 1970. 31 . See A. Coyle, op, cit . 32 . ibid., p .12 . 33 . R. Plant, op. cit. 34 . Advertising Associate, Marketing Pocket Book, 1982, p.43 .

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156 35 . R . Plant, op . cit., p .61 . 36 . Manufacturing Clothier, December 1979, p.13 . 37 . Manufacturing Clothier, November 1979, p.13 . 38 . CIPRA, 'Productivity Survey oftheLadies and Childrens Light Outerwear Sector', CIPRA, March 1980, p.8 . 39. Manufacturing Clothier, July 1982, p .9. 40 . Management Today, November 1980, p.67 . 41 . Sunday Times, 19 .6 .83 . 42. Industrial Participation, Spring 1982, p.7 . 43 . ibid., p.4 . 44. Manufacturing Clothier, July 1982, p.17 . 45 . Sunday Times, 19 .6 .83 . 46. Industrial Participation, Spring 1982, p.7 . 47 . M. Scott & A . Rainnie, 'Industrial Relations in Small Clothing Firms in the North East of England'. Unpublished Mimeo, Newcastle Polytechnic, 1982, p.32 . 48. ibid., p.31 . Management Today, November 1980, 49. p.68 . Manufacturing Clothier, April 1981, 50. p.17 . Investors Chronicle, October 1979, 51 . p.268. 52 . Sunday Times, 28.2 .82 . Management Today, November 1980, 53 . p.68 . 54 . Manufacturing Clothier, November 1979 . 55 . Manufacturing Clothier, April 1982, p.18 .

Sunday Times, 19.6.83 . 56 . Manufacturing Clothier, April 1981, 57 . p.49 . Scott & Rainnie, 1982, op . cit ., p.32 . 58. 59 . Manufacturing Clothier, April 1979, p.9 . Manufacturing Clothier, April 1982, 60. p.18 . 61 . Manufacturing Clothier, November 1979, p .15 . 62. L . Briscoe, 'The Textile and Clothing Industries of the U.K. , Manchester University Press, 1971, p .73 . Industrial Participation, Spring 1982, 63 . p.2 . 'The Anatomy of Purchasing Clothing 64 . Machinery', NEDO, London 1979 . 'Technology and the Clothing Industry', 65 . NEDO, HMSO, London, 1971 . 66 . NEDO, 1979, op . cit. 67 . A.L . Friedman, 'Industry and Labour', Macmillan, 1977 . 68 . ibid. p .122 69 . Guardian 9 .12 .81 . 70 . Financial Times 27.9 .83 . 71 . A. Coyle, op. cit., p.1 1 . 72 . Workplace union organisation in small clothing factories is examined in detail in A . F. Rainnie, `Industrial Relations in Small Businesses: The Case of the Clothing Industry in North East England', Unpublished Ph .D. Thesis, Newcastle Polytechnic, 1983 -espec. Ch VII . International Labour Organisation. 73 . 'The Employment Effects in the Clothing Industry of Changes in International Trade' . I .L .O., Geneva, 1980. Management Today, November 1980, 74. p.73 .

Robert R Albritton

The dialectic of capital : a Japanese contribution JAPANESE POLITICAL ECONOMIST Kozo Uno founded a school of thought that has become influential in Japan, but is little known or understood in the West .' If Uno's work had been available earlier in the West, it is possible that many fruitless debates would have been avoided and that Marxian social science could have been constructed on firmer foundations thus avoiding the seeming eclecticism which is today often referred to as ' the crisis in Marxist Theory ." Much of this crisis stems from a wide- This paper suggests spread rejection of the law of value as theorized by Marx in Capital that European Marxists should and from a failure to replace it with any firmer foundation . Coupled take account of the with this is a general failure of Wetern Marxists to solve the contributions of problem of the relation between any articulation of the law of value Japanese econand historical analysis . The Uno School offers perspectives that omists, Uno and can extricate us from many recent debates . For example, it offers a Sekine . Their reclarification and rigourous defense of the law of value, it develops a statement of the clear and precise theorisation of the relation between the law of Law of Value, which value and historical analysis, it shows precisely in what sense the rests on explicit law of value can serve as a foundation for Marxian social science, it recognition of three 157 offers a resolution to the long debate over the nature of dialectical levels of analysis, is described, and is materialism and historical materialism, and last but not least, this shown to allow new School clarifies the relation between theory and practice so that insights on the theory can serve as a guide to practice without dogmatizing it . In transformation this highly condensed article I shall deal mainly with one of these problem and the contributions; namely, how Uno and particularly his student generation of crises .



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Sekine have advanced our understanding of the law of value over Marx's presentation in Capital.' All too often interpreters of Capital have defended or attacked the text as it stands . But it is unrealistic to expect this embryonic text of a new science to contain more than rough-hewn basics . Many interpreters have analysed this or that part of Capital, but few have attempted to reconstruct the theory as a whole ; and yet such a general reconstruction is exactly what is needed if we are to realize the full potentials of Marx's original and unfinished text . It is precisely to this task that Uno and Sekine devote their considerable talents. Three levels of analysis

Central to the Uno approach is the idea that the analysis of capitalism divides into three levels : the theory of a purely capitalist society, stage theory, and historical analysis . The 'logical-historical method' which wishes to import the necessary laws of a purely capitalist society directly into history or to import the contingency of history directly into the law of value has given rise to serious confusions and errors throughout the history of Western Marxism . It is extremely important to keep the three levels of analysis distinct because a different type and degree of necessity is associated with each level of analysis . As we move from pure theory to historical analysis, from the more abstract level to the more concrete level, necessity is increasingly qualified by contingency . With the law of value in a purely capitalist society, necessity is not qualified by contingency at all . Thus it is necessary in a purely capitalist society for there to be periodic crisis . At the level of stage theory, we look at the way in which a dominant type of capital accumulation deals with crisis or tries to solve the problems that crisis solves for pure capitalism . Thus for example in the stage of imperialism crises become less tolerable as the very large units of capital seek stability . The effort to export problems that might create domestic crisis leads to aggressive expansionism which in turn culminates in war. Thus in the stage of imperialism, to some extent imperialist wars solve the problems solved in pure capitalism by crisis . But imperialist wars depend ultimately on political factors that are in part contingent, so that imperialist wars at the level of stage theory are less necessary than periodic crisis in pure capitalism . A particular crisis or war at the level of history may involve even more contingent and particular circumstances, so that for example, a crisis may be triggered by the failure of a major bank or a war may be triggered by an assassination or a border incident. As we move towards the particulars on the surface of history contingency comes more and more to the fore to the point were the law of value has only a very distant relation to understanding Flaubert's Madame Bovary or Freud's psyche .

Japanese contribution We can consider strategic thinking as an extension of historical analysis towards future-directed action. Strategic thinking should be quite concrete since it involves mobilizing particular groups of people around certain demands in a specific historical configuration . It can and should be guided by more abstract levels of theory, but to a very large extent it depends on the judgment and practical wisdom that comes with long experience of struggle and attuning oneself to the concrete particulars that may be of decisive importance in a political movement . Stalinism epitomizes the mixing of levels of analysis because it associates the degree of necessity and certainty that is only possible at the level of the theory of a purely capitalist society with fine points of political line and political strategy. If we mix the three levels of analysis, then we are likely to mistakenly see the same necessity that is associated with periodic crisis in the theory of pure capitalism associated with socialist revolution, and as a result fail to account for the very important subjective factor . The mixing of levels of analysis has caused immense problems in the history of marxist theory : problems of not achieving the degree of scientificity that is indeed possible at each level of analysis, and problems of claiming too much scientificity given the level of analysis . The weakening of scientificity and dogmatism go together with a logical-historical method that mixes levels of analysis, and fails to be sensitive to the combination of necessity and contingency appropriate for each level . The most abstract level of analysis is the theory of a purely capitalist society which assumes the total commodification of socio-economic life . The spread of the commodity form develops over centuries, but absolutely crucial and central for the development of capitalism is the commodification of labour-power because with this event the commodity form has located its source of profit within a production process controlled by itself . This gives to capitalism a great dynamism because now that its source of selfexpansion is internal to itself, it can penetrate pre-capitalist economies and transform them together with itself into an economy that is more and more capitalist in a world that is also becoming more capitalist (capitalism first takes hold in particular nationstates and it develops unevenly on a global scale) . The limit would be a society in which all production is the production of commodities by commodified labour-power as regulated by the selfregulating market. This is what Uno calls a `a purely capitalist society .' Such a society never exists in history . It is a theoretical abstraction assuming an ideal environment in which the motion of value is allowed to prevail over use-value obstacles . Marx reiterates time and again throughout the three volumes of Capital that production relations are converted

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into entities and rendered independent in relation to the agents of production . . . `4 Or again Marx writes : ' . . . value as capital acquires independent existence, which it maintains and accentuates through its movement . 'S This tendency for the human subject to become the mere object determined by the independent movements of capital is reification . In a purely capitalist society we allow this reification to become total, so that by letting capital have its own way at the level of theory, we entrap it into exposing itself for what it really is. It is reification that enables us to theorize the laws of motion of capitalism in the abstract and in general as distinct from all the concrete contingencies of their actual operation in England in 1859 or Germany in 1900 . The self-purifying and self-abstracting tendencies inherent in reification mean that we can theorize the laws of motion of capitalism as laws working with `iron necessity.' 6 Total reification achieves a level of abstraction that sheds all contingencies associated with the historical concrete so that capital can be theorized as having an inner logic of necessary relations .

Stage Theory: solution to confrontation of necessity and contingency.

But we still have the necessity and objectivity of the law of value confronting the contingency and agency of concrete history, and as E. P. Thompson has argued : . . .no worker known to historians ever had surplus value taken out of his hide without finding some way of fightingback . . . by his fighting back the tendencies were diverted and the `forms of development' were themselves developed in unexpected ways . Some theorists have attempted to overcome this antimony between necessity at the level of theory and contingency at the level of history by placing contingency and classs struggle within the law of value itself. But this is self-defeating because the lawlike character of the law of value is bound to be undermined by such a move . The solution to the problem is not to mix these two levels of analysis but to develop a third level of analysis that can mediate the two so that we can maintain the necessity of the law of value at the level of pure theory while taking account of agency and contingency at the level of history. Uno refers to this mediating level of analysis as stage theory. Stage theory is a meeting ground for the law of value and concrete history and it results in theorizing the dominant form of capital accumulation and accompanying state policies for the stages of mercantilism, liberalism, and imperialism .' At the level of pure theory the motion of value is allowed to overcome all use-value obstacles including the use-value labourpower . That is, we allow the reifying force of capital to securely commodify labour-power with the implication that class struggle is

Japanese contribution

temporarily quieted at this level of theory . This enables us to achieve a clear and precise understanding of how capital secures the commodification of labour power, the centrality of this commodification, the tenuousness of this commodification, the precise relation between capital and labour, and why class struggle is likely to occur and at what points . With this knowledge firmly established at the level of pure theory, we can move to the level of stage theory where use values are partially reactivated; and agency, which was temporarily absorbed by the completion of reification, now partially reemerges . One point at which class struggle seems to be crucial even to the law of value is on the length of the working day . But in purely capitalist society capital and labour are but personifications of economic categories - reification is complete and their can be no class struggle . Thus from the point of view of pure theory the length of the working day is simply given and we examine the effects of variations in its length on the law of value . Pure theory can certainly take note of the fact that class struggle is likely to play an important role in the historical determination of a working day of a particular length, but it does not step outside its level of analysis to carry on the historical analysis of such struggles . Paradoxically, by allowing reification to complete itself and thus theoretically suppressing class struggle, we benefit by gaining a theory that can be a great aid in our studies of class struggle .

Sekine has demonstrated that the theory of a purely capitalist society can be constructed as a rigourous dialectic with a necessary beginning, unfolding, and closure . This is an extremely important contribution not only because it clarifies the inner logic of capitalism, but also because the dialectic of capital is a concrete theory which is both materialist and dialectical . The dialectic of capital, then, clarifies the meaning of `dialectical materialism .' The starting point of the dialectic of capital is the commodityform with its basic contradiction between value and use-value . The dialectic progresses by allowing the motion of value to overcome successive use-value obstacles . The dialectic of capital divides into three main actions or `doctrines': The Doctrine of Circulation, The Doctrine of Production, and The Doctrine of Distribution . In the Doctrine of Circulation commodity, money, and capital are examined as circulation forms without reference to their substantive content . In the Doctrine of Production commodity, money, and capital, as circulation forms are shown to be the phenomenal forms of an underlying labour and production process . All societies must have a labour and production process, but when this is integrated with the commodity-economic principle (or market principle) of

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the circulation forms, a specifically capitalist production process is formed . Key to understanding this integration is the commodification of labour power and the economic processes that maintain this commodification . In the Doctrine of Production we investigate the capital-labour relation that forms the substantive base of the capitalist mode of production . In order to clearly grasp this relationship we must assume that capital and labour are homogeneous . In the Doctrine of Distribution we show that capital can maintain its unity while differentiating itself and reaching a modus vivendi with alien elements . Capital is now grasped as a heterogeneity unified by the rate of profit; so that technical differentiation requires price categories, to reach a modus vivendi with landed property requires the theory of rent ; finally capital's functional specialization requires the theories of commercial capital and interest-bearing capital . With the category of interest, capital itself becomes a commodity and the dialectic achieves closure . 9

The Labour Theory of Value

Marx's introduction of the labour theory of value in Chapter One of Capital has perhaps been the most serious source of confusion in the entire theory of capital . The work of Uno and Sekine demonstrate that the labour theory of value can only be firmly grounded in the dialectic of capital after the circulation forms and their logic have subsumed the production process. The premature introduction of the labour theory of value confuses both the meaning of the doctrine of production and of the doctine of circulation . Here Marx unwittingly violates his own stricture . In a letter to Engels defending postponing the treatment of the transformation of values into prices until Volume III, Marx writes: `If I were to cut short all such doubts in advance I would spoil the whole method of dialectical expostion ."I By treating the labour theory of value in advance of its proper location according to the method of dialectical exposition, that is by introducing it in the theory of circulation instead of in the theory of production, the meaning of the labour theory of value is confused, its theoretical grounding is severely weakened, and the method of dialectical presentation is spoiled . In Capital, Volume I, Chapter I , Marx argues that in order for two commodities to be exchangeable they must contain some common property or substance that makes them equatable . By process of elimination, Marx concludes that they have only one property in common - that of being products of labour . Having argued this, he must introduce the distinction between abstract and concrete labour, skilled and unskilled labour, and finally the concept of socially necessary labour time. But in this context none of these concepts can be properly theoretically grounded . The labour theory of value is thus vulnerable to attack and has been rejected by

Japanese contribution many economists from Bohm-Bawerk to Steedman . Instead of demonstrating the necessity of the labour theory of value, Marx simply posits it . It is thus very easy for BohmBawerk to put forward another theory : namely, that what two commodities have in common that makes them exchangeable is utility. Or it is possible for Steedman to argue that the labour theory of value stands as an obstacle in the way of an adequate theory for determining prices and profits. Neither of these arguments would hold any weight were the labour theory of value presented in Capital more dialectically rigorous . Uno and Sekine correct this weakness by demonstrating the necessity of the labour theory of value to the dialectic of capital . The Doctrine of Circulation, which begins the dialectic of capital, only reveals the inner logic of the circulation forms or the operation of the form of value . Thus capital first appears as the circulation form M-C-M and is in the first instance method of using money to make more money." It is only in the Doctrine of Production, after the circulation forms have subsumed the production process, that we can arrive at an adequate conception of the capitalist production process . First and foremost a capitalist production process requires the commodification of labour-power, because only then can capital produce any commodity whatsoever in accord with social requirements . According to Sekine `Just as Money measures the value of all commodities because it can buy any commodity regardless of its use-value, labour forms value because it can produce any commodity indifferently to its use-value . 72 In all economies there must be some more or less efficient allocation of the total social labour time to produce the goods or commodities required by society . In capitalism it is the commodity-economic principle that allocates total social labour so that only that amount that is socially necessary is applied to the production of each type of commodity . It is through the exchange of commodities that social labour is allocated in socially necessary amounts and it is the law of value that regulates the exchange of products so that in a state of equilibrium no labour is wasted . If too much labour relative to social demand is devoted to a particular branch of industry, then that does not count as part of the total value forming and augmenting labour . In this way, social demand acts as a passive constraint on value formation . Many interpreters of Marx fail to fully appreciate the role of demand in value theory ." The Doctrine of Circulation can only generate the form of value ; the substance of value or the labour theory of value must be developed in the context of the Doctrine of Production. The Doctrine of Production shows how the labour-and-production process common to all societies operates, under capitalism, according to commodity-economic logic. The only real social cost in

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164 any economy is labour. In order to be viable, capitalism must be able to reproduce itself by channeling total social labour efficiently to meet social demand . Human labour is always abstract as opposed to the labour of bees, for example, in the sense that it is not pre-programmed and can produce many different things . But this quality of abstractness is only perfected under the regime of capital, where labour is used by capital to produce any commodity whatsoever with total indifference to its use-value . It is this indifference which enables capital to move in response to price changes so as to insure that only the amount of labour that is socially necessary is devoted to the production of each type of commodity. In short, it is the perfection of labour's abstractness in a purely capitalist society that makes the labour theory of value hold.

The Transformation Problem

The difficulty in mathematically transforming value magnitudes into price magnitudes has been the Achilles heel of Marx's Capital, with the result that both friends and enemies of Marxism have often abandoned value categories . It has been argued that value categories are at best irrelevant and at worst obstacles blocking the advance of economic science . Uno and Sekine point out that values do not present any insurmountable difficulties to the theory of price determination of the dialectical nature of the theory of capital is kept in mind . Because many interpreters have been trained in the positivist or empiricist tradition, they fail to grasp the dialectical logic of Capital. Marx himself helps these interpreters by not being explicit enough about his dialectical method or rigorous enough in his presentation of the dialectic of capital. Because Marx continually gives quantitative examples to illustrate value relations, he gives the impression that a system of value quantities exists quite independently of the system of price quantities and that the price system must be derived mathematically from the value system . This impression is wrong. In a dialectic the movement from one level of abstraction to another may be considered a `conversion' or `transformation' . Thus in the doctrine of circulation the commodity-form is `transformed' into the money-form, which is `converted' into the capital-form . The reason why value categories are used exclusively in Volumes I and II is that the motion of commodities and money is being examined from the point of view of the workers versus capitalists production relation . At this stage of the dialectic, both capital and labour are treated as homogeneous so that the basic production relation can be examined in its purity. As we move through the dialectic, value becomes ever more concrete, or, what is the same thing, ever more capitalistically specified . In Volume III value reaches its most concrete expression

Japanese contribution in the form of market prices, which converge upon market production prices . It is only at this point that value expresses itself in a quantitative form that approaches the actual process in the market of a purely capitalist society. In order to reach this point, values must be modified to fully account for the price effects of the actual technical diversity of capital and for the price effects of supply and demand, This degree of concreteness in use-value production can be suspended earlier in the dialectic because it has no place at a level of abstraction that is exploring the necessary connections between circulation forms and between circulation forms and basic production relations . In a dialectic the sequence of categories is a necessary sequence so that a more concrete category cannot be posited before its time has arrived - all categories necessary for its full understanding must already have been derived and the step to the more concrete category must be shown to be a necessary step . Thus the quantitative expression ofvalues earlier in the dialectic must not be read to represent some independently determined quantitiative system, but rather to simply be more theoretically abstract or more theoretically primitive representations of price where the technical differentiation of capital has not yet been introduced and the captialist market is held implicit. The basic confusion, then, around the `transformation problem' comes from seeing the dialectical movement from one level of abstraction to another or what amounts to a conceptual transformation as a mathematical transformation . According to Uno and Sekine, a society is viable `if and only if the direct producers have a guaranteed access to the product of their necessary labour."I When it comes to calculating prices this fundamental necessity of viability constitutes the basic constraint on the captalist market that constitutes the direct role of the law of value in constraining price formation . According to the basic constraint `the money value of wage goods currently produced must not differ from the money value of labour-power presently employed; for if this condition were violated for long, labour-power would not remain as a commodity and the capitalist market would be deprived of its own foundation ."' Value categories grasp the reified social relation or the workers-versus-capitalist relation that is the foundation of the capitalist mode of production, while price categories conceptualize the thing-to-thing relation among commodites in the capitalist market as if value categories did not exist. The determining of prices as if values did not exist is made possible by reification, and the conclusion made by some economists that therefore values are irrrelevant is one example of what Marx calls `fetishism of commodities .' According to Sekine, prices are calculated from technical data and the basic constraint and not from values . But since

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there is a determinate relation between prices and values, once prices are determined values are as well . The transformation of values into prices is basically a conceptual movement from a more abstract to a more concrete level of analysis, but once having made this move, prices and values are simultaneously determined quantitatively by technical data and the basic constraint . We do not transform mathematically the value system into the price system or the price system into the value system, rather the two systems are quantitatively determined simultaneously . 16 The relation between value and price is still not completely specified with the determination of production prices . Production prices explain prices from the standpoint of technical differences between different branches of industry . But there may also be technical differences within an industry, and the determination of the technique that determines price requires the theory of market value . The market value of a commodity is not necessarily equal to the quantity of labour actually expended even in equilibrium on its production, but is equal to the quantity of labour that `society in its capacity of consumer' is obliged to spend for the marginal production of that commodity ." According to this doctrine then, it is the social labour necessary for its marginal production that determines the market value of a commodity and the market production price is determined by the technique that supplies the marginal commodity . According to supply and demand conditions and technical factors it may be the more productive or less productive technique that supplies the marginal commodity . With the formation of market production prices we have a situation where only that labour which is socially necessary is devoted to the production of all commodities .

Sraffian Marxism

Ever since Bohm-Bawerk some people have argued that it is not possible to mathematically derive prices from values and that therefore Marx's value theory is at best unnecessary and at worst metaphysical or in some sense mystifying . Though such attacks have often come from bourgeois economists, recently such arguments have come from Marxists themselves . Sraffian Marxists in particular have gained a following and appear to be totally convinced of the correctness of their position . Referring to the work of Sraffa and Garegnani, Marco Lippi states : `We owe to these authors the complete and definitive solution of the problem of prices in the theory of Marx and of the classical economists."' Steedman writes : `The Sraffa-based critique of Marx cannot be met head on and rationally rejected, for the simple reason that it is correct ."' Or Steedman again : `Some Marxist economists will, of

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course, be reluctant to concede the irrelevance of the `labour theory of value', but it is now generally recognized that the demonstration of that irrelevance is logically impeccable . . . ' 20 Hodgson uses Kuhn's theory of scientific revolutions to picture those Marxists who still cling to the labour theory of value as `normal scientists' still clinging to the old `paradigm' very much as some clung to the Ptolemaic view of the universe in the face of the Copernican revolution." The self-confidence of the Sraffian Marxists seems to be based on a supposedly rigorous theory of price determination . Generally they have done well in the debate with orthodox Marxists because orthodox Marxists have held too closely to the text of Capital instead of immersing themselves in the logic of capital . As a result, some orthodox Marxists have been caught up in fruitless attempts to solve the transformation problem mathematically while others have retreated to philosophical defences of the labour theory of value, having been driven from the terrain of economic theory by the Sraffians . 22 And yet the orthodox Marxists are much closer to the truth than the Sraffians and have correct instincts in coming to the defence of the labour theory of value . The power of the Sraffians is the power of mathematics and formal models. The problem is that their theory of price determination is not a theory of capitalist prices, their understanding of the law of value is entirely inadequate, and their approach completely undermines Marxian social science . The Sraffians are far too ready to abandon value categories in favour of their formal theory of price determination . Instead of trying to correct the flaws in Marx's formulation of the law of value, they play up the flaws and reject the theory altogether. They fetishize the theory of price determination so that the inadequacy of Marx's Capital on this score is sufficient cause to reject value theory altogether . Their project is to try to reconstruct Marxian economics by grafting a sociology of exploitation onto a Sraffian theory of price determination. But this approach completely conflates the logical and the historical while destroying the inner coherence of the dialectic of capital . The strength of the dialectic of capital is that it conceptualizes the thing-to-thing relations of the capitalist market as objectified social relations . The dialectic of capital is objective because it theorizes social relations that are not simply intersubjective but are reified or objectified by being subsumed to the motion of commodities . If we restrict economic theory to commodity-as-thing, we can produce formally rigorous mathematical models but it is no longer clear how they relate to the substance of socio-economic life . If social relations are not reified, it is possible to construct a sociology of exploitation using analytic

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constructs in the mode of Weber, but such an approach is fundamentally subjective and can at best yield conjectures. The falling apart of the material and the social undermines the possibilities of an objective social science ; and in its place yields formalistic economics and subjectivist sociology . Unfortunately this is the trend of Sraffian Marxists ; their tendency is to abandon any effort to theorize the necessary inner connections of the capitalist mode of production in favour of a formally `correct' model of prices and profits attached to a sociology of exploitation .

Theory of market value as a solution for value theory

In a recent article, Sekine demonstrates that problems posed for the labour theory of value by choice of technique, heterogeneous labour (the problem of skilled labour), and joint production can all be solved by an adequate development of the theory of market value, which Marx left in an unfinished and unsatisfactory state . 23 Sekine also points out some of the difficulties of Sraffian formalism. Some Sraffians have relied upon Steedman's article `Positive Profits with Negative Surplus Value' to argue that value categories are not just futile but error-laden . 24 But Sekine argues convincingly that the technology upon which Steedman bases his argument cannot be capitalistically operated . From the point of view of capitalism, Steedman's technology is economically meaningless, so that his mathematically correct proof proves nothing about capitalism, or about value categories . 25 Besides failing to see the dialectical logic of the theory of capital, the major error of the Sraffians is to give the value system no other significance than as a quantitative base for deriving prices and profits. But value categories rigorously theorize the necessary inner connections of pure capitalism that must underlie the capitalist market and thus lay the institutional base and modus operandi for deriving a specifically capitalist theory of prices and profits . In the Dialectic of Capital Tom Sekine argues that all transformation theories that following von Bortkiewicz try to solve `price equations by means of the physical wage-rate or . . . the commodity-complex which forms the real wage-rate are invalid .' 26 This includes Morishima, whose effort to arrive at a 'labour-feeding input coefficient' amounts to reducing the consumption of workers to a technology as if `capitalism possesses an unseen agency that prescribes the physical wage-rate' like a medicine ."' This also includes von Neumann and the Sraffians, for whom the reproduction of workers is no different from the reproduction of horses and cows . Sekine aptly calls this method ofwage determination `the fodder method,' and argues that such a technological reduction of workers' consumption, though mathematically neat, produces a fundamental distortion of how capitalism operates and therefore

Japanese contribution produces false production prices based on a fixed basket of wagegoods. In capitalism the reproduction of labour-power is achieved by individual consumption outside the production process . The reproduction of labour power cannot therefore be collapsed into the production process . `Capitalism possesses no Stalinist authority prescribing the consumption-basket."" The law of value must preserve the basic capital/labour relation despite the complete freedom of each worker to buy wage-goods . This is why Sekine's theory of price determination uses the `basic constraint' as opposed to the fodder method. This is also why the Sraffans, who reduce the reproduction of labour power to the reproduction of cattle, arrive at prices of production that are capitalistically meaningless . For suppose indeed that all workers are paid the physical wage . That would mean that every week they are forced to convert their money wage into, say, fifty cigarettes whether they smoke or do not, a bottle of vodka whether they drink or not, a lipstick and two razor blades whether they are male or female, some school supplies and a box of disposable diapers regardless of the age of their children, etc . . . . Even if this were the case in the first instance, the existance of the free capitalist market would surely not prevent the workers from actively retrading their commodities among themselves in an effort to achieve a more satisfactory assortment of consumable goods . In that process, however, not only must the prices of wage-goods but also the rate of profit and through it all other prices must change from those that would prevail in the absence of retrading . What then is the point of studiously calculating false production-prices first on the Bortkiewiczian assumption of a fixed complex of wage-goods, only to discover that real production prices deviate not only from values but also from false production prices . 29 From the point of view of the operating principles of capitalism the Sraffan theory produces false production prices. An extended Mathematical demonstration of this is contained in Sekine's

Dialeaic of Capital .1-Besides producing wrong production prices, the fodder method also makes it impossible to generate an economically rigorous notion of exploitation . This is because, according to the fodder method, there is no reason to limit exploitation to living labour-power since animals and machines can also be exploited . Exploitation then becomes a totally meaningless concept . This explains why Marxian Sraffians who want to maintain the concept `exploitation' must resort to sociology to supplement their formalistic economic theory . The result of this is a price theory that in substance is wrong, supplemented by a sociolgy of exploitation

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which, lacking any grounding in the objectified economic relations of capitalism, must necessarily be Weberian and subjectivist . This amounts to a total impoverishment of the Marxian theoretical project.

Crisis theory

Crisis theory is another area of marxian economics where there has been a good deal of debate, and where inadequacies in Marx's formulations have led some interpreters to abandon Marx's theory of crisis. Uno and Sekine have important contributions to make in firming up Marx's theory of crisis . To begin with, it must be understood that it is somewhat artificial to speak of Marx's theory of crisis as if it were a separate theory, since in a sense all three volumes of Capital constitute Marx's `crisis theory .' Crisis theory, then, is an anlytical separation of certain elements from the dialectic of capital for the sake of focusing on this special issue . With this important qualification, I shall proceed to discuss Uno and Sekine's dialectical reconstruction of Marxian crisis theory . It is often stated that the periodic crisis of capitalism most fully exposes the contradictions of the capitalist mode of production . Now, to review the discussion so far, the basic contradiction of the dialectic of capital is between value and use-value or in other words, between the commodity-economic principle and the concrete requirements of real economic life . The dialectic of capital moves from the abstract to the concrete by value 'overcoming' successive use-value constraints in order to secure within its own motion the basis for its continuing existence and expansion . The use-value that offers the most resistence to commodification is labour-power and at the same time the commodification of labourpower is the most important foundation of the capitalist mode of production, since it is this commodity that secures for capital the basis of value expansion within its own motion . And, because labour power cannot be capitalistically reproduced in response to increased demand, the law of value must be supplemented by the law of surplus population in order to ensure the continued reproduction of this key commodity . Because of the central importance of labour-power and the difficulty in securing its continued reproduction as a commodity, we would expect the contradictions of capitalism and particularly capitalist crisis to centre around the commodification of labour-power . The continued commodification of labour power is only secured through periodic crisis produced by the joint operation of the law of value and law of population . It its `widening phase of accumulation,' capital can expand by expanding production on a given technological base thus avoiding expensive new investments in fixed capital . This phase is typically without the large advances in

Japanese contribution productivity that come with new labour-saving technology so that as capital expands more and more workers are needed until the reservoir of surplus population tends to dry up. At this point wages rise reducing the rate of profit and with it investment outlets . At the same time as capital expansion slows, the wage bill places pressure on loanable funds to that the interest rate goes up . The lack of productive investment outlets fuels speculative pressures which maintain artificially high prices and interest rates . As the interest rate rises and the profit rate falls a point is reached where new investment is not worthwhile and capital contraction occurs with a vengeance leading to a sharp reduction in economic activity with accompanying bankruptcies, unemployment, and excess capacity . In the trough of depression, wages and prices fall and excess capital is destroyed. Severe competition between firms leads to a massive reorganization of capital involving centralization and the introduction of new more productive technology (Uno refers to this as the `deepening phase of accumulation'). As a result the surplus population is replenished and a new value relation is established between capital and labour that serves as the basis for a new widening phase of accumulation. This account of crisis differs from Marx in clearly centering the theory of crisis on the law of surplus population and the renewal of fixed capital consequent on revolutions in the methods of production. Capital could in principle continue to accumulate without periodic crisis but for the difficulty of securing the commodification of labour power and the `lumpiness' of technological innovation and fixed capital investment. According to Sekine, fixed capital has two aspects ; it is firstly a reproducible means of production, and secondly, it is a temporarily irreproducible means of production comparable to land." This is because no firm can afford to abandon a major investment in fixed capital that is supposed to depreciate in 10 years after only 2 years even if a much more productive technique has been discovered and introduced by a few firms . Disequilibriums that occur between capitalistically produced commodities can generally be overcome by the price mechanism . The basic source of disequilibrium that underlies capitalist crisis must be related to commodities that the price mechanism cannot so easily regulate . These two commodities are labour-power and fixed capital, and it is precisely the difficulties in the regulating of these two commodities by the price mechanism that calls forth periodic crisis . The approach of Uno and Sekine is more radical than Marx in firmly rooting the necessity of crisis in the process of accumulaton prior to any discussion of the falling rate of profit and by demonstrating the periodic radical change in production techniques that must take place to secure the continued availability of labour-power as a commodity .

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Marx relies too heavily on the rate of profit alone and does not root his discussion of the declining rate of profit in the alternate widening and deepening phases of accumulation so that it becomes easy to treat the rate of profit formally and argue that it has no tendency to fall . When the theory of crisis is not firmly rooted in the law of surplus population it is easy for formalists to argue that the rate of profit has no more tendency to fall than to rise . 32 According to Sekine, the law of the falling rate of profit holds in a purely capitalist society because the higher the organic composition of capital, the more difficult it is for increases in the rate of surplus value to offset the rising organic composition of capital . To be more precise, the higher the organic composition of capital, the less effective is the rise in relative surplus value during the deepening phase in offsetting the rise in organic composition of capital . Marx's discussion of counter tendencies to the falling rate of profit is another point of confusion because most of the counter tendencies that he mentions do not even belong to the level of analysis that we are concerned with . The only counter tendency that logically stems from the accumulation of capital as such is the tendency for the rate of surplus value to rise due to an increase in the production of relative surplus value . Countertendencies such as foreign trade or pushing wages below the value of labour power cannot be part of the theory of a purely capitalist society . Foreign trade cannot be a countertendency because in a purely capitalist society there are no boundaries and hence there is no distinction between domestic trade and foreign trade . The depression of wages below the value of labour power also cannot be a countertendency to a long-run tendency like the declining rate of profit because in general, capitalism cannot survive if wages are depressed below the value of labour power for very long. As Sekine puts it, `workers must receive real wages just enough to reproduce their labour-power, neither more nor less, because in either case its supply diminishes ."' In a purely capitalist society, all exchanges are quid pro quo, so that such an unequal exchange could only be a short-run phenomenon that occurs in the trough of a depression and is counterbalanced by wages above the value of labour-power during the period of prosperity preceding the depression . In the long run, wages must approximate the value of labour-power, so the depression of wages cannot be considered a countertendency at this level of theory. The issue of countertendencies again brings up the issue of the relation betwen the logical and the historical . Much of the discussion of crisis theory has been seriously hampered by confusions around this issue . 34 The levels of analysis approach of Uno and Sekine can help resolve many of the confusions . The theory of crisis that is developed by the dialectic of capital for a purely

Japanese contribution

capitalist society cannot be directly applied to the current crisis since we do not live in a purely capitalist society . The capitalism that we live in today is in fact far removed from pure capitalism . Though pure theory cannot be directly applied to the current conjuncture, an understanding of pure capitalism can help us to sort out what is happening today . Insofar as the state manages the reproduction of labour-power and the circulation of money and credit, labour-power and money have become decommodified . It seems as though the current crisis cannot be rigorously theorized in value categories; and yet value categories can help us sort out the empirical situation and understand its structural necessities and range of possibilities . The debates between various schools of crisis theory such as underconsumption, declining rate of profit, disproportionality, profit squeeze, etc ., at the level of a purely capitalist society, are often confused with considerations of which one best explains the current conjuncture or which one is the least reformist in the current conjuncture . But these are very separate issues and should not be thrown together . Crisis theory must be modified depending on the level of analysis . Thus in the stage of imperialism part of the function that crisis performs for pure capitalism is performed by imperialist war . Crises in the stages of mercantilism, liberalism, and imperialism must be very different, and at the level of historical analysis a particular crisis may display all sorts of peculiarities . If the contemporary economy is becoming rather rapidly decommodified (ie less market-governed), then to that extent it represents capitalism in a state of dissolution . Of course, closely connected to the decommodification, is the growing manipulation of the economy by monopolies and the state . The current crisis cannot be grasped as a direct manifestation of the theory of crisis embedded in the theory of a purely capitalist society . Pure theory can provide an orientation and clues about what to look at, but a great deal of historical and conjunctural material is necessary to understand our present crisis . Furthermore, given the extent of political manipulation of contemporary economic life, any theory that purports to explain the current crisis in purely economic terms must be inadequate .

Over much of its history Marxian thought has suffered from an economism that is too ready to reduce capitalist history to being a function of the law of value . In recent years, the reaction against this tendency has lead to the equal and opposite errors of voluntarism and subjectivism - the error of abandoning the objective guide that the law of value offers to our research and strategy .

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Thinkers such as E.P . Thompson abandon the law ofvalue because they think it tries to impose rigid boxes on the flow of class struggle . Hindess and Hirst abandon the law of value in the name of epistemological scepticism and nominalism. The Sraf cans abandon the law of value in the name of a `logically impeccable' theory of price determination . In my view, the work of Uno and Sekine makes it possible to not only defend the law of value against all of these attacks, but to finely establish its place as the foundation of marxian social science while avoiding the pitfalls of economism and voluntarism. After carefully studying the work of Uno and Sekine, it is still possible to reject the law of value, but then one must be aware that what is being rejected is a theory that rigourously sets forth the necessary inner connections of the capitalist mode of production - a theory that is perhaps the strongest theory ever to be produced in the social sciences . In our struggle for socialism we cannot afford to ignore the guidance offered by the best that Marxiam social science has to offer .

Notes and References

1. So far the only text by Uno available in English is Principles of Political Economy: Theory of a Purely Capitalist Society (Sussex : Harvester Press, 1980) . Thomas Sekine has a number of texts available in English . His immensely important Dialectic of Capital is a completed manuscript without a publisher. He translated and contributed an important methodological essay to Uno's Principles. Sekine has also written : 'Uni-Riron: A Japanese Contribution to Marian Political Economy,' Journal of Economic Literature, XII, 1975; `The Necessity of the Law of Value,' Science and Society, Fall, '80; `The Circular Motion of Capital,' Science and Society, Fall, '81 ; `The Law of Market-Value', Science and Society, Winter, '82-3 . Also Makoto Itoh has written a number of articles and a book, Value and Crisis (New York : Monthly Review, 1980) . 2. Uno's original Principles was published in two volumes in Japanese in 1950. The `new' Principles were a condensed and revised version firt published in 1964, and now available since 1980 as Uno's only work translated into English . 3. This article is a condensed version of a chapter of a book soon to be completed which deals with the full scope of contributions that the Uno approach can make to Marxist theory. 4. K. Marx, Capital Vol. X, (Progress Publishers, Moscow) p . 831 . Ibid. Vol . II, p. 108-9 . 5. 6. `Intrinsically, it is not a question of the higher or lower degree of development of the social antagonisms that result from the natural laws of capitalist production . It is a question of these laws themselves, of these tendencies working with iron necessity towards inevitable results .' Ibid., Vol . I, p . 19 . 7. E .P. Thompson, The Poverty of Theory and Other Essays, (Monthly Review Press, New York) 1978, p .153 .



Japanese contribution 8. Kozo Uno, Types of Economic Policies Under Capitalism, (Unpublished, partially translated manuscript .) This is all worked out in great detail in Sekine, Dialectic of Capital 9. (unpublished manuscript) . 10 . Marx and Engels, Selected Correspondence p . 179. Though Marx is partially aware of the `method of dialectic exposition,' the three volumes of Capital lack explicit and full self-consciousness of the dialectical method . 11 . Uno, p. 14. 12 . Sekine, Dialectic of Capital Vol .1, p. 242 . 13 . The failure to understand the role of demand as a passive constraint in value formation leads to an overly productivist and technological conception of the labour theory of value . This conception which is characteristic of Neo-Ricardianism is basically wrong . Uno and Sekine fully grasp the role of demand in value formation, but they are not the only ones who do so. For example, see Rosdolsky, The Making of Marx's Capital, (London, Pluto Press, 1977), pp . 88-95 . 14 . Sekine, Dialectic of Capital, Volume I, p. 201 . 15 . Sekine, Dialectic of Capital, Volume II, p. 3 . 16 . Sekine, Dialectic of Capital, Volume II, p. 62 . 17 . Sekine, Dialectic of Capital, Volume II, p. 129 . 18 . M . Lippi, Value and Naturalism in Marx, p . XX . 19 . Steedman, MarxAfterSraffa, p . 25 . 20 . Steedman, Value Controversy, p . 11 . 21 . Ibid., p. 98. For an effort to solve the transformation problem mathematically 22 . see Saikh, "Marx's Theory of Value and the Transformation Problem" in Schwartz, The Subtle Anatomy of Capitalism (Santa Monica, Calif: Goodyear Press, 1977) . A good example of a philosophical defence of Marx's value theory can be found in G . Pilling, Marx's `Capital' (London: RKP, 1980) . 23 . Sekine, `The Law of Market Value,' in Science and Society, Winter 1982-82, pp. 420-444. 24 . I . Steedman, `Positive Profits with Negative Surplus Value,' Economic journal 1975 pp . 114-123 . This article is used to support arguments by Sraffian Marxists in Value Controversy . 25 . Sekine, `The Law of Market Value,' p . 432-3 . 26 . Sekine, Dialectic of Capital Volume II, p. 110. 27 . Sekine, Dialectic of Capital Volume II, p. 104. 28 . Sekine, Dialectic of Capital Volume II, p. 104. 29 . Sekine, Dialectic of Capital Volume II, p. 104. A briefer version is in `The Law of Market Value' in Science of 30 . Society, Winter '81-83 . 31 . Sekine, The Dialectic of Capital, Volume I p. 401 . 32 . Hodgson's piece in New Left Review 84 is a good example of the position that argues that the rate of profit has no more tendency to rise than to fall . Itoh notes in Value and Crisis that a long run tendency like the falling rate of profit can not explain the periodicity of crisis (p . 127). In Capital and Exploitation Weeks realizes that the theory of crisis must be rooted in the theory of accumulation and can not depend entirely on the falling rate of profit taken by itself, and he also sees that it must have something to do with fixed capital . But this analysis runs aground because he fails to grasp the widening and deepening phases of accumulation and instead sees a continual investment in fixed capital and technical change that must devalue

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the old fixed capital so that `The crisis was caused by the fall in the rate of profit, resulting from the implicit devaluation of means of production by technical change' (p. 212) . But this conceptualization of crisis is inadequate so that he falls back on formulations that sound good but are actually quite empty such as: 'Crisis result from the uneven development of capital . . . capital as a whole comes into conflict with the mutual interaction of its decentralized parts' (p . 214). 33 . Sekine,'Uno-Rim', p . 864 . 34. In Class, Crisis and the State, Wright takes the first steps towards relating crisis theory to the stages of capitalist development. These are steps in the right direction, but his periodisation of capitalist development is not vigorously posed or convincing, and at the level of stage theory political factors must be accounted for . Thus though it is accurate to argue that in the stage of imperialism capitalist crisis becomes more underconsumptionist, one has to go beyond this and investigate how crises themselves change in this stage and how their inability to solve certain problems solved by crisis in pure theory builds pressures towards imperialist war. Wright inadvertantly falls into the economism of the logicalhistorical method when he tries to smooth the debate between the various interpretations of crisis theory by saying that the falling rate of profit theory is most applicable to the mid-nineteenth century, underconsumptionism is more applicable to the stage of imperialism, and profit-squeeze is most applicable to the post-World War II period . This kind of application of economic models directly on history produces economism, and he still avoids answering the question of which account of crisis best fits the theory of a purely capitalist society . Also he really doesn't consider the possibility that the fundamental nature of crises may change in different stages of capitalist development.

Radical Science 14 features essays arguing that : 1 E .P . Thompson's theory of 'exterminism' disarms the anti-nuclear movement . I Nuclear 'safety' procedures enhance managerial control over workers . 1 NATO's re-armament primarily structures imperialist rivalries between the USA and Europe . I The nuclear export market makes no distinction i between the 'peaceful atom' and nuclear weapons . y 1 India's 'independent' nuclear programme increases '!°* the country's foreign dependence . I I The UK Atomic Energy Authority has bought 1 legitimacy for nuclear power at London's Science I Museum. 1 It also includes news, reviews, letters and listings . Price : £51$8 . MI i 1W

back numbers 5-13 still available . Price : £2/S5 each.

Also

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BOOKS RECEIVED Molefe Pheto And Night Fell. Memoirs of apolitical prisoner in South Africa. Allison & Busby. 1983 £8 .95 . ISBN 0 85031 524 7 Judith Arcana. Every Mother's Son . The role of mothers in the making of men . Women's Press. 1983 £4 .95 . ISBN 0 7043 39161 Ed . M. Sawyer & K . Schott . Socialist EconomicReview. 1983 Merlin Press £5 .95 ISBN 08 5036 3020 Jeff Hearn. Birth andAfterbirth . A materialist account . Achilles Heel . 1983 £1 .50 ISBN 0 9508733 06 Ed . Sue Cartledge &Joanna Ryan . Sex and Love. Women's Press £4.95 ISBN 0 7043 3913 7 Malcolm Chalmers . The Cost of Britain's Defence . School of Peace Studies . Bradford University £1 .50 ISBN 0 85283 210 9 QueenSpark Rates Book Group . Brighton on the Rocks. Monetarism and the Local State. QueenSpark . £3 .95 . ISBN 904733 00 4 Ed. Michael Burawoy & Theda Skocpol. Marxist Enquiries : Studies of Labour, Class &States. University of Chicago Press . $12 .50 M J . Cooley. The New Technology - Social Impacts and Human CenteredAlternatives. Open University Technology Policy Group 1983 £2 .00 . W .A. Suchting. Marx: An Introduction . Wheatsheaf. 1983 £5 .95 ISBN 0 7108 0297 8 Joseph Melling. Rent Strikes. Peoples StruggleforHousing in West Scotland 1890-1916 . Polygon Books. Edinburgh . £5 .95 . ISBN 0 904919 72 2 . Gerard C . Mooney . The State, Housing and the Reserve Army of Labour: Glasgow 1850-1939. CURR University of Glasgow 1983 . ISSN 0263 1075

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Telos a quarterly journal of radical thought Issue No . 55 Spring 1983 SPECIAL ISSUE ON FRENCH SOCIALISM Articles: COHEN : The Problem of French Socialism LIPIETZ: Which Social Forces are for Change? JULLIARD : Mitterrand PORTELLI : The French Socialist Party BONGIOVANNI : The French Communist Party SHRYOCK: The CFDT MOTHE : Democracy at the Workplace? CARO UX: De-centralization? PAQUOT: Nationalizations? KESSELMAN: The General's Revenge ZUKIN: Deindustrialization GONZALES : Gaullism with a Human Face? RAULET: The Agony of Marxism

Notes and Commentary : TOURAINE : State and Social Forces in France BIRNBAUM : All is Calm LEFORT: French-style Socialism ROSANVALLON : Social Corporatism FOUCAULT : On Post-Structuralism : An Interview GORZ: The Reconquest of Time GORZ: On Self-Management: An Interview VIVERET, HASSNER: On French Foreign Policy MOISI : On French Military Policy Subscriptions cost 520 per year for individuals ; S40 for institutions . Foreign orders add 10 percent . Checks must be in U .S . funds . No Canadian checks can be accepted . Back issues prior to No . 50 cost $5 .00 each ; No . 50 and subsequent issues

are $5 .50 each . Institutions pay $10 .00 each for all back issues. For a lull list of available back issues and to subscribe, write : Telos, Box 3111, St . Louis, MO 63130 USA .

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