New Issue, Lump of Labor, etc.

(1) 2010 Annual Labor Issue:  This year's annual labor issue has printed and will ship out today or tomorrow (so subscribers may actually get it just after Labor Day--first time in years!).  Yesterday I posted the table of contents (note the fabulous cover, designed by our intern Lauren Price, with Chinese translation help from our business intern William Cao), plus one of the feature articles, The Assault on Labor in Cananea. We had already posted Alejandro Reuss's article Same Output + Less Labor = Crisis?. Here's the editorial note for this issue:

Workers at the Mott’s applesauce plant in Williamstown, N.Y., are facing down attempted wage cuts and a pension freeze. But as D&S intern Elizabeth Murphy explains (p. 7), the parent company of Mott’s is awash in record profits. With only 300 workers, the strike is the smallest one we report on in this issue, but it is emblematic in the current U.S. economy, in which, as the New York Times reported recently, employers “are squeezing their employees to work the same amount for less money.”

Striking miners in Cananea, Mexico, face not only an adverse economic environment and a hostile employer, but also a neoliberal government that sent in strikebusting armed troops, as Lin Nelson and Anne Fischel report (p. 13). If the strike proves successful, it could be because of cross-border solidarity between the Mexican Mineros union and United Steelworkers in the face of repression.

Workers in China might seem to have it even worse off, judging from the recent string of suicides at the Foxconn factory where iPhones and other electronic devices are assembled. Yet a wave of strikes in the high-tech and auto sectors has led to remarkable concessions from employers, including 20% wage increases in some cases. As John Miller(p. 11) and Chris Tilly and Marie Kennedy (p. 19) discuss, wage increases have been possible not only because of economic conditions favorable to workers--namely, a labor shortage--but also because of sustained worker militancy. Ripple effects are already being felt in lower-skilled sectors. In Bangladesh, considered the low-wage alternative to China’s garment industry, labor activists have stepped up their own campaigns and have faced a government crackdown.

Meanwhile, closer to home, the company that printed Dollars & Sense for many years, Saltus Press--one of the only remaining union print shops in this part of the country--closed its doors just two weeks ago, with no advance notice for the 49 workers who lost their jobs. In our third feature in this issue, an update on Argentina’s recuperated businesses (p. 24), Elissa Dennis discusses a model that we wish the former Saltus workers could follow: workers taking control of production after management has run away, or run a company into the ground.

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(3) Speaking of Bangladesh, A review of D&S book The Economic Crisis Reader in The New Age, out of Dhaka, Bangladesh, by our friend Farooque Chowdhury (you need to scroll down on the linked page to find this review):

WORKING people are hardly prepared to face the present financial crisis, writes Dan La Botz. But they are now resisting. Their resistance to the assaults by capital is on the rise globally as corporations are using the crisis as a cover for laying off workers and restructuring labour markets through plant relocations and wage cuts.

Dan, who teaches history and Latin American studies at Miami University in Ohio, writes: "The working class does not have independent organizations with which it can fight for itself and for society at large". Labor unions in most countries have long been subordinated to capital and government, and have become thoroughly bureaucratic and unresponsive to workers' needs. In some places company and gangster unions dominate the scene, while in other countries the so-called unions are really state institutions created to control workers ("The Global Crisis and the World Labor Movement", The Economic Crisis Reader, Economic Affairs Bureau, Boston, 2009). But this has failed to eliminate the process of protest. Dan observes: "History suggests that from the onset of a depression to the beginning of a mass movement it may take years for the working class to absorb intellectually and emotionally what has happened to them and then finally assert their righteous indignation and begin to act."

Capitalism in the twenty-first century has "expanded, and its penetration of peoples, states, and regions of the world has deepened". [A]lmost everywhere the system has reduced government social welfare budgets and reorganized social welfare programs. In the course of these developments, capital has transformed its relationship to unions in the workplace and to labor parties in society" (ibid). But the transformation of the relationship could not transform the relationship between labour and capital. Capital's all out effort is to appropriate labour. "The fall of the Soviet Union and Eastern Europe opened up that region to private capitalist investment from the West. The collapse of the Soviet Union, China's evolution to a capitalist economy, and the opening up of India's economy have brought about what Thomas L. Friedman called "the great doubling" of the world capitalist labor force, adding 1.3 billion workers.

Read the rest of the review (again--you'll have to scroll down past Farooque's two more recent editorials--though those are well worth reading, given the labor unrest and crackdown in Bangladesh).

(3) The "lump of labor" fallacy:  Hat-tip to D&S collective member Bryan Snyder for passing along this piece by New Zealander Bryan Gould, from the New Zealand Herald:

That is why businessmen who have a good practical grasp of what it takes to run a business are often wide of the mark when it comes to making policy for a whole economy.

An economy, contrary to what is often asserted, is not like a business.

Particularly in down times, the measures that might be required in the interests of an individual business are the reverse of what is needed by the economy as a whole.

Cutting costs, deferring investment and laying off workers will help to balance a single set of business accounts but are the last thing that a whole economy needs if it is to avoid continued recession.

Good economic management may often seem counter-intuitive. A case in point is what economists call the "lump of labour" fallacy - the belief that there is a fixed amount of work available and that the task is to decide how that is to be shared out fairly.

The fallacy is alive and well in the minds of even experienced policymakers. We saw shades of it in the "nine-day fortnight" that emerged as a counter-recessionary strategy from last year's job summit.

The idea, which not surprisingly had little practical impact, was based on the notion that if a fixed amount of work could be shared out more jobs would be created, or at least saved.

By diverting attention from what was really required - a policy which would increase the number of jobs - it actually hindered the fight against unemployment.

The fallacy rears its head in other contexts as well. In the perennial debate in developed countries about immigration, one of the main arguments advanced against allowing an inflow of newcomers is that they will "take our jobs". There is little recognition of the real possibility that a controlled rate of immigration could create jobs and expand the economy.

There are, of course, many considerations in determining what are appropriate levels and kinds of immigration. But we would no doubt reach better decisions on matters such as this if we could free our minds of intuitive fallacies and look at the practical evidence.

The economic success of Hong Kong was helped greatly by the constant inflow over many years of (often illegal) immigration from across the Chinese border.

The "lump of labour" fallacy also underpins an important current debate in our own country. The stubborn refusal of comparatively high unemployment to melt away has again prompted discussion of what the Government could or should do to "create" jobs.

However, the suggestion that something could be done has been greeted - even by experienced commentators - with the objection that "the jobs just aren't there". And that means, it is said, that there is nothing the Government can do.

If that were really the case, of course, the Government's push to get people off benefits and into jobs would be futile. The jobs cannot both be non-existent for the purpose of getting unemployment down, yet there waiting for lazy beneficiaries to take up.

And while it is true that there are strict limits to how far (if at all) governments should go to try to create jobs, that is not the real issue. The reality is that the number of jobs in an economy is not a given but is a function of the level of demand and therefore of economic activity. The number of jobs falls in a recession and rises in better times.

If we want to recover from recession, we need policies that will stimulate demand and purchasing power so that people will buy what producers make and retailers can boost sales. And so that employers can see that it is worthwhile to take on more staff and more people earning good wages will keep the virtuous circle going - so that the government's finances benefit as well through a higher tax take.

There is no mystery about this. And the level of demand is largely determined by policy. A government that provides stimulus to the economy through maintaining or increasing its own levels of spending and investment, as the Australians did, can achieve a great deal in avoiding recession and fighting unemployment.

However, if the policy priority is to get the Government's (perfectly manageable) deficit down, the outcomes are clear. We may comply with good business practice by pleasing our bankers in the short term but our economy will be smaller, unemployment will be higher and the recession longer.

If we want to please our bankers in the longer term, we should be growing the proportion of our resources devoted to production and exports. That will not be achieved by allowing a prolonged recession to close down parts of our productive capacity.

* Bryan Gould is a former vice-chancellor of the University of Waikato and member of the House of Commons.

--Chris Sturr