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Nigel Harris

Deindustrialisation

(Winter 1980)

From International Socialism 2:7, Winter 1980, pp. 72–81.
Transcribed by Marven James Scott.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

A spectre is haunting the treasuries of the advanced capitalist countries. It is not yet, regrettably, the spectre of proletarian revolution, but of the obsolescence of capitalism itself, or rather of its great productive engine, industry. In Britain, the trend is known as ‘deindustrialization’. Elsewhere, less alarmed commentators speak glibly of the advent of ‘post industrial society’; but the scale of the problem is revealed in some of the recent figures:

In West Germany’s case, the full decline in these four years is concealed by the fact that the total German labour force was simultaneously declining – by 600,000 – so that the absolute loss of jobs in industry is a full 913,000, larger than any other Common Market country. In sum, the European Economic Community has lost 2.5 million jobs in industry, and gained 3 million in services (since the labour force has been increasing faster than the small increase in jobs in most of these countries, there has been a simultaneous increase in unemployment).

Changes taking place in four years of world slump would not necessarily indicate a structural decline in industry. For that, we would need a longer period of time. Comparing the past record for the major capitalist powers with 1975–76, what is the picture?

Three countries expanded the size of the manufacturing labour force:

1. Japan. Manufacturing workers in Japan reached a total of 8.5 million in 1957 (or roughly the same as the peak in Britain, 8.6 million in 1961), 10.1 million in 1961 and 13.5 million in 1975. As a proportion of the Japanese labour force, these three years recorded: 19.8%; 22.5%; and 25.8% (that is, still below the British proportion of 1976: 30%).
    
2. West Germany reached 8.4 million in 1958, 9 million in 1961, and then declined very slightly to 8.9 million in 1975. As a proportion of the German labour force in these three years, the figures are: 33.4%; 34.7%; and 35.9% (these figures are for manufacturing employment; in earlier ones were for industrial employment, so the two are not comparable).
    
3. Italy, a late starter in the advanced capitalist league, increased its manufacturing labour force from 5.5 million in 1961 to 6.1 million in 1975; the proportions were respectively, 27.7 and 32.6%.

Of the rest of the advanced capitalist countries, most experienced decline:

1. Belgium’s peak manufacturing employment – 1.2 million – came in 1965, and from there it declined slightly to 1.1 million in 1975. The proportion declined more sharply, from 33.9 to 30.1%.
    
2. France peaked at 5.9 million in 1974, and then began a slow decline; as a proportion, from 28.1 to 27.9%.
    
3. Holland reached its largest manufacturing employment in 1965, at 1.2 million, and then declined slightly to 1.1 million in 1975; from 28.2 to 24%.
    
4. Sweden’s highpoint, 1.2 million, came in 1965, followed by a slight decline to 1975,1.1 million; from 32.4 to 28%.
    
5. The United States manufacturing jobs increased from 22 million in 1961 to 26.7 million in 1973, thereafter tending to decline – from 32.5% to 31.6%, and in 1975, 29%.

On the latest figures, it seems that West Germany and Italy have also joined the downward trend.

Rising labour productivity, however, can ensure that while manufacturing employment declines both absolutely and relatively, the value of manufacturing output is frequently increasing. For example, the value of manufacturing output as a proportion of Gross Domestic Product increased in Belgium from 31.4% (1965) to 34.5% (1975); in Holland in the same period, from 39.1 to 41.8%. In the United Sates, by contrast, the proportion fell from between 27 and 29% in much of the 1960s to 26% in 1975.

* * *

What are the reasons for the decline? It is difficult to separate the effects of at least four processes taking place: changes in the relationship between ‘productive’ and ancillary labour; the effects of world slump from 1973–4, with particularly severe effects on heavy industry (steel, coal, shipbuilding, heavy engineering etc.); the relative obsolescence of existing core industries, and the relocation of manufacturing areas geographically; the increasing centralization of the system. To take these elements in turn:

The relative decline of productive employment – while labour productivity increases – has massive implications for agitational work against the system, but none for the system as a whole in economic terms. Much of what is called “unproductive labour” is vital in making possible “productive labour”, and much of productive labour produces waste. The relationship between the two fluctuates constantly, and a relative decline throughout the world system in and of itself has no particular significance, it constitutes a redistribution of activities within the working class, part of efforts to increase the rate of exploitation, and, for us, a hint of the promise of the mastery of labour in the system.

The world slump has had the most dramatic effects on old heavy industry. Increased competition for a stagnating market has threatened all marginal producers, kept alive where they have survived by protection and subsidies from the local State on a purely temporary basis. The devastation of the Western steel industry is well known, from the closures in Alsace Lorraine, the threats in Benelux, Sweden, in Britain and the Indiana-Ohio area of the States; the same is also familiar in the massive destruction of shipbuilding. The job losses in ‘manufacturing’ have been most marked in this area. The key geographical regions present a similar picture. Take for example the old heartland of German capitalism, the Ruhr. Since 1966, 400,000 jobs have lost been in the region, 330,000 people have left the region, and still the regional unemployment rate is double the national average.

Capitalism is a system that, in its process of change, effects areas very differently. Thus, the transition from the industrial core of the late nineteenth century (textiles, iron and steel, coal, shipbuilding etc.) to that of the period after the second World War (vehicles, light engineering, petrochemicals) was also a shift in location. In Britain, it involved a shift from the old industrial centres in the north-east, the north-west, Scotland and northern Ireland, to the West Midlands and the South East. The system follows the same principles as that involved in open cast mining or a plague of locusts – the devastation of an area takes place for a given period, then industry moves on. Now, it is said, the postwar core of industry is increasingly obsolete. Those areas dependent upon this set of industries will increasingly decline: this is the death sentence for the old West Midlands, based upon vehicles and engineering. The process in Britain is complicated by the decline of light manufacturing in the urban areas, producing another phenomenon, the “inner city crisis”.

New areas, it is proposed, will generate the next core of industries to push the system forward. In the United States, the decline in the north east (and now also the north) is contrasted to the developments in California in the west, and the explosive growth in the south, Texas and Georgia among others. The core industries proposed are already well known, electronic products, petrochemical products, marine biology products etc. It is not usually mentioned in this connection that the last major transition of the system, from 1914 to 1945, involved mass unemployment, Nazism in Germany, two World Wars and various other ‘transitional factors’.

Most of the last three factors are presented frequently by commentators on the question. There is however another element that gives meaning to all three, the differential effects of slump and structural change on the leading competitors. The different degrees of ‘deindustrialization’ on different countries reflects the savagery with which the world competitive struggle is now being fought. Implicit in deindustrialization is an increased centralization of the system, increased dominance and control by a smaller and smaller group of powers. The hysteria arises, not from some common process, but because of the unequal distribution of the process between countries, so that some advanced capitalist countries are being shoved out of the competition.

Changes in the share of exports of the twelve leading manufacturing exporters – not the most accurate guide – gives us some crude index of this centralization process. Three countries – the United States, Japan and West Germany – had a combined share of these exports of about 38% in 1952; by 1970, they held 50%, and on average, 52% between 1972 and 1977. the United States is one of the countries in relative decline in manufacturing terms, and this is partly reflected in the export figures. West Germany’s share of the exports of the twelve leading manufacturing countries increased from 15% in the early 1960s to over 20% in the mid-70s. Japan expanded from 9% to over 15%, while the United States declined from 22 to 16% (Britain, incidentally, with a share very close to the United States in 1950, 26%, declined to 16% in 1960 and between 8 and 9% in the mid 70s). While there is much talk of some backward countries securing the part of world manufacturing, in this, the top league, there is no room for them to compete except on the margins.

* * *

Before looking at Britain in greater detail, it is useful to note in passing not only the common decline in manufacturing employment, but also the general rise in the size of the labour force and in the service sector. The most important factor in the increase has been the entry of married women to the labour force. In Britain, the female labour force increased from 2.7 million in 1951, to 5 million in 1966, 5.8 million in 1971 and 6.7 million in 1976. Between 1971 and 1976, years registering the impact of major crisis in the world system, the British male labour force declined by 123,000 while the female labour force increased by 786,000.

Figures for the main advanced capitalist countries show a general increase in women’s employment, and particularly for the employment of married women (with the notable exception of Japan):

The trend is also marked in the participation rate of women in the main reproductive years. The participation rate for married women in their twenties is between 50 and 60% in the main industrialized countries (for Britain, the figures in the mid-70s were 59–60% for the 20 to 24 years of age group, and 49% for the 25 to 29 years of age group). [1]

The reasons for this remarkable expansion are not at all self-evident, but the increased supply of women workers accounts for a major part of the expansion of the labour force and its redistribution. Possibly, the adult male wage has been steadily declining relative to the rising family costs of the reproduction of fewer children at competitively higher standards, and this may have been a powerful factor in expelling an increasing proportion of married women from household work. The ending of immigration and the decline of hours worked – in Britain, from an actual average of 46.3 hours in 1951 to 43.2 in 1971 and 42.6 in 1976 would have meant that, even without changes in productivity or fluctuation in activity, an increased number of workers would be required to produced the same output. The impact of slump, from 1973-74, seems to have increased the number of married women entering work as if to try and keep up household income at a time when stagnating or declining real male wages, unemployment and an increasing tax “bite” from gross pay were affecting incomes.

Married women were also induced to work by a remarkable expansion in traditional “female jobs” at, of course, lower rates of pay – in community, social and personal services (employing around 41% of all employed women); in wholesale and retail trades, hotels and restaurants (21% of all employed women). [2] The work is frequently part time – part time work increased in, for example, Britain to reach about 17% of all jobs in 1975 (in terms of employed women, some 40.1% work in part time jobs). In all cases, the pay is frequently so low, that relatively high rates of unemployment coincide with high rates of unfilled vacancies, as we can see at the moment in the dispute over the lack of catering staff to provide midday meals in schools. Considerable scarcities of labour exist in skilled or semi-skilled sectors of “female employment” – nurses, typists, sewing machinists, catering staff etc. ... In some of these cases, pay is so low it does not induce a supply of workers of the required skills; the pay is low in part from a general narrowing of skilled pay differentials, the effects of incomes policy in holding down skill differentials and the weak organizational power of the workers concerned.

Put crudely then, the expansion of “welfare” sectors, services, has partly compensated for the decline in manufacturing employment and has constituted a shift between male and female employment (but since the increase in the supply of women workers has been higher than the creation of jobs, female unemployment rates are often still above male rates). The change is so widespread in the advanced capitalist countries, it implies a common structural shift and a change in both the role of women (and the significance of the family) – independently of whatever brand of political rhetoric governs the local State.

* * *

Britain shows a much more exaggerated form of the general trend of deindustrialization, and it is this which underlies the sporadic hysteria of the British ruling class – the relative decline in the capacity to compete of this bit of the world system. In this sense, the terrors of deindustrialization are not at all new, but link to the growing obsession with survival that has dominated the British ruling class since the mid-1950s. For much of this period, the immediate preoccupation has been with the balance of payments, but for essentially the same reasons.

British manufacturing employment fell from 8.6 million in 1961 (36% of total employment) to 7.4 million in 1976 (or 30.1 %). Manufacturing was not at all the sole loser. If we compare average employment figures between 1961 and 1966 (to eliminate short term variations) with those for 1976, the break down of declining job sectors was as follows:

Thus, while the proportionate decline in manufacturing was not at all the worst – that position is held by the mines, followed by agriculture – its absolute size is more than half of the total job loss. At the same time, other sectors generated a larger number of jobs:

The net addition of jobs was 104,000, far too small to take up the expansion of the labour force, even if we could assume that sixty year old miners or toolmakers could convert to being Social Security clerical staff.

Simplifying the figures, we can see a net shift between manufacturing and professional and scientific; between 1961 and 1976, the first declined by 1.3 million, the second increased by 1.5 million; between 1971 and 1976, to put it another way, ‘production industries’ lost just over half a million jobs, and ‘other industries’ put on just under a million. The changes reflect an overall tendency for British capitalism to become converted to a servicing centre in the world system. Given British capitalism’s consistently higher orientation to foreign financial activities, it could be argued that at long last Lenin’s Bondholder State is emerging.

What are the reasons for the industrial decline? Since at least the mid 1950s, British capitalism has apparently had a consistent tendency for profit rates in domestic industry to be low relative to its nearest rivals. [3] Immediately after the second World War, only British and US industry remained intact, and profit rates were high in supplying the devastated rivals in Europe and, for the US, Japan. The returns to British capitalism were not used to renovate the old depreciated stock, or at least not on the scale adequate to compete with the leading overseas rivals. Some went abroad, some into services, and an important chunk into the very substantial military spending Programme. Defence spending was – when added to the much larger US programme – vital for the stabilization of world capitalism, and served the external purposes of British imperialism, but its effect on British manufacturing was disastrous.

The cumulative effect of a sustained failure to invest is at the heart of the growing crisis of British capitalism. By now, the British workforce is, relative to the workforce in other advanced capitalist countries, required to work increasingly hard, for longer hours for lower pay, and, because of the relatively low capital per worker, at disastrously low levels of productivity: at some 40% below the levels of Germany and France in manufacturing in the mid-1970s.

Low profit rates induce poor investment performances. Since the early 1950s, both British and US capitalism have had the lowest rates of investment of the advanced capitalist countries. The US level hovered around 17 to 18% (investment as a proportion of Gross Domestic Production) in the 1960s, declining to 15% in 1975. Britain’s 15% rate in the 1960s rose very slightly to 18% in 1975. Most recently, Italy’s former rates of around 22% have declined to 18%. Compare these proportions to West Germany’s 25 to 27% (although by the mid 1970s, the German rate had declined to 23%) or the spectacular performance of Japan, rising from 24% in 1960 to 37% (1973), and still hovering around 32%.

British employers have annually created the lowest level of gross fixed capital per head of the population (but Britain has been overtaken over the past decade by Italy). Gross fixed capital formation per worker in manufacturing has run at about a quarter of the US figures and a third of its other nearest rivals.

All elements of the central strategy of British capitalism have become subordinated to this question, which in its turn flows from the past structure of British imperialism. Thus, the programme of scientific and technology research has been wilfully twisted to defence questions, producing far fewer innovations for civil industry to develop. Government finance, the major part of research and development spending, has been directed to improve aircraft, particular military prototypes, to aero-space and military electronics; that is, the British ruling class has endeavoured to compete with the leading rivals in the system, the US and the Soviet Union, but with nothing like the industrial base to support such activities. By contrast, the much lower levels of Research and Development spending in West Germany have been devoted heavily to civil industry; as a result, the value per ton weight of German machinery exports is about double that of Britain. Expenditure on training workers has followed the same direction, so that now Britain has one of the lowest rates of participation in full time education in the 16 to 18 years old group. The numbers completing engineering apprenticeships fell by one third in the 1970s.

But the most dramatic and recurring demonstration of the incapacity of British industrial capitalism to compete with its rivals is the external balance of trade. When British capitalism expands, imports rise much more sharply than exports – that is, British industrial capacity cannot meet home demand, nor can it export enough to cover the cost of imports. This produced throughout the 1950s and 1960s the familiar lurching of ‘Stop-Go’, a mild expansion, followed by a payments crisis and the braking of expansion. The payments problem is just as severe now in trade terms but masked by the arrival of oil exports.

Take four key sectors of manufacturing, at the heart of the engineering industry. By 1976, imports took – of the domestic market – 53% in instrument engineering, 32% of electrical engineering, 42% of shipbuilding and marine engineering, and 31% of vehicle production. In the case of vehicles, the downward trend has been very long in the making and very rapid in its final results. 4.5% of the domestic market was taken by imports in 1963, 11.5% in 1970, and now – nearly 60%. In fact, exports now are limited in the main to a narrow range of luxury cars and the internal transactions of multinationals (General Motors, Ford, Chrysler-Citroen). Only a couple of years ago, car component manufacturers consoled themselves that, for every £1 of assembled car imports, there were £2 of car component exports. In the first half of 1979, however, for the first time, the exports of cars and components failed to cover the deficit on the import of vehicles (£210 millions).

The high value of sterling acted as the final straw. In textiles, the trade deficit has nearly doubled, in the past year. Chemicals, which recorded massive export surpluses In the 1960s, is now threatened with massive imports. Finally, services themselves have begun to show signs of weakness as well.

The balance between imports and exports is not the most accurate index of the performance of British capitalism. The structure of informal State controls, domestic monopolies, public subsidies (whether direct or through tax concessions, credit terms etc.) changes any simple reading of the meaning of the trade balance. To a greater or lesser extent, all advanced capitalist countries cheat the spirit of the formal rules of international trade to push up exports, robbing the domestic population to subsidise foreign buyers. So that as imports have ‘invaded’ Britain so British manufacturing sold abroad has risen from 15% in 1966 to 19% in 1971 and 22% in 1974. In the case of the four engineering sectors mentioned earlier, they are also the sectors with highest share of output going to exports – 55% for instrument engineering, 37% for electrical engineering, 34% for shipbuilding and marine engineering, and 44% for vehicle production. In addition, 45% of mechanical engineering output is exported. But the total value of exports does not rise as rapidly as the value of imports nonetheless.

* * *

The ‘deindustrialization’ thesis is thus indeed a cause for hysteria, particularly for that segment of capitalism operating in Britain that is stuck with Britain as a source of its profits. For the world system, however, there is not going to be any sort of self-liquidation of capitalism by slow decline.

The hysteria is under careful control in Deindustrialization, [4] a set of conference papers published by the National Institute of Economic and Social Research. Some of the country’s leading economists take a cool look at the process, providing a wealth of most valuable information. [5] However, while some of the authors are effectively able to demolish some of the arguments about what the causes of the process are, there is no general diagnosis, no analysis showing what the Government should or can do. It is understandable. Many of the authors have been advisers to successive governments, and no doubt have the bruises to show for it: the problem is far more intractable than can be tackled by governments anxious to survive politically.

Evidence is available in the book to indicate that Mrs Thatcher’s simple assault on ‘public expenditure’ is largely irrelevant to the core problem, whatever it may do to stiffen the social power of the State. Between 1960 and 1975, public sector employment increased 5.5%, most of the increase being expanded local authority jobs, particularly in health and education. If we combine the figures for employment in housing, education, National Health Service and Social Security, the increase in the proportion of public sector jobs in these sectors rose from 16.4% (1960) to 22.4% (1970) and 27% (1975) – that is, the most rapid increase came during the Heath Government. But the absolute figures involved are relatively small, and even smaller if compared to employment in comparable sectors in Britain’s leading rivals. In practice, Mrs Thatcher will not do much to lower public spending, but rather to redistribute it towards police and defence and lower real wages to finance what is left. The central aim is political rather than tackling the problems of British capitalism’s survival.

The hysteria that periodically infects the ruling class has its most useful effects for the nationalist Left of the Labour and Communist parties. The argument that British capitalists have failed British capitalism could evoke considerable response in the coming period, and the data in this book, as also in the work of the Cambridge economists who are here represented, would seem to back it up. If only the Left can be permitted to run this bit of the system, British capitalism can be made to work. The argument has credibility only so long as one does not probe the figures too deeply. Once one does, then the scale of obsolescence can be seen to be so gigantic that much more than a reformist government will be required to change it. The Cambridge CEPG estimates that, to restore British capitalism to a competitive position, would require a 50% increase in manufacturing investment over the past trend rate, sustained for at least ten years. That would require the complete destruction of the trade union movement (or, the same thing, its complete incorporation into the State), the radical reduction of the welfare-education segments of the State, and still a sharp cut in real wages. For that, the nationalist Left would need a police State.

For us, the figures show the scale of the mess, the necessarily bitter and harsh struggles ahead, and how the issues of reform disappear for the ruling class into the question of its very survival. Britain, like Italy, is in a relatively unique position. It is one of the big capitalist economies, yet it is necessarily being strangled by the world crisis. Because of the crisis, its nearest rivals can afford little in the way of help, even though the decline of such large bits of the system jeopardizes the position of the whole ruling order of the world. We are among the ‘weak links’ in the chain. Our task is not to concentrate on the single link, but to see the British crisis as the crisis of capitalism itself: the only solutions lie in the destruction of the world system.

Notes

1. The increase in the employment of married women has pushed up the figures for women’s participation (as a per cent of the labour force) to a high of 46.8% n Finland and a low of 27.5% in Greece (among the countries of the OECD). Britain and the US have a common range of 38–39%.

2. The expansion by sector can also be seen in the occupational distribution – the expansion of traditional women’s occupations – clerks, typists, nurses, health care workers, teachers, child care workers, social workers, cleaning and household service workers, sales clerks, etc.

3. Gross rates of return (gross property income as a proportion of total or tangible assets or ‘gross capital stock’) have been consistently low in Britain, as also in recent years in Sweden and Italy. In the 1970s, British rates declined from 3.6 to 2.0% (1975), Sweden’s hovered around 5%, and Italy’s sank from 4.9 to 3.0%.

4. Deindustrialization, edited by Frank Blackaby, National Institute of Economic and Social Research and Heinemann, 1978.

5. Particularly the statistical annex, Deindustrialization in the UK: Background Statistics, by J.J.F. Brown and T.D. Sheriff, Discussion Paper No. 23 (mimeo), 1978.

 
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