Jobless reindustrialisation: down and out in Detroit and Turin

The consensus of the UK's three main political parties of the need to 'rebalance' the economy fails to acknowledge the paradoxes of modern systems of production. Aaron Peters examines how the global processes of mechanisation and outsourcing have together made impotent the possibility of recovery via 'reindustrialisation'. 

Aaron Bastani
9 May 2012

One of the persisting ideas that even now continues to unify all three major parties in the UK is the desire to 'rebalance' the economy. Such a view ignores increasingly mechanised production processes and a correlative decrease in both the volume and intensity of labour required within production. These conditions lead to the paradox of the modern global economy - ever greater production and ever fewer jobs. An age of unprecedented surplus and goods in circulation, matched by the increasing inability of ever-larger populations to consume such surplus. This is the heart of the 'secular' crisis and, whether there is state-led intervention or not, it is a crisis that remains without answer.

BBC Newsnight recently offered some germane analysis on the state of the US car industry and the current travails of its two largest automotive manufacturers - General Motors and Chrysler - in light of unprecedented state intervention since 2008.  The programme was clear to isolate how such intervention represented a break with previous orthodoxy in the US and how the decision made four years ago, in the early days of the Obama administration, was more in keeping with traditionally European approaches of 'dirigisme' and state capitalist industrial policy. Paul Mason speculated that the potential success of the bailout may compel others, particularly in the European Union, to pursue a similar path. It may also emerge as a more accepted model of US industrial policy for what was a previously sceptical American public and political class. It is after all - the viewer is informed - at times of crisis that new and previously unthinkable models emerge, are imitated, and where once anathemas quickly become established orthodoxy.

While Mason’s report focused on how the US automobile industry has recovered consequent to what he terms the Federal government’s 'one-off foray into industrial activism', the story neglected to mention the role of FIAT within the particular ‘foray’ into Chrysler. More importantly there was no comparison between how Chrysler and FIAT have both sought to maintain competitiveness within an increasingly fierce global automotive market during the last several decades: particularly since the global financial crisis of 2008.

The FIAT 'Solution' 2000-2011

Unlike Chrysler, FIAT has always looked beyond domestic shores both for export markets and points of assembly and manufacture. After the Second World War it became a key player in developing motor industries for a number of countries particularly in Eastern Europe, Spain, Egypt, Ethiopia and Turkey. At the time of writing the majority of FIAT Auto production occurs outside Italy, with the only modern assembly plant that produces the main FIAT brand within the country based in Cassino.

The remaining six Italian-based assembly sites are almost entirely for luxury car production and the manufacture of FIAT’s high value brands - Ferrari, Maserati, Lancia and Alfa Romeo. Subsequently the production and assembly lines of the high-volume, core FIAT products are based abroad, primarily in Brazil, Argentina, Poland and Mexico.

While FIAT is performing well at present it was not forever thus. After major company problems that came to a head at the beginning of the decade, FIAT losses fell steadily after 2002. By late 2005 the company posted its first profit in 17 quarters with a further profit of €196m for the first 9 months of 2006. Despite a major setback during 2008/9, as was the case for every major automotive manufacturer, FIAT's return to strength continued unabated soon thereafter with it posting a profit of €179m in 2010.

The ‘recovery’ of FIAT during the last decade has however been based on an increasingly smaller number of vehicles being manufactured in Italy. This meant that by 2011 Italy produced 790,000 cars (90% of which were FIAT) - not even enough for its own domestic market of 2 million. In 1971 Italy was producing 1.8 million cars, a figure that remained steady until 2000. Since then, however, one sees a massive shift of production away from Italy, primarily to Latin America and Central Europe.

This has been part of a particularly focused strategy. In 2002 FIAT cut 20% of its Italian workforce and in 2009 CEO Sergio Marchionne warned that 60,000 domestic jobs might be lost as result of declining sales in light of the global financial crisis. Eventually the restructuring was akin to that seen in 2002 with FIATs strategic plan for 2010-2014 outlining that some 5,000 Italian jobs would be lost, this representing 15 percent of Italian FIAT workers employed on assembly line production.

The Chrysler 'solution'? (Re)industrialising doesn’t mean jobs

All three major political parties in the United Kingdom remain in concordance as to their desire to ‘re-balance’ the economy. This invocation is shorthand for wanting greater production of goods instead of services and with such goods being produced for export, primarily in high-value areas. The hope is that in this re-balancing the UK can re-vivify growth as well as simaltaneously cutting the trade deficit and diversifying it’s economic base.

It is established orthodoxy however that ‘mature’ industries, such as the automotive industry, have a tendency to throw off labour whilst facilitating expanded levels of production without creating new jobs. This is due to the adaptation of labour-saving technology across lines and increased levels of automation. It has also meant heightened levels of outsourcing with employment in industrial production in the OECD subsequently squeezed by these twin processes since the late 1960s until the present day.

The truth is that the very idea that any country can ‘re-industrialise’ to any meaningful extent is fundamentally mistaken. Ultimately whether one chooses to pursue the route of FIAT, or the Obama administration with its state-led investment in Chrysler, there will be a very small number of new jobs actually ‘created’.

Thus it is a common misconception that the de-industrialisation of high-GDP countries such as the UK and the US can be blamed on the industrialisation of previously low-GDP countries such as China since the early 1970’s. Indeed between 1993 and 2006 China did not create any new jobs in manufacturing, with the total number of workers hovering constantly at around 110 million. This was in spite of the fact that the economy grew by over 300% in the period - with the country becoming a world leader in the manufacture and export of a vast array of products.

The number of people, as a percentage of the global population, engaged in industrial production has not increased since the early 1970s, with increased surplus and value since that period being the consequence of more efficient systems of production, automation and distribution - all of which minimise and will continue to minimise the total volume of human labour necessary to what will continue to be expanding production overall. The very nature of ‘(re)industrialising’  is to reduce to the bare minimum the human element within the production process, with greater investment being directed towards fixed as opposed to variable capital (wages). How precisely does this constitute a ‘plan’ for jobs?

The search for profit requires the cost of production to be as low as possible. That which has already been produced or used in order to produce - i.e. fixed capital such as buildings or robotics - can only transfer their own value. Therefore, the only variable that can be adjusted within this is the value of labour power and it is this value which must be reduced to its minimum. 

Capitalism overcomes this by lowering the value of labour power only in relation to the total value produced, thus passifying increased exploitation of labour with a far greater level of goods and services in circulation overall. This is made possible by rising productivity, the rationalisation of labour, and technical and scientific innovations. Eventually production is required to expand to enormous proportions in order to simply maintain the premises required for production at all.

In light of all these facts, the only way that the United States (or Italy for that matter) can have a domestic automotive industry that enjoys a larger share of the global market, is by either constantly automating a greater amount of previously ‘human’ labour, or having wages that compete with those countries outside the OECD such as China, Thailand and India: all of which will become increasingly competitive in the global automotive market.

The Future of Europe - Detroit or Turin?

The only way the ‘post-industrial’ economies of the OECD can ‘re-industrialise’ and have a larger export-oriented manufacturing sector (as they so often claim they want) is by either (a) having a ‘jobless’ process of re-industrialisation, an example of which is Chrysler’s loan from the US government to ‘retool’ and invest in competitive levels of automation and fixed capital or (b) overseeing a massive decrease in worker’s wages (variable capital) in order to compete with the labour markets of China and India.

With Chrysler the US has gone for the former, with the Federal Government giving a $6 billion loan to catalyse a process which means that the company, under Marchionne's tutelage, massively increases levels of automation and therefore employs as few people as possible. A bizarre situation which means the US federal government, when one includes all the costs including the writing off of Chrysler’s past debts, is paying hundred of thousands of dollars per job.

This may in part be a template for re-industrialisation in the OECD: giving state-backed credit to companies to invest in fixed capital and to increase levels of automation, and therefore efficiency, that is currently not present in Chinese or Indian factories, and therefore creating an advantage for OECD-based exporters. By neccessity, however, this would mean not only a jobless recovery but the analogous situation of jobless re-industrialisation.

Such a ‘solution’ would fail to deal with issues of growing unemployment and labour precarity - these being very much structural grievances which find their genesis in the late 1960s and reside at the very heart of the Post-Fordist precarity and massively increased (and still increasing) unemployment even amid a return to ‘Fordist’ forms of production. Furthermore, if increasing numbers of people are unable to earn a wage as a result of their continued exclusion from the production process, who will buy those goods produced?

Dirigisme or not there seems no forseeable solution to the 'secular' crisis. 

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