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Workers, unions, and the globalization of production


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Workers, unions, and the globalization of production structural and institutional challenges for organized labor in the United States
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Kohen, Matthew
University of South Florida
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Social structures of accumulation
Social relations of production
Political economy
Dissertations, Academic -- Political Science -- Masters -- USF
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ABSTRACT: In this thesis, I argue that the globalization of production has weakened the power and efficacy of labor unions in the United States. I describe the globalization of production as a set of transformations in both the institutional structure of the economy and in the organization of production, and discuss how these transformations have impacted workers and unions in the American economy. The theoretical framework I employ is the social structure of accumulation approach, which emphasizes the importance of the institutional structures of capitalist economies and how their interaction with forms of production organization and systems of labor control helps to determine levels of aggregate economic growth, the profit rates of individual firms, and the distribution of power, resources, and wealth among economic agents. I argue that the globalization of production involves the transition from the social structure of accumulation of segmentation to the globalized production^ social structure of accumulation, and the displacement of Fordist mass production by lean production as the dominant paradigm of production organization.Lean production and the globalized production social structure of accumulation involve a transformation in the relationship between firms, workers, and the state. The changing circumstances and economic conditions which these transformations have produced, and the failure of labor unions to understand, appreciate, and effectively respond to them, have been responsible for the rapid and sustained decline in the membership, power, and efficacy of organized labor in the United States. Through case studies on the automobile and clothing industries, I show how the way in which these transformations have materialized in the specific contexts of two industries with different competitive conditions, organizational structures, and levels of capital-intensity have produced very disparate and dissimilar outcomes for the workers in these indust ries.
Thesis (M.A.)--University of South Florida, 2006.
Includes bibliographical references.
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by Matthew Kohen.
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Workers, unions, and the globalization of production :
b structural and institutional challenges for organized labor in the United States
h [electronic resource] /
by Matthew Kohen.
[Tampa, Fla] :
University of South Florida,
3 520
ABSTRACT: In this thesis, I argue that the globalization of production has weakened the power and efficacy of labor unions in the United States. I describe the globalization of production as a set of transformations in both the institutional structure of the economy and in the organization of production, and discuss how these transformations have impacted workers and unions in the American economy. The theoretical framework I employ is the social structure of accumulation approach, which emphasizes the importance of the institutional structures of capitalist economies and how their interaction with forms of production organization and systems of labor control helps to determine levels of aggregate economic growth, the profit rates of individual firms, and the distribution of power, resources, and wealth among economic agents. I argue that the globalization of production involves the transition from the social structure of accumulation of segmentation to the globalized production^ social structure of accumulation, and the displacement of Fordist mass production by lean production as the dominant paradigm of production organization.Lean production and the globalized production social structure of accumulation involve a transformation in the relationship between firms, workers, and the state. The changing circumstances and economic conditions which these transformations have produced, and the failure of labor unions to understand, appreciate, and effectively respond to them, have been responsible for the rapid and sustained decline in the membership, power, and efficacy of organized labor in the United States. Through case studies on the automobile and clothing industries, I show how the way in which these transformations have materialized in the specific contexts of two industries with different competitive conditions, organizational structures, and levels of capital-intensity have produced very disparate and dissimilar outcomes for the workers in these indust ries.
Thesis (M.A.)--University of South Florida, 2006.
Includes bibliographical references.
Text (Electronic thesis) in PDF format.
System requirements: World Wide Web browser and PDF reader.
Mode of access: World Wide Web.
Title from PDF of title page.
Document formatted into pages; contains 200 pages.
Adviser: Michael M. Amen, Ph.D.
Social structures of accumulation.
Social relations of production.
Political economy.
Dissertations, Academic
x Political Science
t USF Electronic Theses and Dissertations.
4 856


Workers, Unions, and the Globalization of Production: Structural and Institutiona l Challenges for Organized Labor in the United States by Matthew Kohen A thesis submitted in partial fulfillment of the requirements for the degree of Master of Arts Department of Political Science College of Arts and Sciences University of South Florida Major Professor: Michael M. Amen, Ph.D. M. Scott Solomon, Ph.D. Harry E. Vanden, Ph.D. Date of Approval: June 22, 2006 Keywords: social structures of accu mulation, social relations of production, deunionization, political economy, post-Fordism Copyright 2006, Matthew Kohen


i TABLE OF CONTENTS List of Tables iii List of Figures iv Abstract v I. Introduction: Globalization, Social St ructures, and the American Economy 1 Description of Theoretical Framew ork and Research Project 4 Outline of Chapters 8 II. Literature Review: The Globali zation of Production and Relationships Between Firms, States, and Workers in the Economy 10 Essential Characteristics of the Globalization of Production 11 The National Economy and the Spatial Reconfiguration of Production 14 Employment and the Globa lization of Production 20 Implications for Labor Unions and State Regulation 26 III. Theoretical Framework: The Social St ructures of Accumulation Approach 34 Overview of the Social Structur es of Accumulation Approach 35 Organizational Paradigms and the Technological Base of the Economy 43 Relationship between Technology, Organi zational Paradigms, and SSAs 50 Social Structures of Accumu lation and Organized Labor 54 IV. From Segmentation to Globalized Production: The Rise and Fall of the Postwar SSA and the Capital-Labor Accord 59 The Second World War and the Consolidation of Segmentation 61 The Rise of Industrial Unionism and the Capital-Labor Accord 69 The Golden Age: Economic Benefits of Segmentation 80 The Decay of Segmentation: Crisis and Stagflation 84 V. The Consolidation of the Globa lized Production Social Structure of Accumulation: Structural Chal lenges for Organized Labor 91 The Globalized Production SSA 95 The Lean Production Paradigm 106 VI. The Automobile Industry: Functional Flexibility and Worker-Management Cooperation 121 The American Automobile I ndustry: Brief Overview 123 Changes at the Point of Production: The Toyota Production System 127


ii Changes in the Supply Chain: Just-inTime and Inter-Firm Networks 135 Implications for Workers and Unions 140 VII. The Clothing Industry: Numerical Flexibility, Intensif ication and Lean Retailing in the Textile-Appare l-Retail Commodity Chain 152 Overview of the Clothing Industry 154 Flexible Production in the Clothi ng Industry: Lean Retailing 159 Implications for Retail, Apparel and Textile Workers 168 VIII. Conclusion 178 Summary of Argument and Key Findings 179 Implications of Findings for Public Policy, Unions, and Researchers 184 References 190


iii LIST OF TABLES Table 1: Historical Timing of Soci al Structures of Accumulation 38 Table 2: Japanese Auto Transplants in the United States by Date Established 125


iv LIST OF FIGURES Figure 1: Technology, Production Organiza tion and Social Structures of Accumulation 49 Figure 2: Social Structures of Accumu lation and Associated Control Systems, Ideologies, Organizing Principles, Forms of Production Organization, and Techno-Economic Paradigms in U.S. History 55 Figure 3: U.S Monthly Un employment Rate, Janua ry 1948-December 1973 82 Figure 4: U.S Monthly Un employment Rate, Janua ry 1974-December 1994 86 Figure 5: U.S. Manufacturing Workers, Percent Union Members, 1983-2005 89 Figure 6: Annual Number of Work Stoppa ges Involving 1000 or More Workers, 1981-2005 89 Figure 7: The Automobile Industry Commodity Chain 124 Figure 8: Illustration of the C ontinuous Improvement Process 131 Figure 9: Automobile Industry Employment, 1958-2004 136 Figure 10: An Organizational Model of Process Control Unionism 151 Figure 11: A Model of the TextileApparel-Retail Commodity Chain 155 Figure 12: U.S. Retail Employment, 1974-2004 155 Figure 13: U.S. Textile and Appa rel Production Employment, 1958-2004 156 Figure 14: U.S. Department and Disc ount Stores: Percent Union Members, 19832005 169 Figure 15: U.S. Apparel, Textile, and F ootwear Production Indust ries: Percent Union Members, 1983-2005 172 Figure 16: Textile Cutting and Sewing Mach ine Operators, Percent Union Members 1983-2005 172


v WORKERS, UNIONS, AND THE GLOBALIZATION OF PRODUCTION: STRUCTURAL AND INSTITUTIONAL CHALLENGES FOR ORGANIZED LABOR IN THE UNITED STATES Matthew Kohen ABSTRACT In this thesis, I argue that the globaliza tion of production has weakened the power and efficacy of labor unions in the United States. I describe the globalization of production as a set of transformations in bot h the institutional st ructure of the economy and in the organization of production, and discuss how these transformations have impacted workers and unions in the Ameri can economy. The theoretical framework I employ is the social structure of accum ulation approach, which emphasizes the importance of the institutional structures of capitalist economie s and how their interaction with forms of production organization and syst ems of labor control helps to determine levels of aggregate economic growth, the pr ofit rates of individual firms, and the distribution of power, resources, and wealth among economic agents. I argue that the globalization of production involves the tran sition from the soci al structure of accumulation of segmentation to the globa lized production social structure of accumulation, and the displacement of Fordis t mass production by lean production as the dominant paradigm of production organization. Lean production and the globalized produc tion social structure of accumulation involve a transformation in the relationship between firms, work ers, and the state. The


vi changing circumstances and economic conditio ns which these transformations have produced, and the failure of labor unions to understand, appreciate, and effectively respond to them, have been responsible fo r the rapid and sustained decline in the membership, power, and efficacy of organized labor in the United States. Through case studies on the automobile and clothing industr ies, I show how the way in which these transformations have materialized in the specific contexts of two industries with different competitive conditions, organizational structur es, and levels of capital-intensity have produced very disparate and dissimilar outco mes for the workers in these industries.


1 I. INTRODUCTION: GLOBALIZATION, SOCIAL STRUCTURES AND THE AMERICAN ECONOMY The impact of globalization on the Amer ican economy is a subject which has consumed both academic and public debate in the recent years. Economic globalization has been characterized by the liberalization of trade restrictions and capital controls, the increasingly transnational character of economic activity, and growing international competition in nearly every industry and sector of the economy. Concerns over the rising inequality in the distribution of income, th e erosion of the domestic manufacturing base, the increasing permeability of national borders, the handcuffing of government regulatory instruments by global financial capital, the in creasingly ‘footloose’ nature of capital and the outsourcing of domestic j obs to low-wage locations abroad, and the increasingly insecure, contingent, and flexib le character of employment have been sounded against the constant assurances of pro-globalization poli ticians and economists that the free operation of market forces in a global economy will ev entually work to the benefit of everyone. Others assert that there is no turning back, no alternative, and that the only way for the American economy to remain prosperous is more trade liberalization, the only way for American workers and businesses to surviv e is to adapt and compete in the global economy.


2 Whatever its desirability, globalization has had an enor mous impact. Increasing levels of trade, investment, and migrati on have produced an extraordinary degree of global economic interdependence. Nati onal economies are becoming increasingly integrated into a single, unified globa l market, national borders are becoming increasingly irrelevant to the movement of goods, services, capital, and information, and workers in all countries now find themselves competing with one another to attract jobs and capital investments. At the heart of economic globalization is the globalization of production. Trade liberalization has not produced a world in wh ich separate national economies specialize in different products or industr ies and trade with one anothe r, as the classical economic doctrine of comparative advantage would predict. Instead, led by multinational corporations (MNCs) and orchestrated th rough foreign direct investment (FDI), outsourcing, and subcontracting arrangements production has shifted from an activity based in a national market and linked to other national markets through international trade, to a global activity based in the gl obal market. Networks of production span national borders and draw workers in dispar ate regions of the gl obe into integrated systems of procurement, production, and distri bution which flow above, beneath, outside, and around the various territorially-based nati onal regulatory systems. The relationship among firms, states, and workers in the global economy has undergone a qualitative transformation as a result. The consequences of the globalization of production have included the weakening of state regulatory powers, th e erosion of workers’ bargai ning power, a dramatic decline in the strength and membership of labor unions and growing income inequality. There is


3 growing consensus that some solution to these problems is desirable, but there is absolutely no sign of a consensus as to what that solution should be. Besides the problem of conflicting interests among di fferent segments of society and parties in the debate, a major reason for the inability to address the negative consequences of the globalization of production has been a failure to adequately understand the phenomenon itself. There is serious disagreement over whether the problem s associated with the globalization of production are the result of competition from producers in low-wage countries, the rapidly rising economic power of multinatio nal corporations, the transition to a postindustrial American economy based on serv ices and knowledge work rather than manufacturing, the increasing mobility of capital, or the absence of an effective international regulatory regime, to name just a few common explanations. In the absence of an adequate understanding of the nature of the problem, there can be no effective solution. This thesis is therefore an attemp t to provide an enhanced understanding of the transformations occurring in the American economy, in order to facilitate a more constructive debate over possible solutions to the problems and challenges which have resulted from the globalization of production.


4 DESCRIPTION OF THEORETICAL FRAMEWORK AND RESEARCH PROJECT My hypothesis is relatively simple: the globalization of production has weakened the power and efficacy of labor unions in the United States. My understanding of the globalization of production, however, is that it represents more than merely a geographical reconfiguration of economic activity. The globalization of production, rather, is symptomatic of changes in the or ganization of production as well as a larger transformation in the instituti onal structure of the American economy. I will argue that the operation of a capitalist econom y is the result of the in teraction among individual economic agents within a larger macro-inst itutional structure which regulates, delineates, influences and impinges upon the actions of th ese agents. The theoretical framework I shall employ is the social structure of accumulation approach. This approach emphasizes the importance of the institutional structures of capitalist economies and how their interaction with forms of production organiza tion and systems of labor control helps to determine levels of aggregate economic growt h, the profit rates of individual firms, and the distribution of power, resources, and wealth among economic agents (i.e. firms, workers, and the state). My basic argument is that the fate of indivi dual agents within the system is tied to changes in the organizat ion of production, which is related to the transformation of the macro-institutional stru cture of the economy. I will discuss this theoretical approach in greater depth in Chapter III. First, however, I will need to discuss the assumptions regarding pow er relations and the relati onship between structure and agency which will underpin my analysis. My understanding of the relationship between structure and agency is a constructivist one – that is, that social structur es are the product of collective human


5 action and rely on continued collective action for their existence, and that individual actions reinforce and reproduce these structures just as these structures encourage and reinforce certain individual ac tions. While individual agents are relatively free to choose their own courses of action in pursuit of their goals, the nature of the social structures within which they act will play a large part in determining the likelihood of success of the various courses of action pursued by individual agents. Furthe rmore, as these structures change, evolve, or are transformed, different courses of action will prove to be the most appropriate and sensible. In other words, an action which generates success under one social structure may generate failure in th e next. Therefore, while structures do not determine the behavior of individual agents, th ey construct incentiv es, assumptions, and expectations which pattern i ndividual behavior by rewardi ng certain types of behavior rather than others. Since social structures represent manife stations of collectiv e human action, they are subject to change through collective human action. Howeve r, the ability of individual agents to bring about changes in the struct ure is limited, and determined by their position within the various systems of power relations of society. Although individual agents, no matter how powerful, rarely possess the abilit y to single-handedly transform the social structure, the degree to which an individual agent is able to produce or influence changes in the social structure is gene rally related to the amount of po wer possessed by that agent. Therefore, in times of transformation from one social structure to another, it is powerful agents – whether they be politicians, the heads of corporations, labor leaders, or influential members of civil society – which have the greatest ability to help determine what final form the new structure will take. Thus, when I speak of the “construction” or


6 “creation” of social structur es, I generally am referring to the process by which social structures are formed through the interplay of different agents of varying degrees of power vying to realiz e a structure which will best serve their own (individual or collective) purposes. New social structures are “constructed” as (powerful) agents attempt to modify the conditions, terms or character of collective human interaction represented by the structure. As important as they are in shaping changes in social structures at the macro level of society, power relations are equally important at the micro level of individuals and organizations. In the specific case of the economy and the organization of production which I will expl ore, the property rights which give the owners of firms exclusive pr erogative to organize their productive and human resources is an important source of power which place s workers in a subordinate position in the employment relationship. Related to this is the idea of histori cal contingency, to which I will make frequent reference. Since social structures play a pa rt in determining the di stribution of power and resources in a society, the tran sition from one social struct ure to the next is heavily influenced by the power relations fash ioned by the former. The timing of a transformation is also important, since at di fferent points in time different agents may have different degrees of influence within the social structure. Furthermore, the specific historical conditions in which the creation of a new social structure takes place plays an important role in determining the ultimate form the social structure will take. The creation of a social structure, therefore, is heavily influenced both by the system of power relations constituted under its predecessor and on the specific historical timing of its construction. Once constructed, however, it tends to have permanence until sufficient


7 inertia is acquired to generate the degree of collective action necessary to transform it, an event which generally comes about only during a period of crisis. The significance of the historical contingency of social structures is that they are neither inevitable nor purely accidental creations, but rather the product of the very specific hist orical conditions and systems of power relations in which they are formed. In order to explore my hypothesis within this theoretical framework, I will undertake a qualitative analysis of change s taking place in the macro-institutional structure of the American economy and expl ore the relationship of these changes to transformations in the organization of production in two major industries – the automobile industry and the clothing industr y. I will attempt to show exactly how transformations in the social structure of accumulation and the organization of production (which, taken together, represen t what is referred to as th e globalization of production) have been responsible for the decline of organized labor in the United States.


8 OUTLINE OF CHAPTERS The following chapter will consist of a lite rature review which will provide an overview of the perspectives of variou s contemporary researchers regarding the importance and implications of the globalizat ion of production, in order to situate my thesis within this larger body of work. I will discuss issues re lated to the study and measurement of the globaliza tion of production, the relevance of the national economy as a unit of analysis, and transformations in th e employment relationshi p, and also introduce various arguments regarding the implicati ons of the globalization of production on organized labor and state regulation. Chapter III will provide a detailed explan ation of the theoretical framework which I will employ in this thesis, the social st ructure of accumulation approach to political economy. I will provide a brief overview a nd background of the social structure of accumulation approach, followed by my own synthesis of what I believe to be its most useful elements in order to provide a system atic explanation of th e relationship between technological innovation, produc tion organization, and social structures of accumulation. Chapter IV will discuss the social stru cture of accumulation which was dominant in the American economy from the Second World War until the 1970s, under which organized labor became an important and pow erful institution in United States. I will discuss the relationship between this social structure of accumulation, the Fordist mass production paradigm, and the evolution and inst itutionalization of th e specific form of unionism which became dominant in the United States during this period. This will provide a historical background to the crisis of the 1970s a nd the decline of organized


9 labor in the decades since, as well as pr oviding the basis for a comparative analysis between the former and current so cial structures of accumulation. Chapter V will discuss the evolution of the current social structure of accumulation. I will describe the core institutions of this social structure of accumulation and discuss their construction and consolidati on. I will also explor e the changes in the organization of production which have coincide d with the evolution of the new social structure of accumulation, and the implications of each for workers and unions in the American economy. In Chapters VI and VII, I will present case studies to explore the impact of the globalization of production on two specific industri es. Chapter VI will consist of a case study of the automobile industry. I will examin e in much greater detail how the transition to a new social structure of accumulation has been manifested in changes in the organization of production in this industry, and how these changes are impacting workers and organized labor. Chapter VII will consist of a case study of the clothing industry, or the textile-apparel-retail commodity chain. These two industries provide contrasting examples of different organizational strate gies being pursued in different industries characterized by different levels of tec hnologyand capital-intensiveness, and the different implications for workers and unions in each. In Chapter VIII I will offer a conclusion, in which I will offer a summary of my argument and findings. I will also include some remarks on the relevance of my thesis to public policy and union organizational strategies as well as the larger debate around the importance and impact of the globalization of production.


10 II. LITERATURE REVIEW: THE GLOBALIZATION OF PRODUCTION AND RELATIONSHIPS BETWEEN FIRMS, STATES, AND WORKERS IN THE ECONOMY In this chapter I will review the litera ture on the effects of the globalization of production on the relationships among firms, states, and workers in the global economy. This will provide an overview of the various points of view held by contemporary researchers regarding the importance and imp lications of the globalization of production, and help to situate my thesis within this larger body of work. I will discuss some of the key characteristics of the globalization of production in order to discount the argument that globalization can be underst ood as simply a quantitative in crease in levels of trade and economic interdependence. I will then di scuss the changing spat ial configuration of economic activity and whether the globaliza tion of production has rendered the nationstate obsolete as a unit of anal ysis in the global economy. Ne xt, I will describe the ways in which various authors claim the globa lization of production has affected the employment relationship. Fina lly, I will discuss several arguments related to the impact of the globalization of production on labor un ions and the regulatory apparatuses of states.


11 ESSENTIAL CHARACTERISTICS OF THE GLOBALIZATION OF PRODUCTION The globalization of production refers to a process by which the production of goods and services has been transformed from a geographically concentrated activity to one which is fragmented and dispersed within and across national bor ders. Most of the authors reviewed agree that this represents a fundamental restructuring of the world economy. Factors responsible for the globalization of produc tion are both political and technological, and include the liberalization of trade and investment controls as well as advancements in communication, trans portation, and information technologies. The globalization of production represents a qualitative shift in the nature of economic activity, from local production fo r local or national markets to global production networks serving global markets. It embodies a set of processes which seek to disembed production from national bases and construct an integrat ed global system of production. Globalized pr oduction therefore entails more than simply an increased level of international trade. Competition among th e exports of territorially-bound firms for shares of national markets falls short of what is meant here. The globalization of production, rather, involves the operation of functionally integr ated, geographically dispersed production networks oriented towards the global market. A major force behind the globalization of production has been the multinational corporation (MNC). Rapid t echnological advances in comm unication and transportation systems over the past few decades have made the management of geographically dispersed production networks more and more feasible. According to Held et al “MNCs have been at the forefront of those corporat ions exploiting new global infrastructures to organize international production within the firm itself,” (1999: 255). Although difficult


12 to directly measure, levels of MNC participation in globa l production networks can be estimated using data on flows of foreign di rect investment (FDI), sales of foreign affiliates, and levels of intrafirm trade (Held et al 1999: 246). Although MNCs play an important role in the globalization of production, many smaller firms are also highly integrated into global produc tion networks. Small firms often participate in globalized production through subcontracting arrange ments and joint ventures (Held et al 1999: 256). International economists typically study international economic activity in terms of aggregate national data, such as levels of imports and exports, GDP and GDP per capita. When studying the globa lization of production, or the global economy in which it is embedded, these statistics become wholly in adequate tools of analysis. For example, an ILO-sponsored study by Ajit K. Ghose ( 2003) sets out to assess the impact of globalization on jobs and incomes utilizing these sorts of indicators. Ghose defines globalization as “a process of integration of national markets into a global market,” (2003: 5). The key operational variable used to measure globaliza tion, however, is the increased two-way trade in manufactured goods between the developed and a set of developing countries (Ghose 2003). The data us ed are all aggregate national statistics, such as GDP, average wages, and manufactur ing employment. The conclusions reached are predictably hollow: gl obalization has increased globa l manufacturing employment and output, decreased internati onal inequality (in aggregate national terms), and increased overall labor productivity. This tells us nothing about the qualitative changes taking place in the organization of production a nd employment. Similarly, Davidson and Matusz (2004) construct a model to measure the affect of international trade on labor


13 markets, specifically job turnover rates. Th ey find a correlation between trade and job turnover rates in affected i ndustries, and recommend policies to compensate the “losers” from international trade in order to facilitate market adjustments. While a somewhat innovative and insightful attempt to measure the impacts of intern ational trade on local and national labor markets, the authors’ study is fairly useless for understanding the sort of qualitative changes brought on by economic globalization which I wish to address. The globalization of production is not onl y changing the quantit ative composition of employment in different industr ies and sectors of the global economy, it is also changing in more profound ways the nature of employ ment in various industries, the internal structure of firms, the organization of in ter-firm relationships, and the relationship between the state and the economy. I will ther efore rely more on studies which address these sorts of qualitative transformations relate d to the globalization of production rather than simply analyses of its quantitative impact.


14 THE NATIONAL ECONOMY AND THE SPATIAL RECONFIGURATION OF PRODUCTION Before attempting to understand the imp act of the globalization of production on the American economy, the question must be asked as to whether there is such a thing as an ‘American’ economy any longer. National economies have long been understood as discrete units which were essent ially greater than the sum of their parts, that somehow the national economy consisted of more than simp ly the aggregate tota l of economic activity that took place within its terr itory. This assumption is essential to the way in which the role between the state and th e economy has been understood. If national economies are giving way to a single global economy, then the economic activity which takes place within the borders of a nation-state can not be studied outside of the context of its relation to the global economy, and the relationship be tween activities whic h take place in the same national territory but are not somewhat directly related becomes quite trivial. Robert B. Reich (1992) makes a strong case for reevaluating the way we think about the national economy. According to Re ich, most of the ideas which inhabit the popular imagination about the economic organi zation of the United States are outdated. Ideas such as national competitiveness, natio nal corporations, and the national champion are leftovers from the mid-twentieth century, when Fordist mass production and Keynesian macroeconomic management were dominant. Under this (now defunct) system, the economy was dominated by large, bureaucratical ly managed, pyramid-shaped corporations. Unions were institutionalize d, managing labor relations and keeping wages high for both union and non-union workers. The bureaucratic organization of enterprises provided opportunities for workers to advance up the corporate hierarchy, and guaranteed loyalty and job stability. National champions (spectacula rly successful corporations)


15 provided a source of national pride, and the success of these companies was the success of the national economy. Reich argues that while the idea of a na tional economy thus conceived was very much applicable to the United States in the decades following the second World War, it is rapidly becoming an anachronism. The newl y emerging system of production has left behind the Fordist model of bureaucratically-managed mass production for what Reich calls “global webs” – flatter, more flexib le production networks organized by a small creative management team whose primary function is coordination, control, and innovation (1992: 113). Whereas in the previous system the gains of one set of workers or sector of the economy would tend to be sh ared by the rest (as Reich argues that the collective bargaining of unions raised wages for all workers), in the new system, Reich identifies three types of workers whose fo rtunes in the new economy are separate and disparate. At the lower end will be th e workers employed in “routine production services” and “in-person servic es.” The welfare of these wo rkers, Reich argues, will tend to decrease in the decades ahead. A third type of worker, the “symbolic analyst,” will be the most important component of the global web. They will be highly paid, enjoy job security and satisfaction, and th eir skills will be the most valuable resource of the firms who employ them (1992; 174-78). Reich’s characterization of the emerging global economy and the flexible network enterprises which will dominate it leads him to conclude that the only way to increase the wealth of a nation’s citizenry is to increase the value which these citizens contribute to the global economy. The nati onality of firm ownership and the profits these firms generate will be less consequential for a na tion than the value of the work performed by


16 its citizens within its territory. In other word s, Reich believes that national economies in the sense of discrete, self-contained units are no more, and that national wealth is determined by the amount of value generate d for the global economy within a nation’s territory. The idea of shared prosperity and the national barg ain is no more, and it is up to individual workers to succeed or fail in the global economy. Thomas I. Palley (1998) is a bit more sk eptical than Reich ab out the end of the national economy. Palley agrees that the shared prosperity of the post-war era has been abandoned, and that changes in the structur e of the economy brought on by globalization and innovations in economic organization (l ean production) have made the Keynesian policies which facilitated shar ed prosperity obsolete (1998: 195). For Palley, however, this was not an automatic or inevitable deve lopment, but rather a strategy pursued by firms seeking to reduce workers’ bargaining power and thereby increase profits. These firms were aided by the ideology of ne oclassical economists, who abandoned the Keynesian commitment to full employment in favor of an incessant pursuit of low inflation. Palley invokes Schumpeter’s concept of “creative destru ction” to describe the process by which firms, inspired by the pr ofit motive, innovate to reduce costs and increase profits. Firms will seek to increase profits by either attempting to cut into the market share of their rivals, or by transf orming the labor-capital relationship, allowing them to change the proportion of revenue which is divided between profits and wages (1998: 17). The amount of wa ges workers are able to demand depends upon the relative bargaining power of firms and workers, which Palley argues is inherently tilted in favor of firms. Keynesian macroeconomic policie s and a pro-union milieu had served to help


17 workers increase their bargaining power, but several factors have led to a definitive reduction in workers’ bargaining power sinc e the 1970s. The first is technological innovation, which allows firms to operate multip le facilities in distant locations. The second is the automation and the flexibiliz ation of many producti on processes, which allow firms to hire less-skilled workers. The decline of trade unions and government policies oriented towards free trade are two further sources of reduced worker bargaining power (1998: 81-2). As a result the shared prosperity of the post-war decades has been lost. Wages have declined and employment has become less secure, and profits have increased. The economy is growing more slowly, operating less efficiently, and generating greater inequality than in the past (1998: 49). While the ideology of neoclassical economics asserts that this is a natural process and one which cannot be reversed, Palley argues that policymaker s must confront the changing economic landscape with new, more dynamic rules and re gulations intended to restore the balance of power between firms and workers. Palley maintains that most of the negative effects attributed to natural processes of globaliz ation and technological innovation are actually conscious actions by firms and economists with pro-firm biases to reduce the bargaining power of workers. Instead of abandoning the ideal of shared prosperity and the national economy, he believes that the proper policy ap proach can create an economic structure conducive to efficiency, full employment, hi gh wages, high growth, and greater equality. William I. Robinson (2001) provides a World-Systems Theory perspective for abandoning the idea of the national economy. Robinson’s argument is that globalization has made the nation-state obsolete as a unit of analysis, and that development should no longer be conceived in national terms. Instead, he proposes that globalization has led to


18 uneven accumulation on a global scale, which has begun to create core, periphery, and intermediate social groups which are geographi cally dispersed and transnational in scale. In essence, Robinson argues that devel opment has become deterritorialized by globalization, as the creation of a functionally integrated global economy has led to the distribution of the unequal rewards of capitali st production on the basis of participation and relative skill level rather than location (2001: 556). R obinson makes the point that the social element had always been the essence of development, and that this is only now more obvious as the dominance of the territ orially-bounded nation-state system recedes and globalization reduces the importan ce of geographic lo cation (2001: 557). The idea that development has become deterritorialized and social groups increasingly transnational means that local labor markets are likely to become increasingly heterogeneous. Robinson claims th at this represents a process of “polarized accumulation,” in which affluent ‘core’ wo rkers live alongside the super-exploited ‘periphery’ workers within the same region or nation, which represents a reversal of the historical tendency towards labor market homogenization (2001: 558). This is what Robinson means when he refers to an emer ging global division of labor: a division based on social standing or skill level rather than geographic location (2001: 559). The implications are clear: if the global econo my produces winners and losers in an increasingly deterritorialize d, transnational fashion, the pur suit of national prosperity becomes less practical as a policy and increasingly ambiguous as a concept. Manuel Castells (1996) argues that the em erging system of globalized production will create a “network society” in which networks and the nodes at which they intersect will form the central infrastruc ture. According to Castells, the “enduring architecture” of


19 economic geography will be dissolved into a “variable geometry” which will be impermanent and subject to constant fl ux and reorganization (1996: 145). Production will be divided hierarchically among producer s of high value, producers of high volume, producers of raw materials, and redundant pr oducers. These four types of production will tend to be geographically concentrated, but wi ll not be coterminous with nation-states. They will instead be organized in netw orks and flows around the technological infrastructure of the global economy. Cast ells emphasizes the compression of time and space that will accompany globalization, and goes so far as to predict that the “space of places” which characterizes the organization of our society will be superseded by the “space of flows” of the network society (1999: 378). Networks are ideal for organizing a dynamic, rapidly innovating society, Castel ls argues, emphasizing that “networks are appropriate instruments for a capitalist ec onomy based on innovati on, globalization, and decentralized concentration…[and] for work, workers, and firms based on flexibility and adaptability,” (1996: 471). Within this fr amework, the territorial division of labor and prosperity envisioned by Castells will be de termined by the location of nodes within the networks of global production, and the position of these node s within the hierarchy of production (with “high value” at the top a nd “redundant” production at the bottom).


20 EMPLOYMENT AND THE GLOBALIZATION OF PRODUCTION In addition to this changing spatial co nfiguration of produc tion, the globalization of production is causing fundamental cha nges to take place in the employment relationship. Three general themes are re flected in the literature: a trend towards increased flexibility, a redefinition of how “v alue” is created in the production process, and, for some authors, a complete redefinition of work itself. A major feature of the changing natu re of employment within globalized production networks is the growing flexibiliz ation, informalization, and feminization of labor (see for example Benera 2001, Gills 2002, Chen 2001, and Parker 2002). The increased flexibility of production has cr eated a demand for an equally flexible workforce, represented by an increase in pa rt-time, temporary, contract, seasonal, and otherwise contingent forms of employment in both developed and developing countries. There seems to be a fairly solid link between the fragmentation of production process and the increased use of some form of informal and contingent workers. According to Sayeed and Balakrishnan, “when firms disintegrate pr oduction within a count ry, they typically move production out of the ‘forma l’ sector to the ‘informal’ sector,” (2004: 108) They also note that firms are either “pushed” or “pulled” into subcontracting arrangements: either “pulled” by productivity gains whic h can be achieved by specialization, or “pushed” by increasing costs or competi tion, or the prospects of circumventing regulations. In either case, workers in the informal sector employed by the subcontractors of disintegrated firms will have lower wages, lower skill levels, worse working conditions, and less potential for orga nization than their counterparts in the formal sector (Sayeed and Balakrishnan 2004).


21 Lourdes Benera argues that the prolifer ation of informal employment has been caused by economic restructuring of firms at th e micro-level, together with the processes of globalization and the ideology of neoliberal ism at the macro-level (2001: 28). Benera identifies several reasons related to the micr o-level reorganization of the firm which favor informal employment relationships. Firs t is the downsizing of large firms and concomitant increase in subcontracting and outsourcing arrangements, which she argues has shifted large numbers of jobs from core firms to peripheral firms (2001: 29). Second is the reduction of the hierarch ical levels of core firms, reducing the number of workers benefiting from the stability of the internal labo r markets of these firms. Peripheral firms, to where jobs are being shifted, are characterized by more intense competition and therefore lower wages and less secure employment (2001: 30). Benera argues that the increasing informalization of employment has created more unstable employment, unemployment, income polarization, and a te ndency for workers to be less happy at work and less loyal to their employers (2001: 3132). Perhaps the most striking observation made by Benera is that the links between the informal and formal sectors of the economy are deepening. While th e informal sector was once seen as a transitional component of developing economies, it is now being recognized as a functionally integrated part of the economy (2001: 37). Arne L. Kalleberg (2003) argues that empl oyers have sought to restructure their workforces in pursuit of two types of flex ibility: functional and numerical. Functional flexibility refers to ability of workers to perform numerous tasks within the firm and therefore be redeployed where needed. Nume rical flexibility refers to the ability of employers to adjust the size of their workfo rce with fluctuations in demand (2003: 154-


22 6). Kalleberg finds that while some workers in flexible work arrangements (especially those that emphasize functional flexibility and worker empowerment) are well-paid and have high-quality jobs, the pur suit of numerical flexibility by employers has led to decreased employment security for large num bers of workers and has increased income inequality in the workforce. James Heintz (2003) explores variations in wages and employment within a global commodity chain framework. Heintz notes that Fordist mass production was based on the logic of a link between the e xpansion of production and the expansion of domestic consumer markets (2003: 3). In ot her words, output was expanded at the same time as workers’ incomes were increased so that they could afford to buy the manufactures being produced, ensuring stab le demand and profitability. Globalized production, which is based on paying low wages to workers in order to stay competitive in global consumer markets, breaks with this Fordist logic. Heintz argues that within global commodity chains, core firms such as merchandisers, retailers, or multinational producers are able to earn rents by differentia ting their products or limiting competition (2003: 10). Competition is pushed down th e commodity chain, and so subcontractors face intense competition and therefore lo w wages and profits. This prevents subcontractors and production workers from increasing their profits or wages through productivity enhancements, as the gains from these advancements move up the commodity chains towards the core firms, who either retain them as rent or pass them on to consumers in the form of lower prices (2003: 17). The general tendency observed by most au thors is not only a fall in the wages paid to most workers, but an increasing in come polarization between production workers


23 and more “high-value” types of workers. Michael Wallace and David Brady, for example, believe that the institutionalizati on of technocratic form s of management will lead to polarization of work ers into experts and non-expe rts, with the former being indispensable to their firms and enjoying stable employment, and the latter being considered disposable and contingent (2001: 121). Most agree that some new hierarchy of job types will emerge, the disagreement is mostly over what form it will take. Reich argues that making a living in the “global web” will depend not on the ability to perform labor but on the possession of skills valued in the global market (1992: 264). As products become “international composites,” nations will trade specialized problem-solving, problem-identifying, and brokera ge services, which are combined with the “routine” goods and services to create value (1992: 113). Within Reich’s hierarchy of workers (routine production, in-person service, and symbolic analysts), the symbolic analysts will be the only ones to be well co mpensated. Their position will be the most important in the global web, that of cont rolling and coordinati ng production networks, and identifying and solving problems crea tively. Routine production and in-person service workers will be essent ially disposable (1992: 174-6). Castells (1996) also develops a hierarch ical division of labor for the “network society” he envisions. Highvalue production in the network society will be based on informationalism production systems organized “ar ound the principles of maximizing knowledge-based productivity through the development a nd diffusion of information technologies, and by fulfilling the prerequisite s for their utilizati on,” (1996: 204). Key elements of the informational work process are innovation, organization and coordination, and flexibility. Castells divide s this work process into three dimensions:


24 value-making, relation-making, and decision-making. Within all three dimensions, hierarchies emerge. Within value-making, for example, ‘commanders’ and ‘researchers’ occupy the highest positions, while ‘operators ’ and the ‘operated’ occupy the lowest positions (1996: 244). Castells also observe s the division of the labor force in the informational economy into a core and peri phery, with the core representing Reich’s symbolic analysts and the periphery represen ting a more or less disposable work force (1996: 272). Finally, Castells also predicts the gradual individualization of the labor process. Work will become increasingly decen tralized and disaggregated (allowing each worker’s performance to be evaluated and co mpensation to be determined individually), only to be later reintegrated through the networked production pr ocess (1996: 471). “Labor,” writes Castells, “i s disaggregated in its perfor mance, fragmented in its organization, diversified in its existence, divided in its co llective action,” (475). This prediction, if accurate, would represent a ma ssive transformation of the labor-capital relationship and the reevaluati on of the role and potential of collective bargaining and organized labor. Jeremy Rifkin (1995) sees increases in productivity genera ted by labor-saving technological advancements as the force driving the changes in the global economy. Essentially, corporations are able to produce more and more goods with a smaller number of workers as worker productivity increases. These productivity incr eases could be used to shorten the number of hours worked while producing the same output. Instead, a sort of prisoners’ dilemma has begun to emerge: companies, facing declining profits and intense competition, develop labor-saving te chnologies and take advantage of the increased productivity of their workers to reduc e their workforce. This results in a “race


25 to the bottom” where competing companies are pressured to do the same. This eventually leads to higher unemployment in the economy as a whole, which leads to lower aggregate demand and therefore lower pr ofits. The lower profits then lead to further innovations in labo r-saving technology (1995: 34-5). As a result, instead of productivity gains being tran slated into more leisure and shorter work-weeks, productivity gains have produced the perver se outcome of longer work-weeks and higher unemployment (1995: 41). The eventual result according to Rifkin, will be a division of the workforce into an upper class of we ll-paid CEOs and knowledge workers, and a vastly larger, poorly pa id working class whose work is stressful and insecure (1995: 17380). For Rifkin, it is not th e globalization of production per se which is to blame for the deterioration of wages and working conditions for large segments of the workforce, but the fact that corporate manage rs are allowed to control how productivity gains are put to use (1995: 227-8). These managers, who Ri fkin argues are motivated by parochial and short-term interests, pursue strategies wh ich produce immediate profits but have the potential to cause massive destabilizations in the long run, potentially resulting in a “clash between rising population pressures a nd falling job opportunities” in the near future (1995: 207).


26 IMPLICATIONS FOR LABOR UNIONS AND STATE REGULATION The employment trends outlined above, which predict increasing flexibilization and informalization of employment as well as growing polarization between the best and worst paid groups of workers, bode poor ly for the economic “social contracts” institutionalized in the twentieth century. Th e ability of unions to manage labor-capital relations, the willingne ss of firms to pay high enough wage s to satisfy workers, and the ability and will of the state to regulate the economy, provide social insurance, and defuse class conflict will all be seriously weakened if these trends continue. Therefore the question of how the relationship between firms, workers, and states will be managed at the macroeconomic level in the near future is an important one. Much has been written about the challenges facing labor un ions as a result of the globalization of production. Two general strate gies for confronting the globalization of production seem to have emerged: either re -localizing organized labor, or globalizing organized labor by joining together workers located at different geographical locations within the same firm, industry or commod ity chain. The transformation of space and time which have facilitated th e globalization of production ar e the key challenges which confront organized labor. According to A ndrew Herod, “space is a crucial element of political struggle, and the ab ility of workers or of capita lists to shape the economic geography of capitalism in particular ways can significantly shape cla ss conflicts,” (2003: 515). One of the ways in which firms have us ed space as a tool in class conflict has been through the relocation or threat of relocation of parts of the production process to distant geographical locations. The challenge for work ers, Herod claims, is to develop ways to “come together across space” by developing ne tworks which link together workers in


27 different communities with common intere sts and causes (2001: 515). Alternatively, Herod writes, some workers may identify with more localized interests and therefore focus on “defending their particular spaces within the global economy” by challenging attempts by capital to relocat e production (2001: 516). Mark Anner (2003) advocates an international union strategy of “triangulation.” Triangulation refers to the use of alliances between plant unions or workers, NGOs a nd human rights organizations, and antisweatshop or pro-labor activis ts in developed countries to put pressure on core corporations in global co mmodity chains to improve working conditions in subcontracting firms. This strategy has achieved limited success in organizing apparel sweatshops in El Salvador (Anner 2003). Rona ld L. Martin (2000) argues that attempts to organize labor transnationally are prematur e. Instead, Martin argues that the postFordist “regime of localized flexible accumu lation” creates the potential for organized labor to abandon its national orientation and adopt a more localized approach which would allow it to revive its membership and influence (2000: 470-1). Gapasin and Bonacich (2002) argue that or ganized labor must either “move down” to the individual worker as the locus of unionization, or “move up ” to organize entire sectors, industries, or production networks. However, the changing spatial config uration of production may not be the primary source of organized labo r’s decline. Robert E. Ba ldwin (2003) uses a regression analysis to compare the decline of union member ship in different indus tries to the effects of ‘global forces’ (measured by increasi ng import and export competition) and the geographical shift of employment on those industries. He finds only a modest relationship between the declin e in union membership and these variables, suggesting


28 “deep fundamental sources, such as growi ng employer opposition, unfavorable legislative trends, and declining worker trust in union institutions,” (2003: 66). Piven and Cloward (2000) argue that wh ile the many aspects of the relationship between firms, states, and workers have been transformed dramatically by the globalization of production, the f undamental power relationships remain the same. This means that workers (and states) do not need to redefine their relati onship with firms, only to develop new strategies to reassert their demands (2000: 41 5). The authors claim that threats to relocate production have always b een used by employers to extract concessions from workers, so this is not a new developm ent associated with globalization. Piven and Cloward emphasize instead that what has chan ged is that capital and labor are becoming increasingly interdependent raising prospects of new opportunities for workers to organize and challenge firms (2000: 420). The authors propose that extended production chains, just-in-time inventory systems, a nd single sourcing of pa rts make globalized production networks vulnerable to disrupti on, and that workers should exploit these vulnerabilities. At the same time, workers shou ld reconstruct their solidarities to adapt to the increasing segmentation of the labor force, as well as beginning to organize transnationally. Piven and Cloward refer to these strategies as the “new worker repertoires” associated with the globalization of production (2000: 423-4). Other observers argue that labor unions s hould reevaluate their role in society. Advocates of “social movement unionism” su ch as Kim Moody propose that the labor movement should be treated as a social move ment. The underlying assumption of social movement unionism is that organized labor represents the strongest of society’s oppressed and exploited groups, and as such it can be used to mobilize other, more


29 marginalized and less powerful groups. Acco rding to Moody, social movement unionism “multiplies its political and social power by reac hing out to other sectors of the class, be they unions, neighborhood-based or ganizations, or other social movements. It fights for all the oppressed and enhances its own power by doing so,” (Moody 1997: 5). Paul Johnston argues that labor movements should be understood as citizenship movements, as they all appeal to, rely upon, and seek to ach ieve the promise of citizenship. This implies a reorientation of labor’s clai ms and strategies: “no longer is the fate of a particular bargaining unit at stake, but th e status and future of a co mmunity,” (Johnston 2002: 241). Johnston claims that unions should rec ognize that they are fighting for whole communities rather than just workers, with the simple fact that workers have lives outside the workplace which are deeply connected with the place in which they live. Accordingly, the most “dynamic and powerful labor movements in the world today take on issues of democracy, human rights, and social justice” in relation to society in general, not simply the employment re lationship (Johnston 2002: 243). What is the role of the state and how is it changing with the globalization of production? The literature reveals many perspe ctives on this question as well. While mainstream economists generally seek a mini mal role for the state, many, such as Davidson and Matusz (2004), advocate some sort of program for states to facilitate market adjustments brought on by increasing tr ade and international competition. Reich (1992) argues that it is the re sponsibility of the state to ma ximize the value its citizens add to the global economy and the amount of high-value-added work performed within its territory. Karoly and Panis (2004) a dvance another common argument when they


30 emphasize that the shift to high-skilled employ ment will require in creasing investments in training and education. Th ese and other various proposals generally argue that as the globalization of production has increased the flexibility of employment and led to an increasing polarization of workers on the basis of skill levels, states must ensure that their citizens are well trained and highl y educated so as to be able to attract to highly mobile capital investments. James H. Mittelman (2000) assigns states a somewhat larger role in the global economy. The global division of labor and power, as Mittelman refers to it, represents an interplay of state power and ne oliberal ideology as well as hi storic and cultural forces. The state can play a role in facilitating the re organization of production and attracting investment, as the case of the East As ian newly industrialized economies (NIEs) illustrates (2000: 42). Furthermore, since th e global division of labor and power is hierarchically structured, the state can influe nce where in this hier archy its territory and citizens will fall, by encouraging the developm ent of high-value domestic industries, for example (2000: 58). This view reflects the idea that globali zed production, while deterritorialized, is still geographically embe dded. As a consequence, the geographical location of different parts of the production pr ocess can influence the relative affluence of different states and their citizens. Economist Michael Porter (1990) similarly ma intains that “national prosperity is created” and can be encouraged with the prope r state policies. Porter argues that the prosperity of a nation depends on the competitiveness of its industries, which depends on their ability to continuously increase produc tivity (1990: 77). Porter’s “diamond of national advantage” identifies four key determinants of the competitiveness of a nation’s


31 firms and industries. The first is factor condi tions, such as skilled la bor and infrastructure which firms can use to increase productivity. The second is demand conditions, the level of demand within a nation’s hom e market. Third is the pr esence of related industries which can cooperate and form networks or “c lusters” to take advantage of external economies of scale. The fourth and final dete rminant is the level of competition within the industry, since intense competition will induce firms to constantly innovate (1990: 78). Porter believes that state policies to ensure that each of the four points of the diamond encourage the creation of competitive na tional industries and firms will lead to national prosperity, whatever that is taken to mean. Thomas I. Palley (1998) argues that states play a central role in determining the structure of the economy, and that this structure is what ultima tely determines the relative prosperity of both firms and workers by alte ring their transaction costs, incentives, and especially their bargaining power. Palley ex plains that neoclassical economic ideology and its associated idea of “economic naturalis m,” which claims that market outcomes are inherently natural and that anything which interferes with the unimpeded function of markets produces distorted outcomes, actually disguises a pro-firm bias (1998: 36). The role of the state, according to Palley, is to structure the economy so as to level the playing field and increase workers’ bargaining power in their relationships with firms, while also stimulating growth and providi ng incentives for firms to inve st and innovate (1998: 102). Palley refers to this approach as “Structural Keynesianism,” advocating that states play much the same role in the future as they play ed in the twentieth century, albeit with more adaptive and dynamic regulatory frameworks which are not made redundant and useless by firms’ innovations (1998: 199-201).


32 While the ability of a state to regulate the economic activity which takes place within its borders has certainly been erode d, this does not mean that the national economy is obsolete as a unit of analysis. Instead, it demands a new understanding of what a national economy consists of. As long as nation-states are the dominant political entities in the global po litical system, they will be the primary unit responsible for fashioning and maintaining the institutional structure of the capitalist economy which exists within their borders. Convergence am ong these institutional structures is not evidence of their replacement by a single, global structure. While the differences between national economies may become more subtle than the plai nly visible and easily measurable contrasts in national regulatory instruments which were characteristic of national economies for most of the twentie th century, they will remain important. Differences in legal frameworks concerni ng collective bargaining, corporate governance, investment, taxation, and property rights are but a few examples of differences in national institutional structures which influence (and wi ll continue to influence) the character of different national economies within the global economy. My argument, as stated in the introduc tion, is that the globalization of production is a symptom of transformations in both th e organization of production within firms and the macro-institutional structure of the econom y, and that these transformations warrant new understandings of the role and strategies of organized labor in the United States. The transformed institutional structure of th e economy – which I will refer to as the social structure of accumulation – and a ne w paradigm of production organization work together to create a functional economic syst em consistent with the current level of


33 economic and technological development of the American (and global) economy. The transformation of the social structure of accumulation in response to changing economic, technological, and political conditions is not an unprecedented event in American economic history, but rather a regular o ccurrence in the deve lopment of capitalist economies. I will argue that in order for orga nized labor to regain its former power and relevance it must develop stra tegies appropriate to the real ities of the new institutional and organizational realities of the economy. These new rea lities, however, do not entail the end of the national economy or the creati on of a unitary global market with common institutions and regulations and a single gl obal workforce. Nor do they represent the “end of work” or the transformation of the wo rkforce into an indi vidualized, empowered cadre of knowledge workers. In the followi ng chapters, I will attempt to outline what I understand to be the most important change s taking place in the American economy, how they relate to technological and economic development, and their implications for workers and labor unions.


34 CHAPTER III. THEORETICAL FRAMEWORK: THE SOCIAL STRUCTURES OF ACCUMULATION APPROACH I will attempt to explain the transformati ons associated with the globalization of production by employing the framework provide d by the social structure of accumulation approach, as developed by Gordon, Reich, and Edwards (1982) and expanded by Kotz (1994), McDonough (1994), and Wallace and Bra dy (2001). The social structure of accumulation (SSA) approach argues that th e institutional structures of capitalist economies are of central importance for unde rstanding the processes and outcomes associated with economic activity in a capit alist system. The social structure of accumulation consists of those institutions which effect, regulate, or impinge upon the process of accumulation (investment, production, and exchange). These institutions are historically contingent, not consciously crafted but arisi ng through the political interplay of various interests in periods of economic cris es in an attempt to restore profitability and economic growth. I will provide a brief ove rview and background of the social structure of accumulation approach, followed by my ow n synthesis (and modest expansion) of what I believe to be its most useful elements.


35 OVERVIEW OF THE SOCIAL STRUCTURES OF ACCUMULATION APPROACH The social structures of accumulation a pproach has its origins in the observation that capitalist economies tend to experience “long waves” of rapid growth followed by extended periods of crisis and stagnation. These long waves are separate from the comparatively mild and self-correcting busin ess cycles, but supposedly just as regular, with each cycle of expansion or stagnation last ing roughly twenty-five years. The idea of long waves dates back to Kondratieff ( 1935) and Schumpeter (1939), both of whom identified long waves as being regular patt erns of vigorous econo mic growth spurred on by endogenous factors internal to the capital ist economy – in Kondratieff’s explanation, related to the replacement of dur able capital goods; in Schumpeter’s, driven by clusters of technological innovation which encourage investment. Gordon, Reich and Edwards (1982) attempted to explain these alternating periods of expansion and contraction as being ne ither spontaneous nor endogenous to the capitalist economy, but rather as being related to the institutional structure in which the economy is situated. A constellation of in stitutions, which they refer to as the social structure of accumulation create the enabling conditions for rapid capital accumulation, unleashing a flurry of investment and initia ting a period of rapid economic growth, which they refer to as a long-swing expansion. However, according to Gordon, Reich and Edwards, each social structure of accumula tion contains within it contradictions which eventually cause it to become a hindrance to accumulation (or at least fail to encourage and support accumulation as it had during the he ight of the period of expansion). The authors are vague on why contradictions must exist with in each SSA that inevitably cause a crisis, offering only that barr iers develop which prevent further rapid accumulation. In


36 fact, they argue that each so cial structure of accumulati on, the purpose of which is to facilitate accumulation within a specific level of technical, economic, and organizational development, eventually either reaches th e limits of the potential of the form of productive organization with which it is as sociated, or becomes a victim of its own success, unleashing forces which destabilize and undermine the SSA (1982:29). In either case, it ushers in a period of stagnation and crisis which provides the impetus for the creation of a new social stru cture of accumulation which will restore profitability and initiate a new period of expansion and prospe rity. Once the institut ions which constitute the new SSA are in place and “favorable conditions for accumulation have become institutionalized,” a long-swing expansi on is initiated and continues until the contradictions within th at structure eventually initiate a new period of crisis (1982: 28). A key element of this argument is the histor ical contingency of each social structure of accumulation. They arise out of a period of crisis, and are the products of various attempts to overcome what are perceived to be the limits or shortcom ings of the previous institutional structure of the economy. Th e perception among powerful agents of what was the cause the crisis which brought about th e decay of the former social structure of accumulation is of critical importance in the construction of a new social structure of accumulation, as I will illustrate in the cases of the two SSAs discussed in Chapters IV and V. Each social structure of accumulation e xperiences a period of exploration, a period of consolidation, and a period of decay. The period of explora tion begins with the onset of the stagnation and cris is resulting from the decay of the previous SSA. As the forms of production organization which had b een profitable under the previous system


37 begin to lose their potential and their weaknesses and limitations become apparent, firms and entrepreneurs experiment with new forms of labor management and production organization in order to overcome the grow ing problems of profitability plaguing the economy. The period of consolidation begins when the more successful of these new forms of labor management and producti on organization are integrated via new institutions into a social structure of accu mulation, which creates the conditions for rapid accumulation and high rates of growth character istic of long-swing expansions. Finally, the period of decay occurs once the ability of the consolidated social structure of accumulation to continuously promote high rates of profit and create attractive opportunities for investment within the prev ailing system of labor management and production organization reaches the limits of its potential. This sends the economy into a period of stagnation and crisis, and the process of explorati on associated with the next social structure of accumulation begins (Gordon, Reich and Edwards 1982: 10-11). The economy of the United States has e xperienced three soci al structures of accumulation (and, I will argue, is currently in the consolidation period of a fourth). Table 1 provides a summary of the histori cal timing, organizing pr inciples (see below), and the dominant systems of labor control of each. The period of consolidation of each SSA correlates with a period of prosperity, high rates of profit, and rapid economic growth, while the periods of decay and explor ation correlate with periods of protracted stagnation or depression. This is the basic empirical evidence for the correlation between the consolidation of social structures of accumulation and long-swing expansions (for the


38Table 1: Historical Timing of So cial Structures of Accumulation Social Structure of Accumulation Initial Proletarianization Homogenization Segmentation Period of Exploration 1820-mid-1840s 1873-late 1890s World War I-World War II Period of Consolidation Mid-1840s-1873 Late 1890s-World War I World War II-early 1970s Period of Decay 1873-late 1890s World War I-World War II Early 1970s-Present Dominant Control System Simple Entrepreneurial Technical Bureaucratic Organizing Principle Concentrated Market Structure Social Influence of World War II Source: Compiled from Wallace and Brady (2001) and Mc Donough (1994). evidence on the occurrence of long-swing expansions, s ee Gordon, Reich and Edwards 1982: 41-47). Although fairly effective in its original form, the social structure of accumulation approach as elucidated by Gordon, Reich, a nd Edwards contains a few ambiguities and shortcomings which have been addressed a nd to some extent resolved by subsequent authors. David M. Kotz (1994) identi fied one major conceptual and empirical shortcoming of this approach, namely that the social structure of accumulation is presented as an integrated whole, while the specific institutions that make it up often undergo significant change, development, or modification duri ng the period of longswing expansion which the social structur e of accumulation is supposed to have facilitated. Kotz identifies several ins titutions supposedly associated with social structures of accumulation underpinning l ong-swing expansions which were not effectively instituted until near the end of the expansion (1994: 61-4). How can these institutions act as an integrat ed whole if they follow diffe rent courses of evolution and development, or if some are not even create d until the period of expansion is coming to


39 an end? Kotz resolves this problem by argui ng that what is needed to create a social structure of accumulation and initiate a long-sw ing expansion is not the complete set of institutions which will eventually come to be associated with the SSA, but only the core set of institutions which will provide the bedr ock for the larger institutional milieu. This core will consist of a small set of key instit utions which represent th e basic elements of a new social structure of accumulation, but whic h are subject to some degree of evolution, modification and adjustment as the so cial structure of accumulation becomes consolidated. Other instituti ons can be developed which supplement the core institutions, and the decay or modification of these institutio ns will not threaten the core or the SSA. But any crisis which disrupts or threatens the core institutions nece ssarily threatens the SSA as a whole, since these core instituti ons represent the unifying logic of the SSA which allows it to function as an integrated whole rather than simply as a transient grouping of separate institutions (1994: 65-7). Relying on th is framework we can avoid the problems of attempting to identify every single institution which effects the accumulation process and having to determine in some arbitrary manner when the breakdown of a single institution represents th e breakdown of an SSA. We must instead only identify those institutions which form the core of an SSA, and recognize that a crisis which causes a breakdown in one or several of these institutions will threaten a collapse of the SSA as a whole. Terrence McDonough (1994) accepts Kotz’ argument that SSAs are constructed around a core set of institutions, but argues th at even this understanding does little to explain how each SSA comes to be constructed. The social structure of accumulation approach only explains why economies experience alterna ting phases of expansion and


40 crisis, and that the creation of an effective SSA is a prerequisite for launching a new period of expansion. Absent, however, is an explanation of how an SSA comes to be constructed during a period of crisis and whether this is a conscious or spontaneous process. Gordon, Reich and Edwards (1982) actually hint at a struggle among competing, alternative visions during each period of crisis, in which one faction wins out and becomes the new SSA, but historical ev idence of such struggling visions does not exist. McDonough sets out to study the c onstruction of previous SSAs in the United States in order to better understand how thes e complex institutional structures arise from the ashes of each period of cris is to initiate a new long-swi ng expansion. He finds that SSAs are not constructed by a coalition of in terests consciously working together to resolve an economic crisis, but neither ar e they the spontaneous outcome of random events. McDonough argues, based on a historic al analysis of two previous social structures of accumulation in American hist ory, that SSAs are assembled more or less spontaneously but around a central organizing principle which has a pervasive influence during the period in which the SSA is constructe d. This organizing principle refers to an extraordinary or especially significant e xperience, idea, or reality which assumes paramount importance in the process of constr ucting institutional solu tions to the crisis caused by the decay of the previous social st ructure of accumulation. In the case of the homegenization SSA, which la sted from 1890 through the 1920s the organizing principle was the more concentrated structure of i ndustry and oligopolistic market structure. Around this powerful reality formed the core in stitutions of the new social structure of accumulation (1994: 113). In the constr uction of the segmentation SSA, McDonough finds the organizing principle to be the so cial experience of the war itself on both the


41 American public and powerful leaders of business and government, which had a pervasive influence on the construction of the institutions which would form the core of the postwar social structure of accumula tion (1994: 115). McDonough argues that while social structure of accumulation theory is useful for studying and explaining long-swing expansions and crises, it contribut es little for actually predicting when the next crisis will occur. Rather, if we accept the historical contingency of each period of crisis, we can attempt to identify the organizing principle which assumes predominance in the construction of the institutions which will form the core of the next social structure of accumulation. The duration of each period of crisis and expansion is dependent on a multitude of immeasurable factors and is of secondary importance once we understand how and why they occur. Wallace and Brady (2001) generally accep t the framework developed in Gordon, Reich and Edwards (1982), but argue that SSA theory should be reoriented to focus more heavily on the labor process and the dominant systems of labor control that characterize each social structure of accumulation. As Wallace and Brady emphasize, “a vital component of any social structure of accumula tion is a system of la bor control that is compatible with and facilitates profitabi lity within the emerging SSA,” (2001: 115). Their argument is essentially that systems of labor control are the link between the social structure of accumulation and the actual production process, and that without an appropriate system of labor control for orga nizing the labor process at the point of production the profits necessary to stimulate a long-swing expansion cannot be generated. While the focus on control systems places due emphasis on the struggle between labor and capital at the point of production, it simultaneously ignores the competitive


42 environment which makes it so vital for manage rs of firms to maintain control of the production process and continuously exert downward pressure labor costs. How competition is structured in the market is an important determinant of which control system will become dominant, and which strate gies of labor to counter them have the best chance of success. Thus I believe we must examine the control systems used by management within a larger context of th e organizational paradigms which predominate under each SSA, and the particular market structure which gives rise to them. I will argue that each of these au thors provides important insights for understanding social structures of accumulati on and the alternating periods of expansion and crisis which characterize the devel opment of the capitalis t economy. In what follows, I will offer a synthesis which incor porates these insights into a systematic framework for understanding the transfor mation from one social structure of accumulation to another, and what implicati ons such a transformation has on the laborcapital relationship.


43 ORGANIZATIONAL PARADIGMS AND THE TECHNOLOGICAL BASE OF THE ECONOMY While there is some evidence for the existence of long-swing expansions in capitalist economies, it can be said with much greater certainty that there exist separate, discrete epochs or stages of capitalist deve lopment. These epochs are characterized by particular macro-inst itutional structures which are co mpatible with, supportive of, and designed to maximize the potential of the part icular organizational paradigm existing in the economy at that period of time. These st ages of capitalist development, separated by protracted periods of stagnati on and crisis, are what are capt ured by and what constitute the explanatory power of the social struct ure of accumulation a pproach to political economy. I follow Wallace and Brady (2001) in paying particular attention to the changes which take place at the point of production duri ng the transition from one social structure of accumulation to the next. I am less concerned, however, with the dominant control systems which are developed to regulate the labor process, and mo re with the broader forms of production organization which come to be associated with each social structure of accumulation. These forms of producti on organization, which Robert Cox (1987) refers to as the “technical and human orga nization of the production process,” coalesce into dominant paradigms due to the competitiv e pressures of the market, which causes the more successful to diffuse and the less succe ssful to disappear. Organizational paradigms structure the relationship between labor and capital, and can be categorized into ideal types and comparatively analyzed. They repr esent not simply control systems used to deploy and monitor labor (although control syst ems are an important element), but more generally the manner in which firms combine raw materials, capital and human labor in


44 the production process in order to create a commodity (that is, something produced for sale in the market). These organizational paradigms form an esse ntial link between the technological and material base of an econom y and its macro-institutional structure. In other words, the organization of the produc tion process represents the way in which means of production (capital and infrastructure and the technology embedded in them) are transformed by individual capitalist enterprises into relations of production (the social structure of the economy). These relations of production produce the classes and various narrow economic interests whose fortune s are impacted by the distributional consequences of the social structure of accumu lation. Thus the historical contingency of each social structure of accumulation beco mes apparent: Each social structure of accumulation interacts with a particular organizational pa radigm to produce a certain distribution of wealth and pow er in the economy. Once the economy enters into a period of crisis, the political struggl e to construct a new SSA is sh aped by the interests, power relations, and experiences which were fashioned by the former. Perhaps even more importantly, the poin t of production repres ents the center of the accumulation process. If the purpose of an SSA is to promote vigorous capital accumulation, it is implicit that this must mani fest itself in how the macro-institutional environment interacts with the actual producti on process. It is therefore of primary importance to study how these organizationa l paradigms interact with the social structures of accumulation to produce periods of robust economic growth and expansion, and conversely how these arrangements eventua lly reach the limits of their potential and break down, producing a protracted period of economic stagnation and crisis. Focusing only on control systems or the organization of the labor process (narrowly understood)


45 misses, I believe, important components of the production process which occur outside of confines the shop floor. In order to obtain a more complete picture of the production process, I will focus on transformations in th e organization of production at the level of the commodity chain as well as at the level of the poi nt of production. Commodity chains represent the flows of value in the production process, from the extraction of raw materials to the consumption of the final pr oduct. These flows of value can span across vast geographical distances and involve a number of separate individual firms, coordinated by a production system which “lin ks the economic activities of firms to technological and organizational networ ks that permit companies to develop, manufacture, and distribute specific comm odities,” (Gereffi 1994: 96). Focusing on the commodity chain level allows for an analysis of changes in competitive pressures, interfirm relationships, supply chains, and other various outside the na rrow confines of the production process. Technology plays a central role in social structures of accumulation and their ability to produce periods of prosperit y, growth and expansion. The level of technological development of the means of production is a crucial determinant of which organizational paradigm will be most successful in the market. It is also an important form of “feedback loop” between the social structure and the ma terial foundation of society. In order to understand why, it is necessary to make a few points about technology and its role in the production process. An organizational paradigm is simply a particular way of combining human labor and capital in the production of a commodity. As the level of technology embedded in the capital machinery and infrastructure prog resses, the organizational paradigm which


46 will prove to be the most productive or profitable (and therefore most successful in a capitalist economy) changes as well. Tec hnological innovations, however, do not occur in a gradual, evolutionary manner; nor do they take place outside of the social and power relations of the society which produces them. I will make three points about technology which are necessary for understanding its pl ace in relation to the social structure of accumulation. First, technology plays an important ro le in determining the structure of the production process and the nature of the re lationship between t hose who control the system of production (employers) and those w ho participate in it (workers). The level and character of the technology embodied in th e capital will play a part in determining the optimal social arrangement of the labor pr ocess. Although the ul timate distribution of power in the system of production is socially determined, for exampl e in laws regarding the property rights of owners of capital, di fferent levels of technology will influence whether it is more efficient and productiv e to employ workers who are more-skilled or less-skilled, whether control should be more horizontal or more hierarchical, whether workers should be allowed some discretion in their jobs or follow e xplicit orders, and so on. As Robert Cox describes it, “the transi tion from a workshop in which a variety of skilled craftsmen work together cooperatively, to an assembly line in which fragmented tasks are coordinated in a continuous process, to an automated factory, is a transition between three different structures of contro l over work,” (1987: 20). The assembly line enables goods to be mass produced much more efficiently and at a much lower cost than is possible with craft producti on, but it also transf orms the social organization of the production process, from one in which skilled craftsmen exercise discretion and expertise


47 to one in which semiskilled operators perf orm repetitive, manual operations at a pace determined by management and regulated by a m achine. It is important to keep in mind that the consequences of new technologies on the social organizat ion of production are not neutral, but benefit some at the expense of others. Second, then, is the point that techno logical innovations do not take place independent of the power relations which constit ute society. This is especially true of innovations with economic applications. Ag ain, Robert Cox makes this point quite succinctly when he writes that “technology is the means of solving th e practical problems of societies, but what problems are to be solved and which kinds of solutions are acceptable are determined by those who hold so cial power,” (1987: 21). If we accept that technological innovations effect the distribution of power in the production process, it logically follows that those innovations which best serve th e interests of those in a position to implement them will be most likely to be adopted, all else equal. Investment in research and development for new pr oduction technology will be likely to flow towards those innovations which enhance, or at least do not upset, the prevailing balance of power in the relations of production. Indeed : “Social control, not the invention of new and bigger machinery, began the movement to factories. Machinery appropriate to the scale of production followed,” (Cox 1987: 21). The key point is that technology serves a social function as well as an economic func tion, and its implementation is subject to considerations of power and control as well as e fficiency and productivity. Finally, it is important to recognize th at technological development does not proceed in a linear fashion, but rather occu rs in a series of discontinuous paradigms (Atkinson 2004). A brief illustration will help make this process clear. A paradigmatic


48 breakthrough, such as the invent ion of the steam engine, occurs which has the potential to transform the organization of production and the economy. Around this epoch-making invention, countless innovations and refine ments are directed which develop it and perfect it until no further refinements are possi ble or practical. At the same time, these technologies diffuse to more and more i ndustries and firms, resulting in growing productivity throughout the economy. Eventua lly, there are no more possibilities for significant improvements on the existing syst em of technology and there are no new areas of the economy into which for it to diffu se, and therefore it is no longer able to produce steady increases in productivity. Ev entually, however, a nother epoch-making invention, such as the electric motor, is deve loped which overcomes the limitations of the former and allows for a new wave of in cremental innovations and refinements and another techno-economic paradigm is born. Pr oductivity takes off once again as the new technological system is developed and refined and diffuses through the economy (Atkinson 2004: 147). The discontinuous natu re of this process is important for understanding the alternating pe riods of expansion and crisis in capitalist economies. The level of technological development, therefore, is a key determinant of the types of organizational paradigms employed by firms, but technological development is also influenced to a significant extent by the relations of production already existing in the economy. This is essential for unders tanding the histori cal contingency of technological and economic development: the problems of one epoch prompt solutions – developed within the context of the social structure of the economy and the dominant form of production organization – which even tually become the basis of the dominant system in the following epoch. While there are always multiple potential paths of


49 development and these transformations are ultim ately the product of the creative energies of individuals, the specific pa th of development which is ultimately followed helps determine which potential paths of developmen t are available to subsequent generations, through both the material conditions and system s of power relations it generates as well as the experiences, ideas, and cultural manifestations it engenders in the society. A graphical illustration of the relationship be tween technology, capital, the organization of production, and social structures of accumulation is provided in Figure 1. Figure 1: Technology, Production Organization and Social Structures of Accumulation


50 RELATIONSHIP BETWEEN TECHNOLOGY, ORGANIZATIONAL PARADIGMS, AND SSAS Institutions shape the accumulation pr ocess in countless ways. The market economy itself is a social institution. In orde r to operate, a market economy requires at the very least laws protec ting private property and guara nteeing the enforcement of contracts, as well as a monetary system. In addition to these minimal institutions, however, markets are embedded in societies wh ich have, over the c ourse of capitalist development, erected various institutions which go further and actually structure the operation of the economy and the accumulation proce ss. It is safe to say that all capitalist economies, as well as the global economy, contain institutions which directly affect, constrain, or regulate the decisions of capital ist enterprises and shape the choices they make regarding investment and producti on. Institutions facilitate accumulation by reducing uncertainty and suppl ying critical expectations and assumptions about the behavior of economic agents, which enable i ndividual firms and entrepreneurs to engage in long-term planning and make invest ments based on reasonable and informed understandings of the operation of the economy. Some institutions contain explicit provi sions dealing with specific areas of economic activity, such as labor laws. Othe rs are more implicit ideological or moral values which prejudice attit udes towards different particip ants or different sorts of economic activities; some socie ties exalt the workers, others the entrepreneurs who create jobs; some societies exalt small business ow ners, others celebrate the giant “national champion” corporations that dominate the econo my. Some of the basic economic issues determined by institutions include: (1) What is ideologically or morally acceptable: Which is more important, the rights of labor or the property rights of business owners?


51 Whose well-being is most important to the economy, the average worker or the average investor/entrepreneur? (2) What types of economic relationships are legally permissible: Indentured servitude, slavery, wage labor? Inter-firm coope ration? Monopolies, trusts, or cartels? (3) What types of economic ac tivities are legally permissible: Are there prohibitions on certain types of transactions? (4) How is investment organized: Incorporation? Availability of financial c apital and debt financi ng? Legal protections against bankruptcy and bad investments? (5) Who are the legitimate stakeholders in business decisions: Workers and unions? The state? Communities? Shareholders? Suppliers, customers, and consumers? These are some of the important areas in which institutions impinge upon the accumulation process. Institutions affect where an entrepreneur can acquire the start-up capital to fund a business venture, how expensive labor will be and on what terms labor and mana gement will deal with one another, where the final product can be sold and to whom, a nd how much of what pa rt of the proceeds will be taxable. A social structure of accumula tion represents a functionally integrated set of institutions which addresses these and other important issues in a way which provides a favorable climate for investment a nd encourages robust economic growth. SSAs promote economic prosperity by maxi mizing the effectiveness of a specific organization of production associated with a prevailing techno-economic paradigm. This means that not only are social structures of accumulation historically contingent, they are also associated with a speci fic level of technological a nd economic development. As technology evolves, new paradigms make mo re productive and more (potentially) profitable forms of production organization pos sible, but these ar e to one degree or another hampered by the existing SSA (or at l east unabetted by it). For an illustration of


52 this, the postwar SSA, segmentation, provide s a useful example. The postwar SSA (1945-1970s) was constructed upon an econom y oriented towards corporate mass production, operating within an electro-mechan ical technological paradigm (Atkinson 2004). This sort of technological and organi zational paradigm operated most efficiently when large economies of scale could be achie ved, producing standard ized products with special-purpose machinery. This entailed larg e investments in capital machinery and the employment of a large, semiskilled industrial workforce. Furthermore, it required a large and stable market for manufactured goods in order to recoup the massive start-up, engineering, and research and development costs necessary to remain competitive and profitable. Within this sort of economic e nvironment, the institutions of the postwar SSA provided the conditions for rapid accumula tion and robust growth. Keynesian demand management and the labor-capital accord provi ded for rising wages and income security, and therefore a healthy market for mass produced goods. An oligopolistic market structure in the core mass production industries such as automobiles limited the extent of destructive cost and price competition, and therefore justified huge investments which could take many years to pay off. Finall y, American dominance in the international economy limited the extent of foreign competition. The decay of the postwar SSA began once the era of corporate mass production st arted to wane, as mass markets grew saturated, increased co mpetitive pressures and the erodi ng position of American industry demanded more flexibility and improved qua lity, consumer tastes became more differentiated, and – critically – technol ogy began to become available which was capable of satisfying these demands. This prompted a decay of the postwar SSA and began the exploration period of a new SSA, more appropriate to the realities of the


53 economic environment and exploiting the po ssibilities of a new digital technological paradigm. In the following two chapters I will deal in detail with the transition from the postwar segmentation SSA to th e current SSA, which I term globalized production


54 SOCIAL STRUCTURES OF ACCUMULATION AND ORGANIZED LABOR I will conclude this chapter by briefly summarizing the essential elements of the social structure of accumulation approach as outlined above, and then offering an explanation of how SSAs imp act the labor-capital relations hip and collective bargaining, which is the focus of this paper. A social structure of accumulation is n ecessary for the healthy functioning of a capitalist economy. Whether or not SSAs pr oduce long-swing expansions is unclear and muddled by problems of definition, measurement and sample size, but it is clear that the breakdown of an SSA is a prelude to a pr otracted period of cr isis, and that the consolidation of a new SSA is necessary to restore the conditions for stable growth and accumulation. Whether these periods of healthy growth constitute long-swing expansions is tangential to the fact that the c onsolidation and decay of social structures of accumulation delineate successive stag es of capitalist development. An SSA consists of a functionally inte grated set of core institutions whose existence and effectiveness is essential fo r its operation, as well as a constellation of various supplemental or peripheral institutions which assist but are not vital to the SSA. SSAs are formed during periods of ec onomic crisis, assembled around a central organizing principle which shapes and guides efforts to construct institutional solutions to the economic crisis. Although the formation of a social structure of accumulation is not a consciously managed political proj ect, the overwhelming influence of the organizing principle may give the ap pearance of a political project. Finally, SSAs facilitate the healt hy operation of the economy by promoting accumulation They do this by providing the cond itions for maximum effectiveness of


55 the prevailing (or emerging) techno-economic and organizational paradigms. As these techno-economic and organizational paradigms reach the limits of their potential for increasing productivity, accumulation slows down and the economy begins to stagnate. The period of crisis which emerges prompts the exploration of new technologies, forms of production organization, and eventually the in stitutions which will be consolidated into a successive social structure of accumulati on. Figure 2 shows the progression through four successive social structures of accu mulation in U.S. history and the different technological and organizational paradigms associated with each. Note that the segmentation and globalized production SSAs and their associated features, described in the right half of Figure 2, will be the subj ects of Chapters IV and V, respectively. Figure 2: Social Structures of Ac cumulation and Associated Control Systems, Ideologies, Organizing Principles, Forms of Production Organization, and Techno-Economic Paradigms in U.S. History Source: Compiled from Wallace and Brady (2001 ), McDonough (1994), and Atkinson (2004).


56 Social structures of accumulation affect organized labor in several important ways. SSAs influence the organization of th e production process as well as determining macro-level relationships between labor and capital and the stru cture of labor markets. I will make several general conceptual points regarding the role of SSAs in the laborcapital relationship. The first point is that firms have a proactive role in organizing the production process, while labor generally has a reactive role. The property rights of owners of capital bestow them with the discretion to organize production as they see fit, within a set of legal and technical constraints. Firms seek to maximize the revenue generated through the production process in a variety of wa ys; they also seek to maximize the share of revenue (profit) which accrues to the owners of the firm and its shareholders – it is this second motive which gives the relationship be tween capital and labor its antagonistic character. Labor’s position in the production process occupies a reac tive role, seeking to improve its lot (in terms of working conditions, control, share of reve nue, etc.) within the general organizational sy stem determined by th e owners of capital. Since each social structure of accumulati on is biased towards a certain form of production organization (as desc ribed above), the SSA plays a role in determining the character of the relationshi p between workers and their employers. An SSA may encourage an organizational paradigm in which workers can demand and obtain a large share of revenue and exert a substantial degr ee of control over the production process; conversely, an SSA may encourage an organi zational paradigm in which workers are unskilled, dispersed, and disposable and unabl e to command a large share of revenue or


57 exert any control over the production process. Ever y organizational paradigm has distributional consequences (i n terms of bargaining power, control, and resources) which may be more or less favorable to workers, and in which it may be more or less difficult for workers to organize and e ngage in collective bargaining. Similarly, SSAs may be more or less conducive to collective bargaining at the macro level. An SSA which enhances work ers’ bargaining power via a low rate of unemployment, a generous social safety net, or extensive legal protections for workers and unions will result in better prospects for organized labor than one which does less to protect workers financially and legally. The ideological or moral predisposition towards labor organizations is important in this respect, as can be observed in the changing attitudes towards organized labor in different periods in Amer ican history (see Zieger and Gall 2002). Finally, the specific strate gies by which labor is able to confront capital and improve its economic and social position are particular to each SSA. The strategies utilized by organized labor must, in order to be effective, be appropriate or consistent with the economic and institutional milieu created by the SSA, and therefore the transition from one SSA to the next will requi re new strategies and forms of organization by labor just as it requires new form s of production organization by firms. The theoretical approach elaborated in this chapter will provide a framework for understanding the transformations taking plac e in the American economy, and how these transformations are affecting organized labor In the following two chapters, I will examine the transition from the segmentation SSA, which began to decay in the 1970s, to


58 the globalized production SSA which began a pe riod of exploration at the same time and is now entering a period of consolidation. I will pay special attenti on to the relationship between changes in the core institutions and changes in the organiza tion of production. I will also emphasize the importance of thes e changes on the strategies and general fortunes of organized labor under each social structure of accumulation.


59 CHAPTER IV. FROM SEGMENTATION TO GLOBALIZED PRODUCTION: THE RISE AND FALL OF THE POSTWAR SSA AND THE CAPITAL-LABOR ACCORD Understanding the current plight of orga nized labor in the United States requires an understanding of the postwar social structure of accumulation of segmentation, under which organized labor became an important and powerful institution in the American economy. During this SSA, which was in its pe riod of consolidation approximately from 1945 to the early 1970s, many of the strategies, institutions, and legal precedents related to collective bargaining were established a nd consolidated. The institutions of the segmentation SSA, both at the macro level of the regulatory apparatu ses of the state and the micro level of production organization, had a profound influence on the historical development of organized labor. The soci al structure of accumulation constitutes the institutional milieu in which the struggle be tween labor and the owners of capital is played out. Organized labor reached its zenith during the segmentation SSA; understanding the decay of this social struct ure of accumulation can therefore do much to improve our understanding of the rapid decline in the position of or ganized labor as the institutions which underpinned segmentation were eroded and replaced with those which would come to be consolid ated into its successor. In this chapter I will discuss each of the core institutions of the segmentation SSA, with a specific emphasis on how they complemented the Fordist mass production


60 paradigm. I will also describe in deta il how Fordist mass production and segmentation helped to construct the adversarial, contra ctual, job-control form of unionism which characterized the capital-labor accord and shap ed the institutionalization of organized labor in the United States. Finally, I will di scuss the decay of the segmentation SSA and explain how the protracted crisis which re sulted contributed to the creation of the globalized production social structure of accu mulation. I will emphasize the importance of the experience of the Second World War on each of the core institutions of the segmentation SSA, especially with regards to Keynesian macroeconomic management and the institutionalization of organized la bor. This will emphasize the historical contingency of this social structure of accu mulation and the policies and institutions it produced.


61 THE SECOND WORLD WAR AND THE CONSOLIDATION OF SEGMENTATION McDonough (1994) identifies the social influence of World War II as the organizing principle of the segmentation SSA. The war indeed had a pervasive influence on all of the institutions which would form the core of the new social structure of accumulation. These core institutions were: the conservative Keynesian state; U.S. international dominance; the limited capital-l abor accord; the Democratic coalition; and Cold War ideology (McDonough 1994: 115-23). As the homogenization SSA (ca. 1890s-1920s) began to decay and ushered in the period of crisis known as the Great Depression, the period of explor ation of a new SSA began. In the 1930s we can observe many of the institutions which would eventua lly constitute the core of the segmentation SSA developing and in some cases beco ming dominant. But it is not until the culmination of the Second World War that we see these institutions become consolidated into a functionally integrated social structure of accumulati on. It was the experience of the war and the great mobilization of will a nd resources which is responsible for this. The organizational paradigm upon which segmentation was founded was corporate mass production, or Fordism. Th e essence of mass production is the manufacturing of large quantities of standa rdized goods through th e use of specialized machinery and large numbers of semi-skilled workers. Large production runs, specialized machinery and a minute division of labor allows for substantial economies of scale and therefore the produc tion of large quantities of relatively low-priced goods. However, since the quantity of goods which mu st be produced in order to achieve the economies of scale capable of producing widely affordable goods is generally very high, mass production necessitates mass consumption. In addition, the necessary investment in


62 plant and equipment (not to mention engine ering, research and development) requires substantial start-up capital a nd a long-term planning horizon. This system entailed quite a different sort of market pressure and competitive environment than an economy based on smaller-scale production for local markets. In the latter, the cost s of inputs and price levels for final products are the major motivat ors of changes in outpu t; in the former, the ability of the market to effectively demand large enough quantities of a product is the key determinant of investment. As Piore a nd Sabel explain, “individual productive units became so large relative to the total market that the propensity to invest in manufacturing plants was determined by the prospective leve l of capacity utilizati on, rather than by the cost of inputs,” (1984: 76). The economies of scale of mass production create a barrier to entry which retards the ability of competiti on to stabilize the ec onomy and harmonize the levels of supply and demand for a product; pr oducers cannot simply drop in and out of a market with every fluctuation in price and demand. Absent the supply-adjusting pressures of more competitive markets, in a mass production economy the large cor poration provides a similarly stabilizing role, smoothing out fluctuations in demand by adjusting cap acity utilization and enabling longer-term forecasting and planning (Piore and Sabe l 1984: 77). Mark Rupert relates the development of the mass production system to the development of the hierarchic, bureaucratic corporate enterprise for contro lling production and large-scale marketing for stimulating demand for the product. “Modern corporate capital – in the form of the multidivisional, soon also multinational, firm – emerged in large measure as a response to these twin organizational imperatives of or chestrating and making more predictable both the production and sale of huge volumes of standardized commodities,” (Rupert 1995:


63 66-7). The bureaucratic corporate system of ownership and management is therefore a direct consequence of the technical deve lopment of the mass production system. The evolution and diffusion of mass production coincided with the development of bureaucratic organization, professional mana gement, and giant, vertically-integrated enterprises which sought to reduce uncerta inty by replacing arms-length market transactions with direct cont rol of large portions of the s upply chain. The eventual result was an oligopolistic market structure in the core mass production industries. The imperatives of planning, control, and coor dination which mass production made central helped to shape the development of the cor porate system of ownership and management. In turn, the need to facilitate planning, control, and coordi nation would also be reflected in the institutions of the segmentation SSA. Fordist mass production, thus, demands a particular set of macroeconomic conditions in order to ensure its optimal and efficient operation. The primary requirement is a high level of aggregate de mand. Long-term stability and managerial control, which facilitate planni ng, are requirements as well. Each of the core institutions of the segmentation SSA supported the opera tion and expansion of the mass production economy. In what follows, I will discuss th e role of each of the core institutions identified by McDonough (1994) and explain how the impact of the Second World War helped to consolidate these institutions into a coherent social structure of accumulation – one which would produce a ‘golden age’ of rapid and sustained economic growth the likes of which has not been seen before or since. The conservative Keynesian state had its origins in the Great Depression and the New Deal. The Great Depression was widely perceived by contemporary observers to


64 have been caused by a crisis of overproduc tion – low wages, insecure employment, and cyclical downturns in the economy led to in sufficient effective demand for the products of the expanding mass production economy, generating chronic overcapacity which impeded profitability and resulted in furthe r cost-cutting pressures which only served to exacerbate the problem of demand defici ency (Babson 1999: 88). Keynesianism emerged as an ideological solution to this cr isis. Keynesian economic theory argued that the state could reduce the impact of business cycles and generally improve the health of the economy through its fiscal and monetary policies, particular ly via government spending and wealth redistri bution. Keynesian theory is vague, however, on exactly which type of government policies would best stim ulate the economy, leaving a range of possible options available to the Keynesian stat e, including state owne rship of industries, direct cash transfer payments, social insu rance programs, defense spending, public works projects, and of course Keynes’ own infa mous recommendation that the government employ workers to dig holes in the ground one day and re-fill them the next. But although the Roosevelt administration began to apply a few of these economic stimulants in the 1930s in an attempt to pull the economy out of the Great Depression (especially public works and social insurance programs) the budget of the federal government was too small and the impact of the projects too minor and uncertain to prove the success of Keynesian macroeconomic management. Th e Second World War simultaneously ended the depression and proved the validity of Keynesian theory. Not only that, but, as McDonough points out, it did so in such a way that involved neither excessive government intervention in markets nor funda mental reform of the private sector economy, but rather through “waste, plain and simple,” (1994: 116). The war


65 demonstrated that the government could s timulate the economy and restore prosperity without increasing consumption or improving productivity, but simply by purchasing vast quantities of armaments to be subsequently incinerated; by hiring millions of American workers to produce them and millions of American soldiers to destroy them. The war also convinced the American public and polit icians of the virtues of full employment (McDonough 1994: 116). These twin pillars of th e conservative Keynesian state of the postwar era – massive defense spending and a commitment to full employment – were born directly of the war effort. Had the war not occurred or had th e effect it did on the United States, American macroeconomic polic y could have followed a quite different path of evolution. American international dominance, a nother direct consequence of the war, complemented the mass production economy in several ways. The most important was the commitment to free trade and a liberal in ternational economic order. The Bretton Woods agreement, the Marshall Plan for the reconstruction of West ern Europe, and the General Agreement on Trade and Tariffs (GATT), were all attempts by the United States government to ensure an open, liberal inte rnational capitalist economy. This system would ensure foreign markets for American investment capital as well as American exports, as American corporat ions enjoyed unmatched supremacy in manufacturing. The Marshall Plan also allowed the United States to rebuild Western Europe in its own image, imposing stipulations that receiving governme nts structure their postwar economies along American principles. It also amounted to a strange brand of Keynesian demand stimulation, as American aid to Western Eu rope financed the importation of American exports (Eichengreen and Kenan 1994: 13-17). According to Mark Rupert, the Marshall


66 Plan enabled the export of the “American vision of social harm ony through productivity, growth and prosperity,” which would underpin the American postwar SSA as well as the international economic order (1995: 44). Th e Bretton Woods system established an international monetary system based on a hybrid gold-dollar standa rd, where the dollar was convertible to gold at a fixed rate ( $35 per ounce) and most other currencies were pegged to the dollar. This re presented in practice a sort of ‘soft’ gold standard with enough flexibility to allow Keynesian m acroeconomic management. While it was intended to allow flexibility and national macr oeconomic autonomy for all countries, the size of the American economy and the practice of pegging currencies to the dollar forced other countries to generally follow Ameri can macroeconomic policy (Eichengreen and Kenan 1994: 34-5). The Democratic coalition was marked by the electoral supremacy of the Democratic party in nationa l politics from the 1930s thr ough the 1970s (the previous SSA had been characterized by Republican dominance from the McKinley to Hoover administrations). The Democratic majority reached ascendance in the 1930s and was consolidated with the successf ul conduct of the war effort. Born of a coalition which mobilized the lower-class vote as well as the support of the capital-intensive, internationalist business sector, the Democra tic political program “consisted of liberal Keynesian policies at home and support for US dominance abroad,” (McDonough 1994: 121-122). Republicans who were able to asce nd to national office generally followed the same program, offering more efficient admi nistration or slightly modified policy prescriptions. Those, such as presidential candidate Ba rry Goldwater, who diverged sharply from this program met with humilia ting electoral defeat (Atkinson 2004: 78-80).


67 Cold War ideology was an extension of the consensus-mobilization of the war. The common enemies provided by fascism in the Second World War and the Soviet Union during the Cold War would foster a ge neral spirit of cooperation in American society. Cooperation, coordinati on, and planning had proven to be effective and efficient in the war effort. In both industry and gove rnment, the idea of rational management and planning coordinated through a top-down bureau cracy were recognize d as both legitimate and desirable. As Robert D. Atkinson puts it, “[A] new set of gove rning principles came to be accepted, partly through trial and error, partly th rough a slow, if not always conscious realization that the world had changed. These princi ples included a belief that top-down rational planning made sense, both in business and government,” (2004: 78). Belief in the existence of a common enem y, and therefore the existence of common fundamental interests and principles, were n ecessary prerequisites for running a society according to the idea of rational management. The final core institution of the se gmentation SSA – the limited capital-labor accord – was the cornerstone of capital-labor re lations in the postwar era. The so-called capital-labor accord was less of an industria l peace treaty than a sort of workplace Geneva Convention. It did not mean an end to the conflic t between labor and management nor to the advers arial relationship which produced it, but rather limited the scope of this conflict, delineating which i ssues were on the bargaining table and which issues would be deemed off-limits. It wa s a shared understanding of what demands organized labor could press for, and what prerogatives management could pursue, without risking the eruption of an all-out war. Piore and Sa bel refer to the capital-labor accord as “a shared set of understandings a bout the continuation of the struggle,” (1984:


68 98). Since it is key to unders tanding both the structure and ro le of organized labor in the American economy, I will discuss the capital-l abor accord at length, with reference to both its historical evolution and its relationship to the or ganizational paradigm of mass production and to the other institutions of segmentation.


69 THE RISE OF INDUSTRIAL UNIONISM AND THE CAPITAL-LABOR ACCORD As the system of industrial fact ory production evolved and achieved predominance in the decades following the Civil War, there emerged two competing strategic visions of unionism: industrial unionism and craft unionism. Industrial unionism is based on the principle of “one shop, one union” – that is, that the basic bargaining unit of organized labor is the wo rkplace, and that all those workers who assemble under the same roof and under the direction of the same employer should organize and negotiate as a single entity (Begin and Deal 1989). This differs considerably from the craft-based unionism which originated in the pre-capitalist guilds, which were organized to control access to the trade secrets of artisa ns and craftsmen and thereby protect the value of their special sk ills. In modern ec onomic parlance, craft unions seek to limit the supply of particular fo rms of skilled workers in order to increase their bargaining power and theref ore the price they are able to demand for their labor. Craft unions are also able to keep control of the production process in the hands of skilled workers, whose talents are essential to the quality of the final pr oduct and indispensable to the employer. Despite some attempts at industrial un ionism during the period of industrial factory production, craft unionism remained dominant until the consolidation of mass production. Craft unionism was typified by th e American Federation of Labor (AFL). Craft unionism as practiced by the AFL was c onservative, attempting to protect skilled workers against the progressive erosion of their crafts by industrialization – which had the effect of fostering antagonism between the relatively well-paid skilled workers and the growing hordes of less-ski lled workers who they saw as a threat to their well-being


70 (Babson 1999: 13). In craft unions, workers were organized according to the type of work they performed rather than according to where they worked. A single factory could contain bargaining units repres enting several different craf t occupations, all negotiating separately with management. Craft unionism was the only organizing st rategy capable of achieving widespread and long-term success under the homogenization SSA (ca. 1890s-1920s) for several reasons. The most important was that the bala nce of power in capital-labor relations was tilted overwhelmingly in favor of capital. Th e growing concentrati on of industry, gradual erosion of the skill content of work, and the hostility or indifferen ce of government at all levels towards unions and work ers’ rights created extremel y unfavorable conditions for organized labor (Gordon et al 1982: 143-4). In this environment it proved much easier and more realistic to focus on organizing ski lled workers, who were in limited supply and difficult to replace with strikebreakers. Abse nt political and legal protection, industrial unions could only hope to succeed by organizing all of the workers in unit at once (before management could retaliate) and by physically controlling access to the workplace to prevent the use of strikebreakers (Begin and B eal 1989: 34). Where attempts at industrial unionism did emerge, they were characterized by sporadic outbursts of resistance, violent confrontations with management, and generally short lifespans. As industrial factory production evolved into mass production, the importance of skilled workers in the producti on process grew more marginal Mass production led to an increasing homogenization of the workforce a nd the growing concentration of workers. The assembly line, first implemented in 1913 by Henry Ford, transformed both the organization of production and the skill content of the labor force in industry. In 1910,


71 prior to the introduction of the assembly line, the workforce employed by Ford Motor Company was nearly evenly divided among skilled, semi-skilled, and unskilled labor, with each comprising approximately one-third of the workers. By 1917, a few years following the introduction of the assembly line, semi-skilled workers made up more than sixty percent of the workforce; the proportion of skilled and unskilled workers fell to 21.6 percent and 16.4 percent, respectively (Gordon et al 1982: 133). The assembly line and related innovations also produ ced dramatic increases in pr oductivity (Rupert 1995: 63). Taylorism (or “Scientific Management”) and Fordism became the managerial ideologies of the day, and both were characterized by the quest to separate conception from execution and progressively reduce the control of the worker over the production process (Babson 1999: 27-8). These were the buildi ng blocks of the mass production paradigm, and marked the proliferation of mass industr ial employment which would make the semiskilled production worker the co re of the American economy. This evolving mass production paradigm was coordinated th rough a system of bureaucratic control. Bureaucratic contro l enabled the owners of massive corporate empires to exercise control over thousands of workers and rationally manage increasingly complex enterprises. It operated through very detailed and explicit rules and job classifications, and a hierarchical, pyra mid-shaped organizational structure: Bureaucratic control rests on two pillars. Th e first is the intricately detailed codification of conduct within the firm. Explicit seniority ladders within the firm’s own “internal” labor market assure that employees who abide by the rules will eventually better their occupational status. Each job has a tightly prescribed description and defined standards of performance. The second pillar is the bureaucratic hierarchy. The great mass of workers in an enterprise is divided into fine ly graded divisions and strata with multiple levels of supervision. Lines of communica tion are clearly designated and the chain of command is explicit (Bluestone and Bluestone 1992: 130).


72 At the same time, managerial authorit y became increasingly arbitrary, harsh and overbearing. Workers wanted to increase th e security of their employment and impose limits on the often absolute authority exer cised by management. Management had developed complex systems of rules and regul ations for coordinating the labor force and reducing workers’ discretion in the production process, yet when it came to issues of wages, working conditions, the pace of wor k, and job security, management exercised caprice and favoritism. Employees in the Ford ist enterprises increasingly “resented the favoritism, arbitrariness, and cruelty of hiri ng practices that forced workers to abase themselves for preference in employment and that discarded older workers in favor of presumably more vigorous younger ones,” (Zieger and Gall 2002: 68). As such, a sort of explosive, militant discontent began to si mmer in the growing industrial workforce. Some employers attempted to coopt th e desire for collective bargaining through the establishment of company unions and worker representation schemes. This system, the so-called “American Plan,” emerged in th e years following the First World War. It was a more or less paternalistic arrange ment which substituted company welfare programs and the appearance of employee representation for genuine collective bargaining, but it did give some support to the advancement of industrial unionism by establishing the “one shop, one union” format in many enterprise s. In fact, several of the company unions established in the 1920s would eventually be taken over by militant industrial unions of the CIO. The American Plan – a form of enterprise corporatism which would have entailed a quite different system of industrial relations had it been institutionalized – collapsed when corporat ions abandoned their “g enerous” paternalism at the onset of the Great Depre ssion (Piore and Sabel 1984: 128).


73 The Great Depression and the misery it brought with it led to an explosive outburst of militant unionism among the mass of industrial workers who now constituted the core the American economy. With the passage of the National Industrial Recovery Act (NIRA), a New Deal initiative of the Roosevelt Administration, which in Section 7(a) extended legal reco gnition to unions for the first ti me, an eruption of unionization in the mass production industries brought millions of semi-skilled industrial workers into the AFL and other unions. Spontaneous re sistance and organization spread through the masses of unskilled and semi-skilled industr ial workers (Babson 1999: 64-5). The AFL and its craft model of unionism did not know how to cope with this influx of membership; the leadership attempted to organize the masses of industrial workers according to craft lines, dividing the work ers among different unions based on the types of jobs performed. The AFL was reluctant to engage in any type of mass organizing (even when the workers were taking all th e actual risk of organizing and bringing management to the bargaining table). They be lieved that the industria l workers should be divided up and controlled by veteran craft union ists (Zieger and Gall 2002: 82). It soon became apparent that the AFL’s strategic orie ntation was ill-suited for the reality of the corporate mass production economy. The Coalition of Industrial Organi zations (CIO) was founded in 1935 by a dissenting faction of AFL unions, led by John L. Lewis of the notoriously militant United Mine Workers. Lewis believed that for th e labor movement to succeed, it had to find way to organize the millions of industrial wo rkers who made up the core of American industry (Zieger and Gall 2002: 83). The CIO adopted a militant style of mass organizing which met with substantial success. In cont rast to the bureaucrati c, arms-length style


74 characteristic of AFL unions CIO unions maintained a shopfloor presence and used grassroots tactics (Zieger and Gall 2002: 92). By the end of the 1930s, the unions of the AFL would be emulating the organizatio nal style of the CIO and expanding the definitions of various crafts to include broa d segments of the industrial workforce (Zieger and Gall 2002: 100). The CIO’s success, however probably would have been either ephemeral or impossible without the state sanc tion provided by the new labor laws of the New Deal. Pro-union legislation was essential to mass industrial unionism. The NIRA spurred some organizing, but it was vague and weak and eventually overturned as unconstitutional. The National Labor Relations Act (or Wagner Act) established explicit rights to organization and esta blished labor relations in th e United States as we know them. This legislation, and the state suppor t that it implied, was critical to the mass organizing of the 1930s and 40s (Zieger and Gall 2002). Bipartism is the term which denotes this the form of labor relations, where representative s of labor and capital bargain as antagonistic parties while the state provi des the legal and procedural framework but does not endorse or attempt to achieve a ny specific outcome (Cox 1987). Bipartism emerged as a practical response to the condi tions of the economy in which it was born. Corporate mass production had given rise to industrial unionism, for which state regulation was necessary in order to restore and maintain industrial peace. Management was brought to the bargaining table by the co mbination of militant industrial unionism and the loss of the po litical support of the state (Babson 1999: 100-101) The end result was the institutionalization of an antagonistic but contractual form of labor relations.


75 The militant organizing waves of the 1930s were primarily aimed at attaining contracts which would limit mana gerial caprice in the treatment of workers and thereby improve the job security and working conditions of industrial workers. After the passage of the Wagner Act (and the affirmation of its constitutionality by the Supreme Court) workers were safe to organize and demand such contracts from their employers, and to do so with the implicit endorsement of the federa l government. This contract-oriented, “job control” form of unionism did not seek to f undamentally alter the system of management or the organization of produc tion. It was therefore not a challenge to the Fordist paradigm, it was only an attempt to alter the balance of power in the workplace. Through the contract and job control union ism, “labor turned the rigidi ty of work standards, work rules, and lines of job demarcation to its own advantage—improving health and safety on the job and enhancing job secu rity,” (Bluestone and Bluest one 1992: 49). This system was especially attractive to the masses of less skilled work ers who had previously been completely at the mercy of the dictates of managers. But the sk illed workers who had dominated the craft unions of the AFL could benefit as well, without needing to abandon their fellow workers by forming their own exclusive bargaining units: “Maintaining narrowly defined job classifications for skil led workers also provided a form of job security. Functions of tradesmen such as th e electrician, the millwright, and the carpenter were defined, and the union made certain that these jurisdictional lines were not crossed,” (Bluestone and Bluestone 1992: 49). The contract also channeled the simmer ing capital-labor conflict away from classbased solidarity and towards a more indivi dualistic model of unionism. The contract identified workers as individuals with rights to be defined and protected rather than as


76 members of a subordinate class, and as such it did not challe nge either cap italist property relations or the fundamental assumptions of liberalism (Rupert 1995: 87). This meant that the capitalist class could accept the gr owing power of organized labor without fearing the loss of their privileged position in the economy or the ex propriation of their property. As organized labor’s gains were consolid ated during the war ye ars, the contract continued to be the central el ement of collective bargaining. Unions sought to establish stable, contractual relations hips governing wages, work rules, and seniority, and established procedures for th e redress of workers’ grie vances (Zieger and Gall 2002: 111). The purging of radicals (w ith their more militant and ambitious goals for organized labor) from the unions following the war was th e final step in institutionalizing this contractual job control unionism in the U.S. labor movement. The Second World War had a much more profound impact on unions than simply helping them to consolidate their previous gains. Union membership took off during the first three years of conflict (1939-1942) as the economy recovered and unemployment plummeted. Millions of work ers joined the unions of the AFL and CIO, and contracts were won with some of the most stubbornl y anti-union employers (Zieger and Gall 2002: 106-7). At the same time, however, the govern ment assumed a much more active role in industrial relations, with the ex igencies of war legitimizing state intervention to prevent interruption of the production of vital war supp lies. Prices and wage s were regulated, and the National War Labor Board (NWLB) wa s created to manage wartime production, consisting of representatives of business, labor and government. The national union organizations agreed to a “ no-strike pledge” following the attack on Pearl Harbor to


77 prove their patriotism and support of the wa r effort. In exchange, the NWLB forced businesses to accept “union shop” provisions wh ich required all newly hired workers to join the union, allowing unions to maintain their membership absent the possibility of recourse to the strike weapon (Babson 1999: 119). In practice, however, the no-strike pledge and union participation in the NWLB meant that unions would become increasingly centralized, w ith national leadership a ssuming the responsibility for disciplining union locals, enfo rcing their support for the wartime production effort, and ensuring their adherence to the pledge desp ite the wishes of the locals’ represented workers. This resulted, by the end of th e war, in a national union structure that was centralized, hierarchical, bureau cratic, and conservative (Rup ert 1995: 99). In fact, the national union organizations came to mirro r in form and function the Fordist corporations’ own bureaucratic st ructures. In a larger sense, the experience of managing production during the war instituti onalized the bipartite labor re lations system. As Piore and Sabel write, The wartime experience taught a generation of business executives, labor leaders, and “neutral” arbiters to accept one another, as well as to reconcile equitable industrial relations with the demands of economic efficiency. Their collaboration exemplified a system of industrial relations that presupposed yet circumscribed conflict, by focusing on the development of a “rational” structure of wages, salaries, and job definitions, as against other kinds of worker demands (1984: 100). In the years immediately following the war, a wave of strikes rocked the economy. When the dust settled, the arrangeme nts which would establish the framework of the postwar capital-labor accord were in place. Key agre ements reached in the auto industry between the United Auto Workers (UAW ), GM and Ford established the rights of labor and the prerogatives of management as well as deciding the distributional issues of wages and benefits. The UAW-Ford agreem ent was symbolically significant as well –


78 before the war they had been the most militant union and most virulently anti-union company, respectively – in that it demonstrated the ability of labor a nd capital to forge an ideological common ground based on social pe ace and generalized prosperity (Rupert 1995: 162). In practical terms, these agreem ents would instituti onalize the contractual job control form of unionism and constitute the basic model of labor-capital relations under the segmentation SSA. The key features of the union-manage ment relationship were wage rules, connective bargaining, and job control (Kat z 1985). Wage rules were intended to increase the stability of the union-manage ment relationship by providing performance measurements for contract negotiations, as well as ensuring steady wage growth for workers. Wages were determined by job cl assification, and Annual Improvement Factor (AIF) and Cost of Living Adjustment (C OLA) formulas provided for yearly wage increases (Katz 1985: 28-9). Connective bargaining elimin ated inter-plant or intercompany divergence in contract terms (partic ularly wages and bene fits). Contract negotiations set wages based on job classificat ions on a national ba sis and could not be negotiated by local unions (K atz 1985: 30-1). Finally, j ob control protected workers rights with job security and a voice in work ing conditions, but simultaneously protected managerial decision-making prerogatives. In essence, job control “constrained management to deal with a legally constitute d union over a range of work-site issues, but it stopped short of providing wo rkers or their representatives with any meaningful input into the strategic decisions of the firm beyond the workplace,” (Bluestone and Bluestone 1992: 43).


79 At a more qualitative level, the labor-m anagement relationship established in the postwar accord can be understood as central ized, adversarial, a nd legalistic. The centralized organizational structure which originated in the no-strike pledge was institutionalized. Local unions had to get appr oval from national offi ces before strikes or other actions could be undertaken. Wage -setting and bargaining took place at the national level (Katz 1985: 46). The adve rsarial relationship between unions and management was also institutionalized. Robert Cox (1987: 65) argues that the institutionalization of labo r-capital conflict is the product of the hegemony of the capitalist class, which could afford to ma ke concessions without fear of losing its privileged position. Bluestone and Bluestone, however, aptly point out that adversarial management-labor relations produced benefits for workers as well as the owners of capital, by providing workers with rapidly risi ng wages and benefits, job security, and a seniority-based advancement system, while si multaneously protecting profits by the sheer growth in the size of markets and allowing management relatively unquestioned authority to run the enterprise (1992: 42) Finally, the legalistic char acter of contractual unionism – complete with a quasi-judicial grievance m echanism – attempted to foster a “workplace rule of law” which legitimated managerial control through the esta blishment of complex procedural rules. This reinforced the indivi dualistic (rather than cl ass-based) nature of labor-management relations, suppressing and channeling workers’ militancy and reducing the collective bargaining process to an essentially economic negotiation over the size of labor’s share of the spoils of mass production (Rupert 1995: 167).


80 THE GOLDEN AGE: ECONOMIC BENEFITS OF SEGMENTATION Whatever its shortcomings, the segmen tation SSA and the postwar capital-labor accord produced a period of growth and expa nsion that has been justifiably labeled the “Golden Age” of American economic history. Unemployment was persistently low, average annual GDP growth exceeded four perc ent, and real wages experienced rapid and sustained growth. While the number of Am erican workers covered by a union contract was always a minority of the labor force, unions were able to bring substantial benefits to all workers, and indeed to the economy as a whole. The labor relations system institutionalized under segmentation brought secur ity, stability, and prosperity to the core of the American economy. The system of Fordist mass production co mbined with institutionalized labormanagement conflict proved to be a powe rful formula for economic growth. Union membership reached its peak in the 1950s w ith more than one third of the workforce covered by collective bargaining agreements The size and strength of the labor movement meant that workers were able to demand a large and growing share of revenue and reap the benefits of improvements in productivity. However, as the term segmentation denotes, the workforce itself wa s divided, both within firms and between the core and peripheral sectors of the econom y. Firms used promotion within internal labor markets to command the loyalties of be tter-paid workers. More importantly, the economy was divided between an oligopolistic and competitive sector. Firms in the core experienced high profits and limited risk a nd competition and implemented advanced systems of labor control, bargaining with uni ons or treating their workforces generously to ward off the threat unionization. Firms in the peripheral, competitive sector were


81 smaller, faced intense competitive pressure and financial risk, and relied on more primitive labor control systems (and had a much lower rate of unionization). The core and periphery of the economy existed in a symbiotic relationship, with the periphery absorbing the risk and providing excess cap acity for the core and producing products incompatible with the production, management, and labor relations systems of core firms (Gordon et al 1982: 189-92). There was a gender and racial component to segmentation as well; workers in the periphery were disproportionately women and minorities (McDonough 1994: 120). Within the oligopolistic core, however, there was secure employment, high rates of unionization, and st eady wage growth. These key sectors of the economy were characterized by a union-medi ated system of partial cooperation which James Crotty terms “corespective competiton,” (2002: 6). Pattern bargaining, by which collective bargaining contracts with one core firm would set an industry standard which would be matched in agreements with other core firms, lim ited the extent of price and cost competition. This led to a stable a nd prosperous arrangement in key industries: “Firms in core oligopolies could engage in long-term planning, ge nerously fund R&D, invest at a rapid pace, and o ffer lifetime employment to most of their workers. Profits were high enough to finance most investment internally and external finance was available at a modest cost, so indebtedness was kept within safe bounds,” (Crotty 2002: 6). Driven by the high profits and steady growth of firms in the core oligopolies, the economy experienced high and sustained GDP growth (above four percent annually) from the 1940s through the 1960s. While union s assumed the bulk of the responsibility for stimulating aggregate demand growth, the co nservative Keynesian state maintained a


82 Figure 3: U.S Monthly Unemployment Rate, January 1948-December 1973 0 1 2 3 4 5 6 7 8 91948 1948 1949 1950 1951 1951 1952 1953 1954 1954 1955 1956 1957 1957 1958 1959 1960 1960 1961 1962 1963 1963 1964 1965 1966 1966 1967 1968 1969 1969 1970 1971 1972 1972 1973Unemployment Rate (Percent) Source: Bureau of Labor Statistics commitment to full employment codified in the Employment Act of 1946 (Gordon et al 1982: 169). As a result, unemployment remain ed persistently low (between three and seven percent) despite the entrance of large numbers of female workers into the labor market (see Figure 3). Low unemployment and steady wage growth generated growth in aggregate demand which supplied the high profits necessary to finance the high wages in the core industries. The so-called high road labor relations which characterized the capital-labor accord generated high productivity growth. The period was characterized by a “virtuous circle” where oligopolistic co mpetition financed high wages and rising productivity, which in turn increased aggreg ate demand and generated secure profits for core firms, limiting the extent of destructiv e price and cost competition (Crotty 2002: 6).


83 From the late 1940s to the late 1960s, industria l output grew at an average rate of five percent annually, productivity (in terms of output per worker) doubled, and real personal income per capita increased by seventy percent (Gordon et al 1982: 167-8). Both workers and their employers reaped the bene fits of the high grow th generated under the segmentation SSA and the capital-labor accord.


84 THE DECAY OF SEGMENTATION: CRISIS AND STAGFLATION Crisis befell the segmentation social st ructure of accumulation in the 1970s and continued through the 1980s. Th e causes and indicators of th e crisis are well known, so I will offer only a brief and somewhat stylized summation. Government spending, which had incr eased dramatically during the Second World War the Korean conflict, began to ge t out of control duri ng the expensive and protracted Vietnam War. Defense spendi ng, which had pulled the economy out of the Great Depression and helped generate the prospe rity of the Golden Age, began to become a drag on the economy and, since it was increa singly financed by debt and a persistent trade deficit, erode confidence in the dollar internationally (Llewe llyn and Presley 1995: 267-72). The OPEC oil embargoes in 1973 a nd 1978 caused recessions and inflation and ended the era of cheap energy inputs which ha d helped fuel the rapid postwar expansion. The reconstruction of the economies of Europe and Japan brought an end to the era of unchallenged American economic supremacy and led to increased competition and import penetration, ending the stability of oligopolistic competition in the American domestic market and reducing the foreign ma rket share of American corporations. Finally, technological innovations permitting more flexible forms of production began to threaten the mass production paradigm itself, al lowing smaller runs of less standardized goods (Wallace and Brady 2001: 111-112). Americ an companies were much slower to adopt these new technologies than their Germ an and Japanese counterparts, and their competitive position was correspondingly w eakened (Kenney and Florida 1992). According to Gordon, Reich and Edwards, the capital-labor accord wa s actually a victim of its own success, since the prosperity generated by the Golden Age expansion


85 eventually gave workers and other groups a de gree of economic and political power that began to undermine profitability and accumulation (1982: 29). As a consequence of these and othe r factors, the stable growth, low unemployment, and generalized prosperity of the postwar Golden Age came to an end; in other words, the social structure of accu mulation of segmentation entered a period of decay. The immediate consequences of the crisis were numerous. The Bretton Woods system which had underpinned the internati onal economic order of the postwar era was abandoned in 1971-3 and replaced with a system of floating exchange rates (Llewellyn and Presley 1995). The economy entered a prot racted period of hi gh inflation and low economic growth, which would be referred to as stagflation The inability of macroeconomic policy to resolve stagfl ation weakened confidence in the Keynesian state. This economic crisis combined with the eventual abandonment of the commitment to full employment under the Reagan Administration led to persistently high er average rates of unemployment (between five and eleven perc ent) from the mid-seventies until the early nineties (see Figure 4). Fi nally, increased import penetrat ion inaugurated a period of intense global competition which would come to be known as globalization. As noted in Chapter III, the perceived cau ses of an economic crisis are a critical factor in determining the institutional solutions to the crisis. Thus, as the perceived cause of the Great Depression was overproduction – a deficiency of effective demand for the products of the mass production economy – the institutional solutions to that crisis were oriented towards boosting aggregate dema nd, specifically by redistributing wealth towards consumers by promoting wage growth and providing social insurance for the


86Figure 4: U.S Monthly Unemployment Rate, January 1974-December 1994 0 2 4 6 8 10 121 9 74 1 9 7 4 1 975 1 976 1976 1977 1 9 78 1 9 7 8 1 979 1 980 1980 1981 1 9 82 1 9 8 2 1 983 1 984 1984 1985 1 9 86 1 9 8 6 1 987 1 988 1988 1989 1 9 90 1 990 1 991 1 992 1992 1993 1 9 94 1 994Unemployment Rate (Percent) Source: Bureau of Labor Statistics by increasing the demand for goods and services. By contrast, the perceived cause of the crisis which began in the 1970s was, in a word, inflexibility The inability of American corporations to remain competitive in th e face of changing economic conditions was blamed on overly rigid institutional envir onment, created by excessive government regulations, union contracts which placed undue constraints on managerial decisionmaking, and high labor costs (e specially the costs associat ed with hiring and firing workers in response to increases or decr eases in demand). More broadly speaking, inflexibility implies distortion of the market, si nce the supposed virtue of flexibility is the ability to adjust to changes in market condi tions. Insofar as labor unions and government regulations prevented firms from pursuing whatever course of action they felt was warranted by the conditions of the market, they were perceived as market distorting


87 institutions which placed a drag on economic pe rformance and retarded profitability. As a result, the very institutions which were responsible for launching the most spectacular period of economic growth in American hi story were now charged with preventing American companies from being able to compete with their foreign rivals. Antonio Gramsci referred to “common se nse” as the residue of the dominant philosophical ideas of an epoch permeati ng the popular consciousness and presenting itself as uncritically accepted assumptions. John Maynard Keynes expressed a similar sentiment when he wrote that “practical me n, who believe themselves quite exempt from any intellectual influences, are usually the slav es of some defunct economist,” and that in the end, “the power of vested interests is va stly exaggerated compared with the gradual encroachment of ideas,” (Ke ynes 1964 [1936]: 383). Indee d, the changing conditions of the economy would be accompanied by the spread of new ideas about the economy and the state’s role in it which would eventual ly sweep away the formerly sacrosanct economic institutions of the postwar economic order, despite all the resistance of its vested interests. The soon to be generall y accepted notions that th e institutions of the postwar Golden Age were market-distorting impediments to accumulation, and that flexibility and free markets were the keys to success and recovery, di d not just pop out of thin air to become popular wisdom. It too ha d its origins in the sc ribblings of economic theorists who had previously been disreg arded and consigned to obscurity. These theorists belonged to the neoclassical sc hool of economics, and the doctrine they preached would come to be known as neoliberalism (in reference to the liberalism that had underpinned the laissez-faire economic policies of the nineteenth century). Neoclassical economics, as formulated by th e likes of Ludwig von Mises and Friedrich


88 von Hayek of the Austrian School, had lost the fight with Keynesianism over the construction of the postwar economic order and been relegated to the sidelines of economic thought and policy-making. It reemer ged in the 1960s, most notably in the work of Milton Friedman at the Chica go School of Economics. As Guy Standing describes the doctrine’s rise to intellectual hegemony: “Its adherents claimed that much of what had passed for success in the pr evious era was actually failure, and was preventing success in the future. The [neo ]liberals preached heresy in the 1970s, and were mocked as intellectual oddities. By th e end of the decade they were strutting like peacocks. In most of the 1980s and 1990s they had the field almost entirely for themselves,” (1999: 58). The immediate consequences of the shif t from Keynesian to neoliberal economic ideology were an attack on workers and labor unions, a reorientation of state macroeconomic policy, and deregulation. As firms faced financial crisis and desperately looked to cut variable costs, the generous wage packages negotiated in union contracts were often the first target. Starting with Chrysler in 1979, American auto companies demanded and won wage concession packages with the UAW. This was not enough to rescue American corporations from the desp erate situation they were facing. Soon, the entire capital-labor accord came under fire and was ultimately abandoned. Starting with the symbolic firing and permanent replacement of the striking air traffic controllers by President Reagan in 1981, the cap ital-labor accord erupted into all out war – and, with the implicit endorsement of the state behind it, capital won decisively. Figures 5 and 6 illustrate this trend, as union membership and the annual number of work stoppages both begin to fall steadily after 1981.


89Figure 5: U.S. Manufacturing Work ers, Percent Union Members, 1983-2005 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 19831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005 Source: Figure 6: Annual Number of Work Stoppages Involving 1000 or More Workers, 1981-2005 0 20 40 60 80 100 120 140 1601981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: National Labor Relations Board


90 The conservative Keynesian state was rema rkably rapidly swept away during the years of the Reagan admi nistration, when the commitm ent to full employment was abandoned and the Federal Reserve adopted a new policy orientation emphasizing controlling inflation and intere st rates. A new macroec onomic management doctrine – supply-side economics, or Reaganomics – absolved the federal government of its responsibility for stimulating demand and inst ead gave primacy to promoting favorable conditions to investment. This invest ment-promoting policy framework meant in practice policies that reduced the costs of doing business, such as by cutting taxes. Finally, the deregulation movement aimed to remove supposedly market-distorting and competition-reducing government oversight of the economy and thereby give primacy to the forces of the free market. Although the decay of the segmentation SSA continued throughout the 1980s and 90s, the period of exploration of a new social structure of accumulation began simultaneously, based upon a newly evolving techno-economic paradigm and associated with a new form of production organization wh ich began to displace the crisis-stricken system of Fordist mass production. I argue that this new SSA, which I refer to as globalized production is now experiencing a period of consolidation. In the following chapter I will discuss the core institutions and organizing princi ple of the globalized production SSA, and how the organizational a nd techno-economic paradigms with which it is associated have impacted or ganized labor in the United States.


91 CHAPTER V. THE CONSOLIDATION OF THE GLOBALIZED PRODUCTION SOCIAL STRUCTURE OF ACCUMULATION: STRUCTURAL CHALLENGES FOR ORGANIZED LABOR The exploration period of the globa lized production social structure of accumulation began in the early 1980s, with th e development and proliferation of a new organizational paradigm and the changes in macroeconomic policy initiated during the Reagan administration. It co ntinued through the 1990s, with important new international economic regimes including the World Trade Organization and the consolidation of a new international financial system. The organizing principle of the new SSA was flexibilization – a generalized, profound, and sustaine d pursuit of flexibility driven by intense international competition and technolog ical innovations facilitating new, more flexible forms of production. In my interp retation, the five core institutions of the globalized production SSA are: neoliberalism; the neoliberal state; a disembedded global financial market; flexible, disintegrated pr oduction; and international regimes ensuring the free movement of goods, services and capital. I will discuss the importance of each of these institutions before describing the organizational paradigm which has risen to predominance under this social structure of accumulation. First, I will briefly summarize the SSA literature regarding the existence of a new social structure of accumulation. There is considerable disagreement in th e literature over the question of whether a new SSA has been consolidated or even begun a period of exploration. David M.


92 Gordon, in one of his final essays on the subj ect, wrote that the transformations in the global economy since the 1970s all point to the decay of the segmentation SSA. He saw no convincing evidence of any signs of c onsolidation of a new SSA (Gordon 1994). Robert Went (2005) analyzed data on cor porate profitability to assess the empirical evidence of a long-swing expans ion. Although he describes a new stage of accumulation associated with neoliberal globalization, he finds no evidence that the new institutional structure was capable of producing sufficient growth or profitability to launch a longswing expansion. Phillip Anthony O’Hara (2003) similarly looked for evidence of a new “transnational corporate social structure of accumulation” and, although identifying four “tendencies” of the new transnational corpor ate system, also found that the new system has failed to generate a longswing expansion. His conclusion was that “overall, the global corporate system is at best in a tran sitional phase where the conditions for profit, accumulation, and growth are not optimistic for long waved upswing,” (2003: 20). On the other hand, Michael Reich writes th at while it is unclear whether a new SSA has been consolidated, four “qualitati ve shifts” (changes in corporate governance, new forms of work organization, the new ‘centr ist’ role of the federal government, and changes in international institutions pr omoting open regionalism) may indicate the existence of a new social structure of accumu lation (1997: 7-8). Victor D. Lippit argues that the construction of a new SSA began ar ound 1980, characterized by elements such as the strengthening of capital relative to labor, a change in financial institutions favorable to investment, corporate re-engineering, smaller government, and deregulation (1997: 12). Martin H. Wolfson argue s that neoliberalism is a tr ansitional phase which does not represent a new SSA because “it has not restor ed stability, profitabil ity, or growth,” and

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93 that it is rather “a new institutional structure that represents the dominance of capital over labor,” (2003: 260). Michael Wallace and David Brady (2001) are perhaps the most convinced that a new SSA, which they term spatialization has been consolidated. Spatialization is characterized by “the spatial restructuring of work as the primary means of employers to reassert control over the labor process,” (2001: 102). Wallace and Brady focus on the systems of labor control, whic h they argue are central to maintaining corporate profitability. Their analysis, howev er, offers no outline of the institutional core of the new SSA, and only cursory referenc es to changes in the organization of production. With these arguments duly noted, it is my c ontention that a new social structure of accumulation is being consolidated, and that its institu tional core is identifiable, but that it is an SSA which has generated much lower levels of growth and profitability than segmentation or other previous SSAs. This has prevented the inauguration of a new long-swing expansion; but, as noted in Chapter 3, a long-swing expansion is not necessarily an essential compone nt of a social structure of accumulation. I do not intend to argue that a global or transnational SSA is being consolidated. While certain international institutions have become important enough to now represent core institutions of national social structures of accumulation, and are in fact helping to accelerate a convergence among the various nati onal social structures of accumulation, there remain sufficient distinctions among national macro-institutional arrangements to be able to distinguish and comparatively anal yze national SSAs. I therefore continue to refer specifically to the so cial structure of accumulation of the United States when I

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94 discuss the globalized production SSA. With these explanations and caveats in mind, I will now briefly discuss the core institu tions of the globalized production SSA.

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95 THE GLOBALIZED PRODUCTION SSA The first core institution of globalized production is neoliberalism Neoliberalism is the primary ideological foundation of the vari ous institutional response s to the crisis of the 1970s, and can be considered an institu tion because of its importance in economic policymaking and its almost unchallenge d intellectual hegem ony in the economics discipline. The assumptions and recommenda tions of the neoliberal economic doctrine are indeed a nearly ubiquitous component of major na tional and international economic policies and institutions. The relationship be tween abstract economic doctrines and their real-world institutional manifestations can be observed in the assumptions on which policies or institutions are founded and in the visions they project about the ideal outcome of their implementation. The segmentation SSA idealized security, especially income and employment security. It sought to deco mmodify labor – that is, to make employment less of an economic transaction and more of a social relation ship – and therefore to make labor deliberately less flexible and more st able (Standing 1999: 512). This had an ideological foundation in Keynesianism, wh ich emphasized the importance of reducing uncertainty, mitigating the effect of business cycles, and promoting stable growth through the management of aggregate demand. The globalized production SSA, by contrast, idealizes flexibility and seeks to remove a ll rigidities and impediments to the optimal allocation of resources (including labor) by the market. This has its ideological foundation in neoliberalism, which holds th at economic growth is most effectively achieved by encouraging investment, more specifically by allowing maximum discretion on the part of economic agents in the deploym ent of productive and financial resources in the most efficient and profitable manner po ssible. Put somewhat more succinctly,

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96 neoliberalism promotes the “belief that indivi dual security hinders economic growth, that public institutions impede market clearing, a nd that inequality acts as the motivational force for accumulation,” (Standing 1999: 60). Moreover, neoliberalism has done away with the idea that profits are best maximized by increasing sales, i.e. promoting demand. Instead, neoliberalism is almost wholly obsesse d with cutting costs in order to increase profits (Campbell 2005: 196). The second core institution of globalized production is the neoliberal state The role of the state in relation to the economy has changed considerably since the ascendance of neoliberalism. There has been a general trend (in rhetoric if not always in practice) towards a preference for smaller govern ment, that is, the re duction of tax rates and government budgets at all levels. Rather than being a boost to economic activity, neoliberals view government spending as “crowding out” private investment and resulting in the misallocation of resources. Deregulation was a major policy shift beginning in the early 1980s by which neoliberals sought to reduce the impact of government regulation in the economy. However, this does not imply that neolib erals do not advocate or exercise state intervention in the economy. The difference, as Kim Moody poi nts out, is that they use state intervention “in ways that free up market forces, rather than restrain them,” (1997: 120). Deregulation is, fundamentally, a misnomer. The deregulation which has been advocated (and largely attained) by neoliber als since the 1980s would more be properly referred to as re regulation. As Guy St anding correctly points out, no society can exist without modes of regulation, and those w ho advocate “deregulation” are actually

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97 advocating a quite specific type of regulation, namely one wh ich increases the role of market forces in the economy (1999: 39-40). Standing distinguishes between three types of regulation: statutory regulation, which ar e laws and rules which set parameters for acceptable behavior; market regulation, whic h seeks to maximize reliance on markets to govern behavior; and voice regu lation, which manages beha vior through bargaining and negotiation amongst parties with conflicting interests (1999: 40-42). Government regulations setting health and sa fety standards or wage and pr ice restrictions are examples of statutory regulation, while the determin ation of prices on the market (and the corresponding behaviors these prices induce) ar e a form of market regulation. Advocates of deregulation have, it is true, sought to weaken or remove many forms of statutory regulations; at the same time, however, they have advocated “a mixture of repressive and fiscal regulations, with some promotional regulations, while vigorously opposing protective, pro-collective regulations and in stitutions,” (Standing 1999: 42; emphasis in original). So the purpose of deregulation ha s actually been to protect certain economic agents (capital) at the expense of others (workers, consumers, communities, etc). Corporations need the state for the laws, prot ections, and regulations it provides, but seek to limit state autonomy in various ways in orde r to protect the profita bility of capital and to secure it against the threat of seizur e or expropriation (Moody 1997: 138). Thus the somewhat contradictory character of the neoliberal state. Another change in the role of the state is in the real m of monetary policy. The conservative Keynesian state had sought to strike a balance between pursuing full employment and controlling inflation, tw o conflicting though not mutually exclusive goals. Beginning in 1980, the Federal Reserv e has abdicated the responsibility for

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98 pursuing full employment and instead give n overwhelming priority to controlling inflation. Rather than pursuing full employ ment at the cost of modest inflation, unemployment would be allowed to settle at the “natural” level dete rmined by the forces of supply and demand in the labor market ( NAIRU, or the natural inflation-restricting rate of unemployment). This has had two c onsequences: “First, it has provided political cover for higher average rates of unemploym ent, which have undermined the bargaining position of workers. Second, it has provided co ver for keeping real interests rates at a higher level, thereby benefiti ng the wealthy and the financia l sector,” (Palley 2005: 24). The final important aspect of the neoliber al state has been a tendency to remake the world in its image. Besides the ins titutionalization of neoliberal policies in international agreements and regimes (discuss ed below), the neoliberal state itself has spread across much of the globe since 1980. The Reagan and Thatcher administrations brought the neoliberal state to the core of the advanced indus trial world; the International Monetary Fund, through its structural adjustment programs and debt conditionality policies, brought the neoliberal state to much of Latin America and the developing world in the 1980s and 90s; and the “shock therapy” programs of the 1990s brought neoliberal state to much of the former Soviet bloc including Russia itse lf (Standing 1999: 61-2). The third core institution of globalized production is the global financial market The liberalization of global cap ital flows began shortly after the collapse of the Bretton Woods system and the shift to floating exch ange rates in 1971-3. Canada, Germany, and Switzerland abolished all restrictions on cap ital movements in 1973. The United States did likewise in 1974, and other major industrial powers eventually followed (Eatwell and

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99 Taylor 2000: 3). Eatwell and Taylor argue that the liberalization of global capital markets began unofficially with the creation of the Eurodollar markets in the 1950s, and proceeded incrementally with liberalization of exchange rates (1971-3), bond markets (1980s), and equity markets (1990s), resulti ng in a liberalized a nd largely unregulated global financial market (2000: 36-7). Financ ial liberalization was a necessary result of the floating exchange rate regime, since this system, as opposed to the fixed-rate regime it replaced, “stimulated capital flows with a powerful cocktail of the carrot of speculative profit and the stick of financial risk, laced with the proceeds of extensive arbitrage,” (2000: 3). As noted above, deregulation constitutes a shift to market regulation, and the deregulation of global finance created a power ful transnational financial sector which began to regulate not only the behavior of fi nance but, in important ways, the behavior of non-financial corporations as well. Evid ence suggests that “we have moved from a Golden Age system in which finance s upported real-sector gr owth and capital accumulation, toward a neoliberal system in wh ich finance in some sense ‘dominates’ the real sector, impeding economic growth a nd imposing more regressive distribution systems on most of the global economy,” (Crotty 2002: 12). The growing power and importance of financial capital – and its mobile, disembedded nature, which makes it nearly immune to state regulation – has cha nged the competitive environment, planning horizons, and investment patterns of the pr oductive sector of the economy. This has produced a condition which James Crotty refers to as “coercive competition,” where destructive price and cost competition creates a vicious circle that impedes profitability and results in chronic excess capacity in key in dustries (2002: 7). Furthermore, Eatwell

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100 and Taylor charge that the high and volatile in terest rates resulting from financial market liberalization has hurt corporate performan ce by reducing cash flow and undermining investment plans (2000: 114). Despite a steady wave of technological innovations, productivity growth is kept low since defl ationary macroeconomi c policies and the low overall rate of growth result in new technol ogies changing merely the composition, rather than the total amount, of produc tive activity (Eatwell and Ta ylor 2000: 136-7). Finally, Crotty notes that changes in the incentives of corporate executives which links their compensation to short-term stock price fluctua tions, combined with th e transfer of stock ownership from households to institutional owners (such as mutual funds) and the associated emphasis on “shareholder value” abov e all else, has significantly shortened the planning horizons of non-financ ial corporations ( 2002: 17-23). Robert D. Atkinson notes that “the environment is such that firms that do not cut costs and improve financial performance face swift acti on in equity markets,” (2004: 121). The pursuit of sustainable, long-term growth has been disp laced in favor of maximizing key quarterly economic indicators. Fred Block (1996) e xplicitly attributes these changes in the international financial system to the highe r unemployment and slower growth of the world economy since the 1970s. The liberalization of global financial markets has resulted in capital which is increasingly “footloose” and ther efore more difficult to regula te and tax. Governments at the national and local levels now somewhat notoriously “compete” to attract investment capital by offering generous tax incentives and subsidies to transnational corporations to persuade them to locate operations within th eir borders. This has put pressure on wages and labor protections, which represent higher costs of doing business, and has led to a

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101 shift in the redistributive bur den from capital to labor (Sta nding 1999: 71). The explicit or implicit threat that oper ations will be relocated ab road in response to union organization drives has also significantly hampered the ability of unions to win certification elections, especia lly in more mobile industries such as manufacturing (Bronfenbrenner 2000). All in all it seems that if th e globalized production SSA continues to fail to generate higher levels of employment, profit and growth it will be the structure of the global financia l market that is responsible. The fourth core institution of globalized production is flexible, disintegrated production Digital technologies (e specially computers) have made possible more flexible systems of producti on. Innovations such as num erically-controlled machine tools, computer-aided design (CAD) and manufacturing (CAM), and electronic data interchange (EDI) have enhanced firms’ ability to produce smaller runs of more specialized or customized products and to re spond to small fluctuations in demand in more precisely targeted market segments. This has led to a demand for an equally flexible labor force, a demand which has been increasingly met with the assistance of the neoliberal state. A new system of “flexible accumulation” has risen to predominance in the global economy (Wallace and Brady 2001: 112). Atkinson goes so far as to state that market tools and flexibility have replaced command and control as the mode of regulation in the economy (2004: 96). Flexibilit y in the labor force has taken the form of wage flexibility, numerical flexibility, a nd functional flexibility (Wallace and Brady 2001: 112). Wage flexibility has been pursu ed through the indivi dualization of wage determination, achieved in part thanks to the decline of unions, reduction of workers’

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102 bargaining power, and the implementation of individualistic rather than collectivistic forms of regulation (Standing 1999: 97). Nume rical flexibility has been achieved by the outsourcing of portions of th e production process and the in creasing use of contingent (temporary, part-time, informal, etc.) workers. Functional flexibility has been increased through multi-skilling and the proliferation of team-based forms of production. Increased competition and uncertainty in the global economy have reversed the previous trend towards vertical integrati on which characterized Fordist mass production. This trend was epitomized by Ford’s mammoth River Rouge plant, which was an attempt to integrate all stages of the automob ile production process, including even the production of steel, under one roof. This has be en replaced with a much more flexible and adaptive system dominated by networks linking the various firms in a commodity chain, an arrangement more stable than arms -length market relati onships but less rigid than vertical integration. It also represents a deepening of the sp atial and organizational division of labor, with the disi ntegration and dispersal of prev iously integrated production systems. As Wallace and Brady point out, the pr imary advantage of networks is that they “afford organizations some security in an uncertain economic environment by allowing them to pool and exchange information and other resources, but they are implicitly impermanent, allowing firms to uncouple quickly if circumstances change,” (2001: 122). Duguay, Landry, and Pasin describe the network model of supply relati onships as one of long-term partnerships, which complement an “organic” organizati onal structure which “appears as an open system in search of harmonious relations with its environment,” (1997: 1191).

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103 The demise of vertical integration has been accompanied by the demise of the strictly bureaucratic enterprise structure. This has been replaced with what Standing refers to as a “federal” structure, a more flexible form of orga nization in which “the organizational integration of the firm is loosened… so that there is either a core to which a set of satellite units are almost umbilically tied or a core that shrinks to little more than a co-ordinating unit,” (1999: 122). This ha s been accompanied by a gradual shift to a “financial” conception of the corporation as an ephemeral arrangement of liquid subunits which can be restructured, dissolved, or s pun-off at any point in time in order to maximize the stock price of the firm (Crotty 2002: 17). In other words, corporations are increasingly characterized by loose arrangements of semi-autonomous profit centers which command the loyalty of the corporate he adquarters only to the extent that they generate revenue and improve the attractiv eness of the firm in equity markets. The fifth and final core institu tion of globalized production is international regimes ensuring the free movemen t of goods, services and capital This is the most well-known institution of the global economy an d the one most often associated with globalization. It is also one of the most important. Vari ous global (e.g. the World Trade Organization) and regional (e.g. NAFTA) ag reements and organizations have been created which are designed to reduce barriers to trade and facilitate cross-border exchange and investment. While trade liber alization was also a cornerstone of the postwar international economi c order, it was generally focused on the gradual reduction of tariffs on tradable goods. Various instit utions which have be en created since the 1980s, however, seek to remove all explicit and implicit barriers to the free movement of

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104 goods, services, and capital across borders. Th e result has been an institutionalization (and in fact intensification) of the heightened level of global competition characteristic of the neoliberal era, as well as the disembedding of capital fr om national economies. This has led to the globalization of production a phenomenon which involves “not merely the geographical extension of economic activity but also – and more importantly – the functional integration of such internationally disper sed activities,” (Dicken 2003: 12). Globalized production is characterized by the in ternationalization of accumulation, as the transnational character of th e three “circuits of capital” – production, investment, and trade – have all been institutionalized and protected by international agreements and institutions (Went 2005: 378). Furthermore, accumulation is not just globalized, but neoliberal, as the multilateral economic agr eements and institutions which have been established all limit the ability of states to regulate their own economies and the behavior of transnational corporations, and all seek to guarantee the sanctity of private business property (Moody 1997: 137). These five core institutions neolibera lism; the neoliberal state; a disembedded global financial market; flexible, disinteg rated production; and international regimes ensuring the free movement of goods, services and capital – repr esent a functionally integrated social structure of accumulation wh ich began its period of exploration in the United States around 1980. The organizing prin ciple of this SSA is flexibilization, the singular obsession with increasing institutional and organizational flexibility that arose from the crisis of the 1970s and has domina ted economic policymaking ever since. The obsession with flexibility has been both reflec ted in and reinforced by the evolution of a new form of production organization to displace Fordist mass production. In the

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105 following section I will discuss this organizatio nal paradigm and its implications for labor relations.

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106 THE LEAN PRODUCTION PARADIGM The organizational paradigm which has e volved to displace Fordism is referred to as lean production Although there is substantial di sagreement over the appropriateness of this term, there is enough agreement on the essential featur es of the production system it describes to be able to ignor e this largely semantic debate.* Lean production involves, briefly, the replacement of the ‘just-in -case’ model of Fordist mass production, characterized by high-volume production, larg e inventory buffers, bureaucratic control and vertical integration, with the ‘just-in-time’ m odel, characterized by small, flexible production runs, low inventories facilitated by close relationships with suppliers, the functional integration of work tasks, and smaller firms with market strategies focused on narrow “core competencies” and differentiated pr oducts. I will discuss in more detail the essential characteristics of lean production, followed by a discussion of the implications of this organizational paradigm for labor relations. While lean production has not completely displaced Fordist mass production (or indeed all other forms of production) in the American economy, it has become sufficiently diffused, developed, an d consolidated to be considered the paradigmatic form of production. Paradigms represent ideal type s and are therefore analytic devices which are meant to capture the important similarities across a diverse set of specific, contingent, and unique individual cases which are nonethel ess fundamentally similar (Smith 2000: 13). As Emilio Bartezzaghi notes, “a producti on model is specific to an individual Some of the names which have been applied in either the business literature or by critical analysts of the new production paradigm, in addition to the generic designation of “post-Fordism,” include “flexible specialization” (Piore and Sabel 1984); “innovation-mediated production” (Kenney and Florida 1993); “flexible/agile production” (Duguay et al 1997); “strategic flexible pr oduction” (Bartezzaghi 1999); and “mass customization” (Wallace and Brady 2001). The term “lean production” was coined by Womack et al (1990) in their study of transformations in the automobile industry.

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107 company in a certain stage of its developmen t, and, in almost all cases, it is a hybrid model with respect to the proposed ideal type s,” (1999: 237). By reference to paradigms, however, we can identify the points and degrees of divergence from the ideal type in each individual case without losing sight of the fundamental simila rities which distinguish the members of one paradigm from another. Furthermore, in the specific context of organizational paradigms of which I am speaki ng, it is important to keep in mind that the ascendance of a paradigmatic form of produc tion does not imply its universal superiority over all other alternatives, even within the narrow historical conditions in which it arises. The development of new forms of production organization involves a process of experimentation, demonstration, and diffusion which leads to the ev entual predominance of one model over all others, which becomes cons olidated and proliferat es with the aid of researchers, proponents, trade associations business schools, govern ment agencies, and other interested parties who may or may not have a stake in the as cendance of one model rather than others (Piore and Sabel 1984: 44) The “victorious” paradigm is eventually strengthened further as the ec onomy adapts to accommodate it and the institutions of the social structure of accumulation are tailored to maximize its potential. One of the main distinctions between Fordism and lean production lies in the orientation to customer demand of each. Ford ism represents a “push” orientation, where massive quantities of standardized products are manufactured and stockpiled before salespeople are deployed to sell them, or create a demand for them. Lean production represents a “pull” orienta tion, where (ideally) no product is produced until a customer expresses a demand for it (Womack and Jones 2003: 67). Under the just-in-time model, production takes place strictly on an as-needed basis at al l points along the commodity

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108 chain, with customer orders and products flowing in opposite directions (Smith 2000: 14). Advances in information technol ogies, inventory control systems, and telecommunications have allowed the creati on of systems in which real-time data on customer purchases is used to order the pr oduction of only those goods which need to be replenished on a store’s shelves (Abernathy et al 1999: 49). This has led to a shift in firms’ emphasis from co mmand and control to customer satisfaction (Duguay et al 1997: 1192). Lean production has also changed the key source of firms’ profitability. Under Fordist mass production, profits in the core industries generally took the form of oligopolistic rents originating from the less then perfectly competitive structure of the market. Profits under lean production ar e more likely to take the form of Schumpeterian rents deriving from the first-mover advantage of firms who are the fastest in their industry to develop and implement new innovati ons in products or processes. This has made innovation a key pursuit of firms, in te rms of both routine, incremental innovations (or “continuous improvement” as it is popul arly referred to) and more radical and fundamental innovations (Bartezzaghi 1999: 243) Atkinson exaggerates a bit in arguing that knowledge and innovation have replaced labor and capital as the key factors of production, but they are without a doubt central to mainta ining healthy profitability (2004: 96). Kenney and Florida emphasize the role of innovation when they argue that lean production results in the “factory as laboratory,” where “the intellectual capabilities of various types of workers are integrated and explicitly harnessed in the process of turning knowledge into commodities and new productive forces,” (1993: 69). The speed

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109 with which innovations and new technologies are commercialized is therefore increased tremendously under lean production. In the pursuit of constant innovati on and continuous improvement, lean production has also reversed the trend toward s the deskilling of the average worker, and has to some extent reintegrated conception and execution. Workers are expected to be cross-trained in many different types of j obs and are given increased discretion in identifying and implementing improvement s in the production process. In contradistinction to scientific management which sought to reduce every job to a few simple, repetitive motions requi ring as little brain activity as possible, lean production “involves the whole person and not just a pair of hands,” (D uguay et al 1997: 1193). As such, lean production requires more cooperation from the workforce, since intelligence is not something which is susceptible to be ing squeezed out of a worker by force or coercion, as physical labor is. As Kim Moody points out, the key to the success of lean production systems is maintaining workers’ goodwill and maximum (physical and mental) effort (1997: 107). Kenney and Flor ida argue that lean production requires a fundamental transformation in the organization of the firm, which “involves a shift in management focus from the simple or coerci ve management of workers and hardware to the cultivation and deployment of smart workers,” (1993: 75). This is further accompanied by an elimination of the separa tion between the office, where creative and mental work takes place, and the plant, where physical work takes place, and the integration of as many of these processes as possible in a single facility (Womack and Jones 2004: 59).

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110 Another change brought about by lean pr oduction is the incr eased importance of speed in the production process, which is relate d to its “pull” orientation and its obsession with innovation. Quick response to fluctuat ions in customer demand and the rapid introduction of new technologies have become essential to maintaining competitive advantage. Of course, th ere is such a thing as too much speed, since one of the cornerstones of lean production is only produc ing products for which there is already a demand. Therefore the ideal speed under lean production revolves ar ound the concept of “ takt time,” a rate which “precisely synchronizes the rate of pr oduction to the rate of sales to customers,” (Womack and Jones 2003:55). The use of the just-in-time production system is especially sensitive to the speed of different operations in the production process, since buffers of work-inprogress inventory are eliminated. The traditional assembly line production la yout of Fordism is being replaced with modular or cellular manufacturi ng, where production is organized in several discrete cells containing all the machines necessary to manufacture the product and allowing a “continuous flow” which significantly reduces the time necessary to produce a single item (Womack and Jones 2003: 60). Workers wi thin modules are grouped into teams and trained in every step of the production proce ss, allowing for the “func tional integration of tasks” and overcoming the rigid separations between job categories characteristic of Fordism (Kenney and Florida 1993: 304). M odular manufacturing and this functional integration of tasks go hand in hand, since e fficient modules require the integration of component processes into a true work team, conscious of quality and with an attitude towards continuous improvement (Castro et al 2004: 303).

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111 This reorganization of production towards work teams and modular manufacturing has contributed to a tendency towards more horizontal firm structures, reducing the numbers of layers of management and hierarchies of job classifications. The network-based orientation of the lean produc tion firm, essential to its flexibility, has required more responsibility be delegated to the worker. This has led to a tendency towards what Emilio Bartezzaghi terms “process ownership,” the delegation of knowledge of the production process and probl em solving to the point of production (1999: 244). The work team has been the prim ary means of transferring responsibility to the average worker, though teams have been used to discipline as much as to empower workers. Kenney and Florida aptly refer to th e work team as a “simultaneous source of motivation, discipline, and social control for team members, dr iving them to work harder and more collectively,” (1993: 39). Whether a source of empowerment or control, work teams have helped eliminate the need for cons tant close supervision of workers, thereby removing whole strata of nonproductive lowe r and middle managers. Bureaucratic control is giving way to what Wallace and Br ady refer to as “technoc ratic control,” which “centers on the use of computerized technol ogies in the workplace and the reliance on technical expertise in the creation, dissemination and interpretation of computerized information,” (2001: 115-6). Lean production has also led to a ne w orientation towards quality in the production process. Without stockpiles of inventory to replace defective products or components, the elimination of defects or their prompt identification by workers is essential. Lean production systems must be designed to make it impossible for a defective part to move from one step to the next, ideally eliminating substandard products

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112 from reaching the consumer (Womack and Jones 2003: 60-1). Quality, as used in reference to lean production, essentially means exact confor mance to specifications and therefore increased control by management (Moody 1997: 89). Finally, lean production is distinguished by its structur al incentives to innovate and reduce all kinds of costs of production. These incentives derive from many of the features outlined above. This has led Mike Parker and Jane Slaughter (1995) to refer to lean production as a system of “managemen t by stress.” The use of just-in-time, continuous flow, work teams, and a chronic, intentional undersupply of production inputs pushes workers to work harder and identify th e weak points in the production process. As Parker and Slaughter put it, “the system itself is designed so that any deviation in the process—any failure by a worker or any ot her part of the system—is immediately exposed and magnified. This disciplines th e whole system and allows management to focus its attention on th e weak spots,” (1995: 44). The syst em is constantly being driven to increase productivity by the very organization of the produc tion process, which is why it requires neither direct coer cion by management nor genuine commitment by workers to achieve the goal of continuous improvement. The organization of supply networks extends this pressure to innovate to all of the firms in the commodity chain (Kenney and Florida 1993: 306). Thus the centr al feature of the system is its constant ability to find ways to cut costs, and essentially “all of the well-known features of lean production are the means to reduce the resources, including la bor, needed to produce a given product or service,” (Moody 1997: 87).

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113 The impact of lean production on organi zed labor has been substantial, though somewhat ambiguous. The reason for this ambi guity is the difficulty in distinguishing between the impacts of the organization of production itself and the impacts of other changes which have taken place concurrently with the development and diffusion of lean production. Unionization rates ha ve plummeted in the private sector since the decline of the Fordist paradigm, but this could be the resu lt of changes in the degree and nature of political support towards organized labor, the increase in foreign competition associated with globalization and free trade, the ideolo gical antipathy towards unions by neoliberals, the anti-union attitude of foreign firms who are responsible fo r a growing share of investment and employment (especially in manufacturing), the ineptness of union leadership, or any number of exogenous factor s. That being said, there are certain features of lean production which have direc tly observable effects on labor relations. Since I will discuss these changes in more detail and in more specific contexts in the next two chapters, I will limit the following discussion to a few brief and intentionally general remarks. The system of labor relations institutiona lized in the postwar capital-labor accord – with its contractual, adversarial relati onship between unions and management and its reliance on complex systems of job classificat ions, seniority-based pay and job security structures, and its reification of the separation between conception and execution reflected in the exchange of job control for management’s unchallenged control over strategic decision-making – is incompatible with lean production and fundamentally at odds with the quest for flexibility at the heart of the globalized production SSA. The reduction of hierarchies and drastic reduc tion in the number of job categories has

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114 rendered job control unionism anachronistic, a nd the need for management to attain the commitment and cooperation of the workfor ce has made the advers arial approach of unions appear counterproductive and confrontational. The benefits unions were able to s ecure for workers under the mass production paradigm were based on rigid systems of job classifications with explicit rules and sharp lines separating production tasks. Lean production has not only transformed the bureaucratic organizational structure of the firm, it has also in many cases led to the collapse of these complex systems of job cla ssifications and replaced them with a handful of generic job categories (K enney and Florida 1993: 104). Therefore unions can no longer use job classifications as the basis for job security and wage-setting, as was the cornerstone of job control unionism. Furtherm ore, most of the bene fits unions achieved for workers under the capital-la bor accord such as seniority -based employment security, long-term contracts with stable wage in creases and fringe be nefit packages, and especially perpetual income guarantees such as pensions, are all antithetical to the flexibility required by lean production and th e social structure of accumulation. Firms need to remain as flexible as possible to st ay in business, and even if unions did manage to negotiate the sort of contracts character istic of the postwar er a they would run the chance of losing everything by driving the firm to bankruptcy. This situation is likely to only get worse, as the more successful flexible firms inevitably desire even more flexible environments to operate in (where they can maximize their competitive advantage), and therefore put pressure on workers and governments for fu rther flexibility-enhancing regulations (Standing 1999: 123). Flexible firms are in fact relatively stronger in more

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115 competitive, unstable market environments sin ce they shift the costs of instability and competition on to governments and workers (Crotty 2000: 8). Unions, who following the Second World War adopted the centralized, bureaucratic structure of the Fordist co rporation, have not undergone a similar transformation to a more flexible, adaptive, or decentralized structure. They are, so to speak, at a competitive disadvantage in th e more flexible and unstable market environment characteristic of the globa lized production SSA. As Bluestone and Bluestone note, “bureaucratic control may wo rk reasonably well in reasonably well under stable conditions where change is slow and market competition is weak. But in an economy where competition is rampant and technological change is abrupt, bureaucracies tend to trip over their own feet,” (1992: 131) Beyond this organizational disadvantage, unions are also weakened by the fact that the primary benefits they have sought to bring to workers – namely, security and a less in tensive work environment – challenge and undermine one of the essential components of lean production, the stress in the system which extracts effort from workers and encourages them to innovate (Parker and Slaughter 1995: 51). Although the bipartite arrangements inst itutionalized by the National Labor Relations Act continue to be the legal founda tion of labor relations in the United States, they have been seriously undermined by th e loss of strong state support for organized labor and the increasingly anti -union stances of employers. Bipartism requires a degree of “good faith” on the part of capital in order to produce stable labor-management relationships based on collec tive bargaining. Since the 1980s, employers have been opposed to unionization to such a degree that they are increa singly willing to break the

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116 law (by firing employees engaged in orga nization activities or by using fear and intimidation to defeat union certificati on campaigns) in order to remain non-union, accepting the fines and injunctions handed out by the National Labor Relations Board rather than accepting union certi fication (Bronfenbrenner 2000). Management’s “substantive agenda” in labor relations since the 1970s has centered around achieving more (w age, numerical, and/or func tional) flexibility in the organization of the workforce and attaining more sustained contributions from workers (Walton et al 1994: 18). Firms have generally chosen one of two genera l strategies for realizing this agenda. The first, a stra tegy of compliance and containment, does not require a fundamental transformation of la bor-management relations. It is based on forcing wage concessions and rule changes on workers and implementing stricter or more sophisticated control systems (Walton et al 1994: 18). This is most easily undertaken in a non-union context or where unions are weak or on the defensive. The second strategy, based on commitment and cooperation, require s a substantial reor ientation of the management-labor relationship, whether in a un ion or non-union environment. It is based on a conscious alignment of the interests of workers and management. It is achieved through mutually agreed-upon changes in wage systems, increased flexibility through informal practices and problem-solving (such as through work teams), and positive motivation or empowerment to extract more sustained contributions from workers (Walton et al 1994: 18). One of these two strategi es can be identifie d in the bulk of corporate re-engineering initiatives associat ed with lean production. They can be classified more generically as strategies of intensification and cooperation respectively (Walton et al 1994: 6). The latter represents a hi gh-road approach to labor relations

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117 characteristic of more technologyand capit al-intensive industri es where innovation and functional flexibility are more important, such as the auto industry (discussed below in Chapter VI); the former represents a low-ro ad model of labor rela tions, likely to be found in more competitive and labor-intensiv e industries such as apparel (discussed below in Chapter VII). The cooperative model of labor relations though not yet necessarily dominant in the American economy, is more likely to become the model for collective bargaining in the globalized production SSA for the simple re ason that intensification is likely to erode union strength in industries where it is pur sued, and to be implemented in industries where the ability of unions to improve work ers’ compensation and working conditions is limited by the intensity of market competition. Cooperation entails a break with bipartism as well as industri al unionism. Bipartism, pr edicated on adversarial labormanagement relations and the institutionalizat ion of conflict, is incompatible with a cooperative management philosophy. Cooperation entails a system of social relations of production known as enterprise corporatism Under enterprise corporatism, both workers and managers are encouraged to identif y with the goals of the enterprise rather than with their position in th e system of production. It is based on a harmony of interests, rather than a conflict of interests, between workers and management (Cox 1987: 74). In contrast to the bipartist capital-labor acco rd, “the union-management relationship in enterprise corporatism is symbiotic rather th an adversarial. Symb iosis does not exclude conflict about some issues of concern to work ers in the enterprise, but it is a conflict carried on within an overriding common intere st in the well-being of the enterprise,” (Cox 1987: 74).

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118 Industrial unionism, where work ers identify with the intere sts of all of their fellow workers in the same industry (or at least t hose within the same na tional territory), is incompatible with enterprise corporatism si nce workers are encourag ed to identify with the success of the enterprise to which they be long, which pits them in direct competition with other enterprises in th e industry and therefore with the workers they employ. Enterprise unionism is a better fit to the ente rprise corporatist system of labor relations proliferating under lean production, since worker s identify with their enterprise and tend more and more to acquire skills and knowle dge specific to the production system of a particular enterprise (MacDu ffie 1995: 64). This is a nother instance in which the centralized, bureaucratic organi zation of unions becomes an impediment and interferes with unions’ ability to serve their member ship. A more localized bargaining unit coterminous with the enterprise (the semi -autonomous profit center within the federal firm structure, discussed above) would be better equipped to protect and pursue its members’ interests: “the f act that the boundaries of know ledge under lean production are so strongly associated with a single firm rather than a craft or industry provides an additional push in the direction of local va riation and enterprise unionism,” (MacDuffie 1995: 65). So as unions struggle to adapt to the new system of production, they face the difficult situation of having to overcome the now anachronistic model of industrial, job control unionism which clings to an advers arial form of labor-management relations, while simultaneously avoiding being co-opt ed by the new corporatist management philosophy which threatens them with irrelevance (Yanarella 1996a: 48). The adversarial union model forces unions to emphasize the materi al benefits they can deliver to workers,

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119 just as the structure of mark et competition is making it increasingly difficult for them to deliver these benefits (Jarley 2002: 207). It also requires unions to instigate conflict in the workplace, as management increases its e fforts to cultivate a more cooperative ethos. Unions have begun to adapt to these realities, in some cas es more successfully than others. There is evidence that unions are having more success in organization drives by focusing their campaigns less on distributional issues (wages and benefits) and more on non-traditional issues concerning the quality of work and worker empowerment (Bronfenbrenner 1997). Some obs ervers note that unions are in a process of transition from a “service” model which focuses on solving members’ problems for them to an “organizational” model which mobilizes and empowers workers (Jarley 2002: 224). Some unions have successfully adapted to the enterprise corpor atist mode of labor relations, becoming strategic partners with management and participating in high-level decision making (discussed in greater depth in Chapter VI). Still, it remains to be seen whether a systematic, institutionalized paradigm of labor organization will emerge to successfully challenge lean production. In the following two chapters I will ex amine more closely the changes taking place in the organization of production and labor-management relations in two very different sectors of the economy: the autom obile industry and the clothing industry. These industries represent drastically diffe rent competitive conditions, organizational structures, and approaches to labor relations which will serve to emphasize both the commonalities and differences in the forms of production organization being pursued within the broader lean production paradigm It will highlight how the globalized

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120 production SSA can support very different – but equally flexible – models of production organization which each pose distinct challenge s for organized labor. I will employ the concepts and historical analys es developed in the previous three chapters in order to continue to emphasize the connection betw een social structures of accumulation, organizational paradigms, and labor-management relations.

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121 CHAPTER VI. THE AUTOMOBILE INDUSTRY: FUNCTIONAL FLEXIBILITY AND WORKERMANAGEMENT COOPERATION This chapter will explore the transformations which have taken place in the organization of automobile production and the implications of these transformations on labor-management relations. I will begin by briefly outlining the automobile industry and production process, in order to give a cl ear contextual framework for the discussion of the changes taking place in the organiza tion of production. I will then discuss the changes taking place at the point of production, specifically relating to the application of lean production to automobile assembly. Ne xt, I will detail the changes taking place in the organization of supply networks in the automobile industry, and the changing nature of the relationship between assemblers and parts suppliers. Finally, I will discuss the impact of these transformations on workers and unions in this industry. The general managerial strategy being followed in the automobile industry is cooperation – the use of a cooperative managerial ethos to elicit increased physical and intellectual contributions from workers, through a combination of incentives, peer pressure, and some degree of structural (as opposed to direct, persona l) coercion. It is based on designing both the systems of produc tion organization and social organization of the enterprise to elicit maximum quality and productivity at the lowest possible cost.

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122 This has, in practice, taken a number of fo rms and achieved varying degrees of success, as shall be discussed below.

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123 THE AMERICAN AUTOMOBILE INDUSTRY: BRIEF OVERVIEW The automobile industry is a key source of employment and GDP in many advanced capitalist economies. It has play ed an especially important role in the American economy, considering its impor tance in the development of the mass production system (see Chapter IV) and due to the United States’ historically large share of global automobile production. An automobile consists of thousands of intricate parts, each of which must be individually designe d and produced before being combined and assembled into a finished product. It is an assembly industry, centered around the design, production and assembly of completed autom obiles, supported by a myriad of component producers (Dicken 2003: 355). The number of workers directly employed in the automobile industry in the United States ex ceeds one million, approximately sixty-four percent of which consists of production worker s (Bureau of Labor Statistics [BLS] 2005). The vast quantity, value, and diversity of inputs which are embodied in a completed automobile give the industry an import ance which extends far beyond the simple production and sale of a single commodity. The automobile industry represents a producer-driven commodity chain As discussed in Chapter III, a commodity chai n represents the flow of value in the production process. Each commodity chain consists of: (1) a specific input-output structure, (2) territoriality (its specific geographical or ganization); and (3) a governance structure which organizes and coordinates th e flow of information and resources along the chain. Producer-driven commodity ch ains, common in capitaland technologyintensive industries, are ch aracterized by a governance structure in which large core manufacturing firms coordinate the production an d assembly process, either directly or

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124 through subcontracting relationshi ps, while maintaining a high degree of control (Gereffi 1994: 97). In the automobile industry, the la rge automobile assemblers such as Ford, GM, and Toyota coordinate the production pr ocess, with both the suppliers who produce the inputs and the dealers who sell the fina l products assuming subordinate roles. The automobile industry commodity chain is illustrated graphical ly in Figure 7. Figure 7: The Automobile Industry Commodity Chain Source: Adopted from Dicken 2003 (p. 356, Figure 11.1) The automobile industry in the United Stat es has seen a rapidly declining share of global output since the 1960s. U.S. automa kers’ share of global production has fallen from 51.4% in 1960 to a mere 14.2% in 2000 (Dicken 2003: 358). Imports of both automobiles and parts into the United States have simultaneously increased, resulting in a $104.83 billion trade deficit in automotive produc ts (Dicken 2003: 360). General Motors and Ford have managed to remain the numbe r one and two automobile producers in terms of sales value, respectively, owing in large pa rt to their sizable overseas investments. Meanwhile, Japanese automobile producers ha ve gained a growing share of the global

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125 automobile market by refining lean producti on techniques which enabled the production of high quality, low cost cars and trucks. American manufacturers were slow to adopt these methods, and lost a substantial portion of their market share as a result (Kenney and Florida 1993). Political pressu re and trade restrictions aime d at Japanese imports, which were seen as threatening to undermine Amer ican dominance in automobile production, led Japanese automakers in the 1980s to unde rtake a strategy of tr ansplant manufacturing, opening ‘greenfield’ plants or undertaking join t ventures with American producers. As a result, “during the period of less than a decade an entirely new Japanese-controlled automobile industry was created in North Am erica in fierce, direct competition with domestic manufacturers,” (Dicke n 2003: 391). A total of twel ve Japanese transplants and joint ventures were established in the United States and Canada between 1982 and 1989, as listed in Table 2. Table 2: Japanese Auto Transplants in the United States by Date Established DATE ESTABLISHED COMPANY LOCATION 1982 Honda Marysville, Ohio 1983 Nissan Smyrna, Tennessee 1984 Toyota Fremont, California (J.V. with GM) 1986 Nissan Decherd, Tennessee 1987 Honda Alliston, Ontario 1987 Mazda Flat Rock, Michigan 1988 Mitsubishi Normal, Illinois (J.V. with Chrysler) 1988 Toyota Georgetown, Kentucky 1988 Toyota Cambridge, Ontario 1989 Subaru/Isuzu Lafayette, Indiana 1989 Suzuki Ingersoll, Ontario (J.V. with GM) Source: Dicken 2003 (p. 392, Table 11.6)

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126 The Japanese transplants have impacted the North American automobile industry in two important ways. First, they have increased the level of domestic competition, especially in the small ca r market. With global au tomobile industry currently experiencing approximately thirty percent overcapacity (Dicken 2003: 362), this has served to exacerbate an alre ady extremely difficult situation for American automakers. Second, the transplants have served to uni versalize Japanese production methods and demonstrate their transferabi lity to a Western context (C larke 2005: 95). The production methods developed by Japanese automakers turn ed out to be well-suited for the intensely competitive and slow-growth economy of the globalized production SSA. The constant pursuit of cost reduction and wa ste elimination allows for increasing profits even within an unfavorable economic environment (Clarke 2005: 101). The result has been intense pressure on American automakers to either emulate Japanese produc tion techniques or develop their own productivity-i ncreasing, quality-enhancing, cost-reducing strategies with which to compete with the Japanese producers.

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127 CHANGES AT THE POINT OF PRODUCTION: THE TOYOTA PRODUCTION SYSTEM Just as the Fordist mass production paradi gm was developed within and typified by the automobile industry in the mid-twen tieth century, automobile producers were among the first industries to develop and implement the lean production paradigm on a significant scale. In fact, the term lean production was coined by Womack, Roos, and Jones (1990) in a study of changes in the auto mobile industry resulting from the diffusion of Japanese-style production techniques. The essential elements of lean production were developed in Japan by Toyota’s no Taiichi, in an attempt to adapt American mass production techniques to the Japanese mark et, which demanded the production of a diverse assortment of products at low vol umes (Cusumano 1985: 266-7). Since lean production, as applied to automobile produc tion, essentially draws on the elements developed at Toyota, I will refer to it as th e Toyota production system (TPS) in order to avoid conceptual ambiguity with the broade r organizational paradi gm discussed in the previous chapter (although they share the same basic features). This is done with the understanding that the Toyota production syst em is not the only form of flexible production being developed in the automobile industry, nor does it refer to every aspect of automobile manufacturing practiced by Toyota. Rather, it refers in a very specific sense to three fundamental features – functi onal flexibility, dynami c standardization, and the pull system – which have proven to be uni versally applicable and widely imitated. Although each enterprise has and will con tinue to adapt TPS to their specific circumstances, the following outline represents an ideal-typical model with which to conceptualize the impact of the lean production paradigm on labor relations in the American automobile industry.

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128 The first essential element of the Toyota production system is functional flexibility This involves a fundamental break with the rigid, hierarchical system of job classifications of mass production and a re organization towards fewer, more multifunctional work categories which can be more flexibly deployed. Within Japanese transplants in the U.S. there are typically less than five job categories, in contrast to the hundreds which characterized the American plants under Fordism and formed the basis for job control unionism (Kenney and Florida 1993: 104). This ‘streamlining’ of job hierarchies in to a more horizontal firm structure has been accompanied by the proliferation of t eam-based work assignments. Teams are typically semi-autonomous work groups, coordi nated by a team leader (either chosen by team members or appointed by management), whose members are assigned a general production function as a group and then allowe d to allocate specific work tasks amongst themselves as they see fit (Kenney and Florida 1993: 36) Although Steve Babson notes that there are a spectrum of team forms, ranging from di rect managerial control of individual workers to total worker control of the enterp rise (1995b: 235), work teams under TPS generally play a limited but signifi cant role. Teams enhance flexibility by allowing for the rapid reconfiguration of job assignments and by harnessing the “collaborative” as well as the “tech nical” skills of workers (Hamilton et al 2003: 468-9). Teams also reduce the need for several cl asses of non-productive workers, by fulfilling various quality control, maintenance and housekeeping functions and eliminating the need for close supervision of individual workers.

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129 Both the use of teams and the cross-traini ng of workers to be able to fulfill a number of production tasks have led to an incr ease in the level of training invested in workers under TPS. According to MacDuffie et al “having a workforce that is multiskilled, adaptable to rapidly changing circumstances, and with broad conceptual knowledge about the production system is critical to the operation of a flexible production system,” (1995: 153). Training is an important way of supplying the technical skills required for the complex work tasks typi cal of jobs in the automobile industry, but it also serves a socializati on function (Kenney and Florida 1993: 110). Training is used to impart in the workers the values and norms of the ente rprise and production system and to propagate the corporatis t philosophy. This has led critics to refer to training as a sophisticated means of exercising manageri al hegemony over the workforce (Yanarella 1996). Functional flexibility has also been achieved through inve stments in more flexible forms of capital equipment. As discussed in Chapter III, technology evolves within the context of the social and power relations of the production system. This is reflected in the types of automation technology being im plemented by automobile manufacturers as they transition from Fordist mass production to the Toyota production system. Ulrich et al note that while automation in a mass production context tends to lead to a reduction in both the size and skill content of the workforce and to increas e the role of technicians and experts in the production system, lean produc tion encourages more flexible automation systems which complement the highly trained and multi-skilled workforce (1997: 396-8). In fact this is evident in th e development of the Toyota produc tion system itself. As early as the 1950s, no Taiichi and other managers at Toyota were designing and

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130 implementing equipment with the intention of simplifying tasks and freeing up the hands of workers, enabling them to operate seve ral machines at once (Cusumano 1985: 274). More recently, Toyota has developed a new de sign of assembly line which consists of several U-shaped mini-lines, each associated with a single aspect of vehicle production and separated by small buffer stocks, whic h can be stopped without halting production along the entire assembly line (Shimizu 1998: 84). The re lationship between technology and production organization is not deterministic, so the development of flexible forms of automation and machine tools do not by themselves necessitate the proliferation of flexible forms of work organization. MacD uffie and Pil write that while “robots do not require teams to operate effectively, nor multis killed workers,” there is an increasingly evident relationship between changes in work organization and inve stments in flexible automation (1997: 250). In fact the authors cite sta tistical eviden ce of such a correlation, demonstrating that plants using flexible form s of work organization are more likely to implement flexible forms of automation, while plants using ‘fixed’ forms of automation are more likely to continue to use more traditional Fordist forms of work organization (MacDuffie and Pil 1997: 250-1). The second essential element of the Toyota production system is dynamic standardization Just as standardization, in the form of a static, rigid system of bureaucratic control and system atic job classifications, was key to the success of the Fordist mass production system, standardiza tion is key to the success of the Toyota production system. Standardization in TPS, however, takes the form of a dynamic, decentralized, and constantly evolving system known as kaizen or “continuous

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131 improvement” (Clarke 2005: 100-1). Conti nuous improvement operates by encouraging workers to identify inefficiencies in the produc tion process, and allowing them to suggest or implement refinements. This, in esse nce, is designed to “harness the collective intelligence of workers as a source of c ontinuous product and process improvement,” (Kenney and Florida 1993: 106). Workers are thus transformed into centers of innovation which are the key to the refinement of the pr oduction process (Clarke 2005: 110). Constanze Clarke describes conti nuous improvement as a “learning spiral” between workers on the shop floor and experts with technical and engineering expertise which results in an internally generated pr ocess of dynamic standard ization (2005: 110). “By contributing to the refinement of standa rds, the know-how of each individual worker is integrated into the standards of the TPS: th e individual worker is thus able to set best standards and hence can infl uence existing standards,” (C larke 2005: 110). A graphical illustration of the continuous improvement process is provided in Figure 8. Figure 8: Illustration of the Continuous Improvement Process Source: Reproduced from Clarke 2005 (p. 110, Figure 3.3)

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132 Continuous improvement is supported and facilitated by improvements in automation technology. With flexible and programmable robots and machine tools, changes in the production process no longe r involve a time-consuming, expensive design and engineering process. Capital equipmen t which can be reprogrammed with little difficulty and adapt to incremental change s and minor adjustments makes continuous improvement and worker involvement in refining the production process much more feasible than systems utilizing fixed, sp ecial-purpose machinery (MacDuffie and Pil 1997: 250). Continuous improvement, it should be note d, is not necessarily as empowering to workers as it may seem. It is at base centered around the elimination of waste, which includes the waste embodied in idle time, those minutes during the workday when labor or machines are not productively occupied. Thus, it encourages the reduction of the workforce to the bare minimum necessary to maintain full capacity utilization and the employment of workers in production with as few interruptions as po ssible. Thus, “each second of idle labour or equipment becomes part of the quest for the elimination of waste and the drive for continuous improvement,” (Yates et al 2001: 528). In some plants the term kaizen even became synonymous with the elimination of jobs (Rinehart et al 1996: 111). The third and final esse ntial element of the T oyota production system the pull system The pull system, as noted in the previ ous chapter, is based on the idea that upstream production should only occur to fill a downstream demand at all points in the production system. Within the enterprise, this is accomplished through a system known

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133 as kanban Kanban which refers to small pieces of paper attached to containers and pallets to signal the need for the replenishm ent of each part as it is used in production, helps to eliminate the need for both large st ockpiles of inventory and large numbers of quality inspectors. Workers move backwa rds along the production line and take only those parts that are needed, checking parts for defects and mistakes as they work (Cusumano 1985: 265). Kanban thus represents the information system which coordinates the pull system, while the pull system itself is re sponsible for eliminating the waste embodied in work-in-process invent ories and production buffers (Clarke 2005: 104-5). The pull system simultaneously produces dramatic improvements in quality by preventing defective parts from moving along to subsequent stages production process. At the level of the supply chain, the pull system is embodied in the just-in-time (JIT) delivery system. Just-in-time extends the pull system to the commodity chain level by requiring the prompt delivery of precise quantities of producti on inputs by suppliers. The use of JIT has caused the changes in th e organization of production in automobile assemblers to produce substantial changes in au tomobile parts producers. It has led to the creation of tight, durable supply networks to replace the arms-length market relationships and vertical integration whic h were dominant under Ford ist mass production. As Kenney and Florida argue, the effec tive functioning of a JIT supply network requires “close geographic proximity of producers, long-term relationships, and tight interorganizational linkages characterized by personnel sharing, jo int participation in product development, and regular communication and interaction,” (1993: 130). As a result, many Japanese parts producers followed their customers as th ey developed productive capacity in the United States and opened supplier transpla nts near the major Japanese assembler

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134 transplants and joint ventur es (Dicken 2003: 392). Furthermore, changes in supplier selection practices by both Japa nese transplants and American automobile assemblers has led American parts producers to change thei r practices along Japanese lines to one degree or another (Yang 1995: 56-7). The followi ng section will discuss changes in the organization of supply networks resulting from the implementation of the JIT system in greater detail.

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135 CHANGES IN THE SUPPLY CHAIN: JUST-IN-TIME AND INTER-FIRM NETWORKS Just-in-time has diffused through the Am erican auto industry more rapidly and more extensively than other components of the Toyota production system, and has produced substantial changes in both the orga nization of supply networks and in the internal organization of parts producers. Under the Fordist mass production system, American automakers had pursued a strategy of either owning their suppliers outright through vertical integration (maximizing control) or pursuing short-term, costminimizing relationships based on competitive bidding (minimizing risk). Components were purchased in large lots from distant, lo w-cost producers and stoc kpiled to reduce the risk of temporary disruption to the production pr ocess resulting from defective parts or an interruption in supply (Dicken 2003: 366). Just -in-time has led to the creation of a more network-oriented commodity chain structure to replace the bureaucratic control system of vertical integration. Sturge on and Florida go so far as to argue that the source of competitive advantage in the automobile industr y has “begun to shift from excellence at the point of production toward excellence in governing spatially dispersed networks of plants, affiliates, and suppliers,” (2004: 78). The proliferation of JIT has produced pr ofound changes in both the geographical and organizational distribution of employment. The outsourcing of previously integrated parts manufacturing and module-assembly opera tions has caused growth in employment in suppliers to far outpace that in the a ssemblers, as shown in Figure 9. Furthermore, employment in automobile assembly is onl y expected to grow by two percent by 2014, compared to six percent in parts manufact uring and eight percen t in body and trailer manufacturing (BLS 2005). JIT suppliers ar e characterized by spat ial (geographical)

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136Figure 9: Automobile Industry Employment, 1958-2004 0 1000 2000 3000 4000 5000 6000 7000 8000 90001 95 8 1 96 0 1 9 62 1964 1966 1 968 1 97 0 1 9 72 1 9 74 1976 1 97 8 1 98 0 1 9 82 1984 1986 1 98 8 1 99 0 1 9 92 1994 1996 1 99 8 2 00 0 2 0 02 2004Employment (00s) Motor Vehicle Manufacturing Motor Vehicle Body and Trailer Manufacturing Motor Vehicle Parts Manufacturing Source: Bureau of Labor Statistics proximity to their customers, as well as relational proximity (close collaboration in research and design), and serve as buffers to defects for assemblers, with each ‘tier’ of suppliers screening out defect s for the next (Kenney and Fl orida 1993: 140-3). Despite the increasing degree of capital mobility fac ilitated by globalization, the trend has been towards a recentralization of pr oduction in the automobile indus try, as the benefits of JIT are best realized when suppliers and assemb lers are located in close proximity to one another (Katz and MacDuffie 1994: 198). Just-in-time is the primary mechanism through which the changes in work organization in the assemblers is being diffu sed to suppliers. Part s suppliers are often

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137 subject to audits by th eir customers, who inspect various aspects of their operation, such as their quality control systems, work organization, union contracts, and employee involvement programs (Walton et al 1994: 119). Some assemb lers have developed systems for ‘rating’ suppliers’ performance, and organize teams of employees from several different departments to make quarterly visits to suppliers in order to ensure problems are detected and remedied promp tly (Yang 1995: 46). These changes were initiated by Japanese transplants, but soon adopted by American automakers as well. JIT has shifted a significan t degree of risk from assemblers to suppliers. Suppliers have the option of e ither investing in just-in-time (lean) manufacturing systems to meet their customers’ new demand schedules or holding large stocks of finished goods to be delivered on a small-lot basis, in creasing inventory costs (Yang 1995: 55). Japanese firms generally prefer to cultivate dependence on the part of their suppliers, accounting for such a large proportion of the s uppliers’ output and capital investment that they need the assemblers ’ business to survive (Ke nney and Florida 1993: 146). Responsibility for quality, research and develo pment, and design has also been shifting to suppliers. Japanese transplant s require their suppliers to i nvest in improved capacity for R&D and quality control, and award contract s based on factors such as engineering and design capability (Yang 1995: 42-3). American assemblers have followed suit, seeking contracts with suppliers who exhibit “leadership in product and process technologies” as well as capacity for design and engineeri ng (Yang 1995: 55). Assemblers are also increasingly demanding that s uppliers provide complete suba ssemblies of components, or modules, which “arrive fully assembled on load ing docks ready to be bolted onto vehicles as they move down the assembly line,” (Sturgeon and Florida 2004: 55). This

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138 “modularization” of automobile components (not to be confused with modular production as a form of work organization) has served to increase the labor-intensiveness of parts production and to decrease that of assemb ly, further contributing to the shift in employment. Suppliers’ relationships with assemblers have, at the same time, become more durable, long-term, and cooperative. In the interests of improving quality and maintaining long-term partnerships with ke y suppliers, automakers have by and large abandoned the practice of dropping suppliers if they fail to offer the most competitive price bid, and rather encourage current supplie rs to upgrade their ow n capabilities. As Xiaohua Yang writes, assemblers now prefer “to improve the current suppliers to the extent that they either match the best in the market in both cost and quality, or they deliver better performance,” (1995: 46). The supplier network has co me to represent an organizational system which itself can act as a source of value by “mobilizing knowledge and intellectual labor on a collective, social basis,” (Kenney and Florida 1993: 306). Collaboration between assemblers and parts su ppliers has increased greatly, and this has led to increased investments in technology being required on the part of suppliers, but also to the commercialization of innovations at an increased speed and a greater degree of information-sharing and technol ogical diffusion between asse mblers and suppliers (Yang 1995: 56-7). The organization of supply networks is ma de more efficient by their multi-tier but decentralized structure, with suppliers at e ach tier being responsible for organizing the next, eliminating the need for the assemblers to monitor the entire network (Kenney and Florida 1993: 131). The grow ing sophistication of producti on in parts suppliers (owing

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139 to both greater demand for design and engineer ing capabilities, as well as the increasing demand for modules rather than indivi dual components) has produced a tendency towards consolidation in the supply chain, with pressure on suppliers to acquire upstream and downstream capabilities and expand their r each internationally (Sturgeon and Florida 2004: 68).

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140 IMPLICATIONS FOR WORKERS AND UNIONS Application of the principles of the Toyota production system has varied across the many companies and plants operating in th e United States. The different historical circumstances of each company and their prevailing system of labor-management relations have caused each to interpret and im plement their own particular adaptation to the lean production paradigm (Yates et al 2001: 536). Toyota itsel f has attempted to refine its production system to make it mo re effective and humane (Shimizu 1998). Honda has developed its own mode of fl exible production, based on a globalized production format using a modified “push” system, designing products to fit existing capital equipment while emphasizing f unctional flexibility (Mair 1998). Among American automakers, GM has had the most difficulty adapting to lean production. GM has suffered from persistent ly hostile labor rela tions, resulting from poor managerial decision-making and strategies which placed a dispr oportionate share of the economic burden of reorganization on the blue collar workforce (Flynn 1998: 200). Despite success in isolated experiments with transforming work organization along Japanese management principles at specifi c plants (such as at NUMMI, Saturn, and CAMI), the lessons gained from these experi ments failed to diffuse to other GM plants (Yates et al 2001: 534). Ford was able to adopt so me key elements of lean production, especially concerning quality control and em ployee participation, bu t implemented them within a strategic context wh ich was primarily neo-Fordis t (Bordenave 1998: 235-6). Chrysler focused on a dual strategy c onsisting of improved product quality through reengineering and work reorga nization. Chrysler implemen ted a team-based form of work organization and negotiated drastic cha nges to work rules and job classifications

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141 with the UAW at a pilot plan t in the early 1980s, which served as a model for more widespread reorganization in the 1990s (Belzowski 1998: 260). Chrysler also implemented a strategy of “design-fo r-manufacture” which included employee involvement in product development and closer collaboration with s uppliers (Belzowski 1998: 263-4). This diversity of approach es to the implementation of the Toyota production system demonstrates that while certain generaliza tions can be made about the implications of TPS on labor-management rela tions, the specific circumstances at each plant are subject to significant variation. In Japan, the Toyota production system is complemented by a system of labor relations based on enterprise corporatism, where worker s are represented by company unions which are coterminous w ith the enterprise and cultiv ate a cooperative relationship between workers and management. The Am erican tradition of labor relations institutionalized under segmentation, based on cross-company industrial unions and an antagonistic labor-management relationship, re presents an obstacle to the Japanese system of production management. It impede s functional flexibility in the workforce, undermines the cooperative philosophy of management, and encourages workers to identify with their fellow workers throughout th e industry rather than with the enterprise in which they are employed. As a result, Japa nese automakers were wary of establishing transplants in North America, and when they did they did so cautious and in ways which would ensure labor relations could be adapted to an enterprise corporatist model. In situations where union representation was in evitable, most notably the Toyota-GM joint venture established in Fremont, Calif ornia (New United Motor Manufacturing Incorporated, or NUMMI) in 1982, union-mana gement cooperation was enshrined in the

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142 union contract and unions were given access to participation in strategic decision-making (Clarke 2005: 94). In most cases, however, Japanese transplants were located in ‘greenfield’ sites in rural locations, where wo rkers lacked union or automobile assembly experience (Kenney and Florida 1993: 101). Re cruitment of the workforce was also very selective, aimed at hiring workers who displa yed attitudes compatible with flexible work practices (Dicken 2003: 392). Japanese transplants also used the hiri ng process to screen out workers with “undesirable” attitudes, in other words, t hose who were pro-union or were unwilling to adopt the corporatis t philosophy of a harmony of interests between workers and management (Graham 1996: 70). This co rporatist philosophy a nd the cultivation of loyalty to the enterprise has been a cornerst one of the socialization of workers in the transplants (Kenney and Florida 1993: 110). Company “rituals” which promote egalitarianism and a corporate community at tempt to construct a common identity and foster unity (Graham 1996: 73). In some settings, such as the Toyota transplant in Georgetown, Kentucky, this practice is extende d into the community itself. Workers are encouraged to participate in community or ganization and the company sponsors various causes to promote a positive im age (Yanarella 1996: 139). As MacDuffie (1995) notes, the “social entity” of the wo rk organization is of central importance under lean production. The word “team” itself becomes in creasingly ambiguous, since “it refers not only to the work team, the formal structural uni t, but also to a noti on of ‘team work’ that embodies the goal of a cooperative relations hip among work teams, among departments, among functional specialties, and among organiza tional levels,” (MacDuffie 1995: 57).

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143 In a union setting, where the selection proce ss is likely to be more constrained and managerial hegemony does not go unchallenge d, the philosophies of corporatism and a cooperative labor-management relationship are still equally carefully cultivated. At NUMMI, the union gave up the right to stri ke over work conditions and management consented to an obligation to consult with th e union in strategic decision-making (Clarke 2005: 94). Management attempted to create a “culture of cooperation” by offering employment security in the form of a “no lay-off” pledge as well as by eliminating executive and manager privileges such as reserved parking and a separate cafeteria (Wilms 1996: 226-7). Union leaders were even allowed to participate in the hiring of managers (Wilms 1996: 221). At Saturn (the GM experiment in TPS established in Spring Hill, Tennessee), a “Par tnership Agreement” negotiated in 1985 codified the cooperative union-management relationship. Th e Partnership Agreement contained four key provisions: the organization of the work force into self-directed work teams; a decision-making process based on consensus; recognition of th e union as a full partner in all business decisions; and gove rnance of the organization by joint labor-management committees at all levels (Rubinstein 2001: 169). Despite these empowering provisions institutionalizing union involvement in the running of the ente rprise, other observers note that the unions’ role in training programs tr ansforms it into a tool for transmitting the company’s values. Ernest Yanarella argues that the union is complicit in a process of securing company hegemony through “a cooptati on strategy geared to assimilating the unionized workforce into the company’s worl d view, institutional structures, values, interest, and goals,” (1996: 143).

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144 Proponents of lean production and the T oyota production system argue that it provides a superior work environment in addition to increasing efficiency and productivity. It is proposed that the new model of work organization offers “more challenging and fulfilling work” (Womack et al 1990), or that it “harnesses the worker more totally and completely than did previous institutional and organizational arrangements,” (Kenney and Flor ida 1993: 9). Paul Adler (19 95) describes it as a system of “democratic Taylorism” which requires a change in the attitudes of both workers and management (to be more responsive, adaptive, and group-oriented), as well as changes in the organizational structure which actually empower workers. Advocates of lean production further insist that it ‘structurally’ empowers work ers, in that its successful operation as a system depends upon the maximu m commitment and effort of workers, thus requiring management to treat the workers fa irly (Babson 1995a: 16). Empowerment and positive reinforcement are, it is true, one way to extract effort and commitment from workers, but they are not the only way. As Steve Babson points out, “fear of unemployment or the peer pressure of company-dominated teams might actually push people beyond the effort norms that in dividual workers w ould actually choose,” (1995a: 16). Which of these two strategies – empowerment or coercion – will be pursued by the management of individual enterprises wi ll depend on both their relative abilities to produce the desired effort and commitment from workers as well as the context of labormanagement relations (especially regarding whet her or not the plant is unionized). There is not, however, any a priori reason to assume that the im plementation of lean production will automatically result in a more empow ered workforce or more fulfilling work.

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145 A key aspect of lean production in general and the Toyota production system specifically is that it encourages the cons tant elimination of waste and the constant increase in the output and productivity of the workforce. Individual performance is maximized through the interaction of team work, continuous improvement, and various incentive structures, which motivate workers to achieve constant increases in productivity (Clarke 2005: 107). Workers are encouraged, both implicitly and explicitly, to increase their own pace of work (Kenney and Florida 1993: 270-1). One method by which this takes place is simply by chronic understa ffing, forcing workers to increase their individual effort just to keep up with the pace of production (Rinehart et al 1996). Another is the accumulation and elimination of waste. This is the practice of keeping each member of a work team working at ma ximum pace and effort and allocating all of the remaining idle time to one or a few work ers, rather than distributing work tasks evenly. This allows for the eventual (and constant) reduction of the size of the work group (Parker and Slaughter 1995: 47). The prac tice of staffing work teams with the bare minimum number of workers possible, and the ab sence of extra or “floating” workers to fill in for absentee workers or help out when the team falls behind, helps teams to serve as a powerful source of peer pressure to re duce absenteeism and main tain a high level of work intensity: “When the team is made the responsible unit fo r getting the assigned work done, a powerful peer pressure is set up: if one person is absent, the system forces the other team members to ta ke up the slack with the like ly consequence that their frustration will focus on the absent team member,” (Parker a nd Slaughter 1995: 48). There is evidence that work teams often function as a system of social control rather than productive organization. Teams are in many instances simply superimposed

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146 on a traditional assembly line system (Rinehart et al 1995: 224). Team leaders, the lowest level of management which are supposed to represent the team’s interests, often become subordinate to higher levels of ma nagement and begin to behave as “junior foremen,” especially when they are appoint ed or their performance is evaluated by management (Babson 1996: 91). Team leaders play a key role in the Toyota production system, especially regarding the organizat ion, design, and allocation of work tasks (Kenney and Florida 1993: 104-5). How team l eaders are selected and how they exercise their responsibilities is an important determ inant of the nature of the organization of production and the general level of autonomy an d empowerment of individual workers. The issue of how team leaders are select ed and function has been a source of labor-management conflict in several automob ile assembly plants which have adopted a team-based form of work organization. At CAMI (a GM-Suzuki joint venture in Ontario), the problem derived from the ambi guous position of team leaders, who behaved as neither genuinely management nor as workers’ representatives (Rinehart et al 1995: 230). At a Mazda transplant in Flatrock, Mi chigan, widespread dissatisfaction with the role of team leaders led the union to include a demand for the direct election (and recall) of team leaders in the nego tiations for the 1994 union contra ct (Babson 1995b: 243). At Saturn, by contrast, team leaders are not only elected by their respective work teams but also sworn in as union officials (Rubinstei n 2001: 172). The advocacy of a system of selecting team leaders (and defining their ro les) which gives individual workers more power and control seems to be an area wher e unions can serve an especially important, empowering, and transparent function in a le an production system, especially considering the extensive diffusion and implementation of team-based forms of work organization.

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147 At the parts suppliers, the pressure on work ers to increase their effort and improve quality has been much greater than in the a ssemblers. The parts suppliers operate in a much more competitive environment and ex ist in a subordinate (though collaborative) relationship with their customers. As assemb lers have sought to constantly reduce cost, they have used the competitive nature of th e supply sector (owing in part to overcapacity) to demand constant prices or annual pri ce reductions from thei r suppliers (Walton et al 1994: 118-9). Unionization rates in the supply sector have fa llen greatly as internal suppliers have been sold off and more operations outsourced from the major auto manufacturers, and the formally clear lines of union jurisdiction within the automobile industry have become blurred (Katz and MacD uffie 1994: 192). Howe ver, suppliers have been eager to avoid labor conflict since the JIT delivery system has reduced parts inventories and made networks vulnerable to interruption, which has given unions some leverage (Katz and MacDuffie 1994: 192). Over all, first-tier suppliers have experienced contradictory pressure from assemblers to both reduce costs and adopt a more cooperative labor-management model which elicits worker commitment and improves quality (Walton et al 1994: 120). Successful cases of cooperative union-m anagement relationships at plants implementing the Toyota production systems have been presented by advocates as evidence that antagonistic labor relations ar e becoming obsolete. Lean production and cooperative labor relations ca n, it is argued, produce hi gher quality products while simultaneously providing a superior work e nvironment. Koichi Shimizu writes that NUMMI’s collective bargaining agreement “stipul ated that the partie s would make every effort to create the most innovative industr ial relations in the US A, on the one hand to

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148 deliver to customers vehicles of the highest quality in the world at the lowest possible cost, and on the other hand to assure equita ble wages to employees,” (1998: 78). Also examining the case of NUMMI, Wellford W. Wilms writes: “Far from diminishing the union’s role, this emerging compact between labor and management casts the union in a whole new light. The union continues to function in its traditional role of representing its employees and balancing management’s power, but now it also becomes an instrument of productive change,” (1996: 265). Further, Wilms asserts that the new union-management compact “shifts labor’s interest from antagoni zing management with grievances brought by a minority of workers to representing the ma jority of the workforce. The need for cooperation is an incentive for the union to resolve conflict quickly and fairly, and the symbolic value of confrontation all but disapp ears,” (1996: 265). Pa ul Adler cites survey results that demonstrate a level of “overall work satisfaction” at ninety percent of NUMMI employees, suggesting that workers ha ve a favorable view of the production system (1995: 214). On the other hand, Saul A. Rubinstein’s research on the Sa turn “Partnership” suggests that its success in achieving high leve ls of quality and job satisfaction were due to the union’s careful balancing of strategi c involvement in managerial decision-making, collective representation of the workforce as a whole, and individual advocacy on the part of disgruntled or dissatisfied workers ( 2001: 194-99). The union adopted a flexible, participatory internal organiza tional structure which allowed it to adapt to the conditions of the production system over time and to be responsive to workers’ demands (Rubinstein 2001). Despite the assertions of some critics that the union has been coopted to serve as a tool for the transmission of management’s va lues (Yanarella 1996) the union has been

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149 able to establish for itself and its members a role consistent with meaningful participation at every level of decision-making at Satur n, and maintained this role by wielding the power of a mobilized membership (Rubinstein 2001). NUMMI and Saturn are two of the most successful examples of cooperative labor-management relations, and results elsewhere have been less spectacular. At Subaru-Isuzu Automotive, a nonunion transpla nt located in Indiana, management propagated a cooperative, team-oriented philo sophy that promised to involve employees in decision-making and treat them like fam ily (Graham 1996: 69). The reality was much different, and worker dissatisfaction and di sillusionment translated into militantly antagonistic relations by the ea rly 1990s, with worker resist ance ranging from individual acts of charade, sabotage, and open protest to collective acts of dire ct confrontation and organized agitation (Graham 1996: 76). At CA MI, a unionized GM-Suzuki joint venture in Ontario, management failed to convince wo rkers of its commitment to a cooperative relationship (Rinehart et al 1996). Although initially expe riencing somewhat harmonious labor-management relations, relentless work speed-ups, chronic understaffing, and a kaizen program which focused on cost -cutting and work intensification led to a return of antagonistic relations and culminat ed in a strike in 1992 (Rinehart et al 1996: 115-7). What these cases suggest is that while the Toyota production system, combined with a cooperative style of labor-management relations, may be able to bring benefits to workers in terms of increased job security and satisfaction while delivering the benefits of improved quality, flexibility and producti vity to management, these outcomes are by no means guaranteed. Indeed, they more or le ss require an ability on the part of the workforce (union or nonunion) to enforce management’s commitments to cooperation

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150 and empowerment. Without an independent source of power immune to managerial discretion, workers will likely be unable to secure more than the bare minimum of concessions from management necessary to elicit their commitment. Cooperation, mutual gain, and trust are most likely to be achieved and sustained when parties meet on equal terms, and so if workers remain in a subordinate relationship without an independent source of power to collectively wield against management they will be unable to deal with management as equal partners in any meaningful way. The importance of innovation, process-ownership, and continuous improvement in the Toyota production system means that workers’ knowledge and information about the production process can become an important source of control. The profitability of commercializing the information gathered at the point of pr oduction by individual workers and autonomous work teams is a key source of competitive advantage, and workers’ ability to withhold such informa tion thus gives them power in dealing with management. Job control unionism should perh aps be replaced with “process control” unionism in the automobile industry and ot her industries like it. Process control unionism would involve protec ting the autonomy of differe nt units in the production system by establishing their proprietary rights over knowle dge acquired and information generated within their job func tions. This would give workers at different levels of the enterprise a source of power in dealing with management as well as establishing control over the use of the information they gather in terms of how it is implemented and commercialized and its dist ributional consequences. This sort of union strategy would replace the centralized, bureaucratic structure of union organization with a decentralized, conf ederate model, where power is dispersed

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151 across the many small work units and delega ted upwards to various larger collective bargaining units at the system, enterprise a nd commodity chain level. This model is illustrated graphically in Figure 10. This re presents simply one proposal based on my own understanding of the form of production organization becoming dominant in the American automobile industry. As the situa tion and circumstances in each individual plant and enterprise vary significantly, the method of or ganization which is most effective in each context will be the one which is most cogni zant of and adapted to the production system in place, and most able to evolve as those circumstances change. Figure 10: An Organizational Mode l of Process Control Unionism

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152 CHAPTER VII. THE CLOTHING INDUSTRY: NUMERICAL FLEXIBILITY, INTENSIFICATION AND LEAN RETAILING IN THE TEXTILE-APPAREL-RETAIL COMMODITY CHAIN In this chapter I will outline the tran sformations taking place in the clothing industry* and their implications for workers and unions. I will begin by providing a brief overview of the clothing industry, that is, the textile-apparel-retail commodity chain. I will then describe the changes taking place in supply networks since the advent of lean retailing. I will examine the impact of these changing suppl y relations on textile and apparel production. Finally, I will discuss the overall impact of these transformations on workers in the clothing industry and th e implications for organized labor. The clothing industry is, in general, pursuing a labor relations strategy of intensification The requirements of increased flex ibility and quick, accurate response to fluctuations in consumer demand character istic of the globalized production SSA are being met by pushing pressure, risk, and uncer tainty down the supply chain to lower-tier producers and then to the work ers themselves. Changes in the organization of production and supply networks have not been oriented towards eliciting in creased intellectual contributions by production workers, but towa rds integrating information systems and I use the phrase “clothing industry” interchangeably with “textile-apparel-retail commodity chain” to refer to the production system linking textile production, a pparel assembly, and the distribution and retail sale of apparel products. Although textile producers and retailers do not exclusively serve the clothing industry, when I refer to the textile and retail industries I am making specific reference to their participation in the textile-apparel-retail commodity chain.

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153 streamlining distribution channels within the commodity chain in order to increase the speed with which products can go from the text ile mill and the sewing room floor to the retail store shelf. Workers have been requi red to work harder, longer, or on more contingent terms, for the same or lower wages, without any serious and widespread attempts to transform the organization of work or to profit by commercializing employee involvement or innovations in the production proc ess. This is a result of both the nature and structure of the industry it self as well as specific orga nizational strategies pursued by lead firms in the commodity chain. This chapter will emphasize how the different competitive conditions characteristic of labo r-intensive industries with a low degree of capital sophistication respond to the market environment of the globalized production SSA.

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154 OVERVIEW OF THE CLOTHING INDUSTRY The clothing industry is represented by th e textile-apparel-retail commodity chain. It is a buyer-driven commodity chain, where pro duction is organized by large merchandisers, distributors, or retailers who retain control ov er such functions as design, branding and distribution but contract out the actual manufacturing of the product (Gereffi 1994: 97). This means that the lo cus of power in the networks of production, distribution, and sale of appare l lies in the large retailers and brand-name merchandisers who order the production of apparel products a nd their textile inputs ra ther than in those who undertake the production of these products. The main role of the lead firms in buyer-driven commodity chains is the manage ment of the production and trade networks, enabling them to profit primarily from thei r position as “strateg ic brokers” between manufacturers and consumers (G ereffi 1994: 99). Production is contracted out to large manufacturers, who in turn contract out some or all of their orders to smaller manufacturers, creating a decen tralized web of producers all linked to retailers and brandname merchandisers through inte rmediate relationships. A graphical illustration of the textile-apparel-retail commodity chain is provided in Figure 11. The retail industry is a se rvice industry which conti nues to experience steady employment growth in the American economy (see Figure 12). Textile and apparel production, on the other hand, are extremely comp etitive industries due to their laborintensive nature and the gene rally low cost and sophisticat ion of capital equipment. Textile manufacturing was the engine of the first industrial revolu tion in Great Britain, and, although synthetic fibers and technological advancements have increased the capital intensity of (especially high-end) textile pr oduction in developed economies such as the

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155 Figure 11: A Model of the Textile-Apparel-Retail Commodity Chain Figure 12: U.S. Retail Employment, 1974-2004 0 20000 40000 60000 80000 100000 120000 1400001974 19 7 5 19 7 6 1 977 1978 1979 19 8 0 1 981 1982 1983 19 8 4 1 985 1986 1987 19 8 8 1 98 9 1 990 1991 19 9 2 1 99 3 1 994 1995 1996 19 9 7 1 998 1999 2000 20 0 1 2 002 2003 2004Employment (00s) Source: Bureau of Labor Statistics

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156 United States, it remains an industry which can be developed with relatively little investment by third world nations seeking to industrialize. Apparel manufacturing has eluded any significant degree of mechaniza tion and therefore remains very laborintensive, and has also diffused rapidly to de veloping countries, especially in East Asia (Dicken 2003: 320). The threat of forei gn competition to domestic production and employment was felt especially early in the apparel industry, beginning in 1955 to put pressure on wages and weaken unions (Tyler 1995: 265). Employment in both textile and apparel production has fallen in the Unite d States since the ea rly 1970s, with the decline being particularly steep in the apparel industry (see Figure 13). Figure 13: U.S. Textile and Apparel Production Employment, 1958-2004 0 2000 4000 6000 8000 10000 12000 140001958 1960 1962 1964 1966 196 8 197 0 197 2 197 4 197 6 1 97 8 1 98 0 1 98 2 1 98 4 1 98 6 1 9 88 1 99 0 1 9 92 1 9 94 1 9 96 1 9 98 2 0 00 2002 2004Employment (00s) Textile and Textile Product Mills Apparel, Leather, and Allied Products Source: Bureau of Labor Statistics

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157 As competitive pressures have increased in the textile and appa rel industries, the retail industry has undergone si gnificant restructuring and reorganization. The ‘retail revolution’ which began in the 1970s led to an explosive growth in the industry, leading to overcapacity and fierce price competition in a slowly growing consumer market. It had two major consequences. First, it led to the growth of depa rtment stores into powerful national chains. Second, it led to a wave of mergers, acquisitions, and bankruptcies which resulted in the consolidati on of the market into a handful of powerful firms (Bonacich and Appelbaum 2000: 79-80) Another development has been the emergence of discount mass merchandisers, such as warehouse clubs (Costco, Sam’s Club), “category killers” (Hom e Depot, Staples), and discount general merchandisers (Wal-Mart, K-Mart), to compete with the nati onal department stores (Stone 1995: 12-13). Discount mass merchandisers generally follow a strategy of selling high volumes of merchandise at low cost, in contrast to the department stores’ highe r-end market strategy. Department stores also face increased competition from specialty clothing stores (such as Gap) targeting niche markets (Bonacich a nd Appelbaum 2000: 84-5). The competitive environment was exacerbated by product prolif eration, which increased the uncertainty, costs, and risks associated with holding i nventory. Product proliferation has caused the demand uncertainty that had been previously been associated only with high-fashion items with short selling lives to be exte nded to the most basic clothing products (Abernathy et al 1995: 190). This trend is in part th e result of retailers’ attempts to increase their own market shares by increasing market variety (Abernathy et al 1995: 193). Retailers have also deve loped their own “private label” brands so that they can

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158 bypass the brand-name merchandisers and redu ce their power in the commodity chain (Bonacich and Appelbaum 2000: 99). The increasingly competitive nature of the retail market, the increasing market power of retail firms, and the increased demand uncertainty resulting from product proliferation and weak consumer markets have all contributed to the pressure to improve the speed, flexibility, and efficiency of the textile-apparel-retail commodity chain. Since this is a buyer-driven commodity chain, the im petus for change has largely been driven by retailers attempting to more effectively target consumer demand, and therefore has developed into a quite different form of comp etitive response than that developed in the automobile industry, as discussed in the pr evious chapter. Th e model of flexible production which was developed and prolifer ated in the clothing industry has been termed “lean retailing” (Abernathy et al 1999). In the following s ection I will discuss the basic features of lean retailing and how th e diffusion of this model has impacted apparel and textile producers in the clothing industry.

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159 FLEXIBLE PRODUCTION IN THE CLOTHING INDUSTRY: LEAN RETAILING The application of the lean production paradigm to the clothing industry has produced a somewhat different or ganizational structure than th at of other, more capitalintensive sectors, such as the automobile industry. The market conditions facing the industry, however are not unique: overcapacity, intense international competition, market saturation and weak consumer demand provide most of the impetus for reorganization and rationalization. The key to profitability has proven to be flexibility and quick response to changes in consumer demand, ra pid commercialization of information, and the reduction of costs resulting from waste of all types, particularly that embodied in unsold inventory and unnecessary fixed capital investments. The buye r-driven nature of the clothing industry means that the informa tion which can be most profitably harnessed is information on consumer purchasing patter ns, and so the improvement of information systems linking the point-of-sale where cons umers purchase products to the factories where these products are manufactured and a ssembled has been more important than transformations in the organization of production itself. Work reorganization has, in fact, been undertaken mainly in response to ch anges in the information and distribution systems. The general point is that wh ile in producer-driven commodity chains, improvements in quality and efficiency in the production process are the key to profitability (and therefore harnessing information ge nerated at the point of production can provide a key source of competitive adva ntage), in buyer-driven chains the key to profitability is improvements in the abili ty to communicate information on consumer demand (generated at the point of sale ) to producers and then to act on this information to move products rapidly and effi ciently to the store shelf.

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160 The traditional retail model was a “push” system, in which retail buyers purchased large quantities of each product line several months ahead of the selling season, using their judgment and expertise to predict consumer demand. Retailers then did their best to unload inventory stockpiles on customers before the end of each selling season (Abernathy et al 1999: 42). The costs associated with this traditional model became more clear and more of a burde n as competition increased and product proliferation continued unabated. Unsold goods had to be continuously marked down to be sold at the end of the season; stock-outs resulting from faulty pr edictions of a products popularity led to lost sales revenue; and large inventorie s in stores and warehouses carried substantial costs in bot h overhead and risk (Abernathy et al 1999: 48). On the other hand, retail buyers coul d shop around for the lowest-cost producers and speed of delivery was generally not important. There wa s pressure on apparel firms to cut costs, but the typically large runs purchased by reta ilers lowered uncertain ty and the long lead times (several months) between order and delivery complemented the form of production organization dominant in the apparel indus try, which was designed to minimize direct labor costs at the cost of long throughput tim es (the time it takes for a complete garment to move through the entire assembly process). Lean retailing marks a dramatic break w ith the traditional model, from a “push” system to a “pull” system where inform ation on actual customer purchases replace buyers’ forecasts as the basis fo r production orders (Abernathy et al 1999: 49). Retailers responded to the changing market conditions of the globalized production SSA not by undertaking work reorganization or by tran sforming labor-management relations, but by investing in information technology and i nventory management systems which would

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161 reduce waste and inventory risk and increase the flexibility of the supply network (Bailey and Bernhardt 1997: 190). Lean retailing a llows retailers to offer a greater product variety at a lower cost than the traditional model, and is means of “reducing exposure to market demand by constantly adjusting the supply of consumer products available at retail outlets to match actual levels of market demand,” (Abernathy et al 1995: 184-5). Lean retailers no longer place orders for la rge runs of each product line months in advance of the selling season. Instead, th ey order minimal runs and require their suppliers to replenish products as they are sold to customer s. This is facilitated by advances in information technology, especially bar codes, which allow for the tracking of individual products from the time of proc urement to the time of sale as well as identifying the contents of shipping containers, and electr onic data interchange (EDI), which allows suppliers to receive orders and payments electronically and in some cases to track customer purchases in real time (Abernathy et al 1995: 199). This new orientation requires apparel producers to respond much more rapidly and to be much more flexible in order to be able to pr ovide the exact quantity and mix of products demanded by retailers in a prompt manner. As a result, retailers no longer evaluate their suppliers based solely on cons iderations of cost. The abil ity to adopt and utilize the information technology systems and to res pond rapidly, accurately, and flexibly to retailers’ orders have become equally important considerations (Abernathy et al 1995: 186). The system of manufacturing dominant in the apparel industry is one which, like lean retailing, emphasizes flexibility at the network level rather than at the point of production. The system of cont ract manufacturing reduces th e overhead and risk of the

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162 large manufacturers and merchandisers by pr oviding them with excess capacity or allowing them to avoid engaging in any ma nufacturing whatsoever. Fluctuations in demand are responded to by hiring or dropping c ontractors, providing a great degree of numerical flexibility (Bonacich and Appelbaum 2000: 12). This numerical flexibility is eventually passed on by the small contractors to workers themselves, who are paid only for the work they perform, offered no job securi ty, and are simply laid off or rehired with each fluctuation in demand (Bonacich and A ppelbaum 2000: 137). The contract system also renders large port ions of the production chain invisible. The large merchandisers and manufacturers are highly vi sible, and generally treat their employees relatively well and attempt to maintain a positive public im age. Underneath these visible upper tiers of production rest a myriad of small producer s who are largely unseen by the public and often subject their workers to deplorable working conditions (Hurley 2005: 99). Indeed, the contract system has revived the sweatshop and given it an inte gral role in global manufacturing networks. The c ontract system externalizes risk and lowers labor risk while allowing retailers, mercha ndisers and large manufacturer s to evade moral and legal responsibility for poor working conditions in their contractors (B onacich and Appelbaum 2000: 136). It also helps thwa rt unionization since “not only do workers in the same production system not know one another, but also their membership in that production system may keep changing,” (Bon acich and Appelbaum 2000: 140). Large manufacturers develop the producti on networks which characterize the contract system by developing long-term rela tionships with a few key “core” contractors in an area and then developing links to sma ller “peripheral” contra ctors through the core contractors (Palpacuer 2002: 59-60). The re lationships between la rge manufacturers and

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163 core contractors form the “backbone” of th e production system, a nd allow manufacturers “to meet the simultaneous needs for producti on quality, flexibility, and cost control,” (Palpacuer 2002: 59). Core contractors ma y be relatively well-off and treat their employees better than the smaller producers, offering high wages and decent working conditions and investing in training. Ar ound this relatively well-paid workforce, however, is assembled a system of tempor ary workers and subcontractors to absorb demand fluctuations (Palpacuer 2002: 64). Within apparel manufacturers, changes in the organization of production has not been widespread. The progressive bundle sy stem (PBS), which has been the standard form of production organizati on in the industry since the early 1900s, is still dominant. PBS breaks down the assembly of garments in to a large number of small, simple sewing operations. Each worker receives a bundle of materials and performs the same operation on each piece before re-bundling them and passing them along to the next work station. PBS minimizes the direct labor cost of producing a garment by breaking the production process into a series of simple, repetitive ta sks which can be easily mastered by relatively unskilled workers. However, since inventor y buffers between operations are substantial, the time it takes for a complete garment to move through the system is rather long. Although a typical garment only contains a few minutes of direct la bor content, it can take several weeks for the assembly of a single garment to be completed (Dunlop and Weil 1996: 337). Add to this the time required to transport products from the factory to the retailers’ sales floor, a nd it often becomes impossible fo r apparel manufacturers to produce garments to order by retailers in the short time required to replenish depleted inventories, advanced information system s notwithstanding. Apparel manufactures are

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164 left with two options: adopt a new system of production with shorte r lead times, or hold large stocks of inventory and assume the co sts and risks associated with it (Abernathy et al 2004: 27). While holding large inventory stocks requires cont ractors to engage in the same demand forecasting which was abandoned by retailers and to absorb the costs of unsold items and stock-outs that result from fa ulty predictions, it allows them to continue to pursue a cost-minimizing production strate gy, seeking to minimize direct labor costs and locating production in the lowe st-cost location possible. The development and diffusion of lean retailing has affected both the geography of production and the organization of the pr oduction process to varying degrees. Lean retailing has contributed to a relocation of apparel producers to locations closer to their suppliers and customers (Hurle y and Miller 2005: 30). Since different products require different degrees of replenishment (standard ite ms such as t-shirts require a much lower degree of replenishment then fashion items), lean retailing has had the most impact on producers of high-replenishment items. Time and distance are increasingly important, so producers of high-replenishment items tend to be located closer to their customers. This can be demonstrated in the composition of tr ade; in 1999, eight out of the top ten apparel items imported from Mexico were high-replenishment items, compared to only two out of the top ten items imported from China (Abernathy et al 2004: 39). This also provides a niche for domestic manufacturers, since the higher labor costs they must pay can be compensated by being able to increase the sp eed they are able to respond to and fill retailers’ replenishment requests (Abernathy et al 1999: 127). There is also a correlation between the degree of replenishment pressure and the adoption of new, more flexible systems of production organizati on. Modular production

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165 and the unit production system (UPS) both offer flexible alternatives to PBS, shortening throughput times from two weeks or more to just a few days (Abernathy et al 1995: 217). Module production is a form of team-bas ed production which involves the grouping of similar or related operations into tasks wh ich are assigned to teams of workers operating clusters of machinery to produce all or pa rt of a garment (Dunlop and Weil 1996: 338). Castro et al define a module as “a team of workers assigned to the production of a specific product, organized so that the pr oduct flows in a quick and synchronized way according to the order of its operations,” ( 2004: 303). In addition to reducing lead and throughput times, modules can reduce costs by requiring fewer supe rvisors and quality inspectors and reducing work-i n-process inventories (Berg et al 1996: 366-7). When properly implemented, modular pr oduction can result in impr oved efficiency, with higher levels of human resource and machinery utilization versus PBS (Castro et al 2004: 306). There is a strong correla tion between high replenishment pressure and the adoption of modular production, although m odular production remains utilized by only a small percentage of appa rel producers (Dunlop and Weil 1996: 351). Managers who have implemented modular production systems c ite pressure from retailers as the primary reason for adoption (Dunlop and Weil 1996: 342; Abernathy et al 1999: 173; Hamilton et al 2003: 476-7). Modular production is also more likely to be adopted by producers who have implemented the information systems required by lean retailers (Dunlop and Weil 1996: 335). The implementation of these in formation systems, furthermore, is statistically correlated with the degree of replenishment pressure (Abernathy et al 1995: 214). Ian M. Taplin (1995) argues that a pparel producers have pursued three general strategies to reduce costs and improve effi ciency in response to market conditions

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166 demanding increased speed and flexibility. Thes e strategies have been oriented towards the introduction of microproce ssor technologies into the ga rment preparation functions (design, grading, marking and cutting), the implementation of computerized monitoring systems to track the flow of materials and monitor workers’ output and technological and organizational changes to improve assembly productivity (Taplin 1995: 421). In this context, managers sought flexibility thr ough the systems by which they coordinated the various functionally distinct assembly tasks, rather than by more fundamental changes to work organization (Taplin 1995: 421). D ecisions regarding investments in work reorganization and technology by apparel produc ers have been constrained by the intense cost competition in the industry, which require s capital investments to pay off fast and makes investments in training difficult for mo st firms to afford (Sels and Huys 1999: 126). Textile producers have also felt pressure to increase their flexibility and to respond more rapidly to changes in dema nd, but apparel producers have acted as somewhat of a buffer by absorbing most of th e pressure from lean retailers. Textile producers have had more time and money to invest in and experiment with new technologies, and have been able to increas e productivity significantly in recent decades (Chaykowski et al 1994: 382). Investments in “quick response” technology and EDI have increased flexibility and speed, and provided American text ile producers with a source of competitive advantage lean retail supply chains (Chaykowski et al 1994: 383). Of course, domestic textile producers have also enjoyed advant ages deriving from American tariff codes, which allow the re-i mportation of garments assembled abroad from American-made textiles at a lower rate than those assembled from foreign-made

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167 textiles. The increasing tec hnological sophistication of te xtile capital appears to be biased towards larger firms, leading towards concentration in the i ndustry (Truchil 1988: 12). Although internat ional competition remains fierce, the global market is segmented in such a way as to allow producers in the Un ited States and other de veloped countries to specialize in product niches producing higherend textile products which require high levels of capital investment (Chaykowski et al 1994: 380-1). Therefore, American textile producers do not face the same degree of cutthroat competition as apparel producers and have pursued a somewhat different strategy to meet the demands of lean retailing and international competition.

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168 IMPLICATIONS FOR RETAIL, APPAREL AND TEXTILE WORKERS Workers in each sector of the textile-apparel-retail co mmodity chain have fared relatively poorly under the globalized produc tion SSA, as managers have generally pursued a labor relations policy of intensific ation. Price competition among retailers and intense international cost competition in the ap parel and textile industries have resulted in firms pursuing flexibility in networks, inform ation systems and supply chains rather than in training, human resource development, or work reorganization. The communication and distribution channels have been str eamlined, while workers have simply been required to work harder, longer, or under cl oser supervision. With information at the point of sale being the most important sour ce of value and profit in the commodity chain, workers in apparel and textile operations have few sources of bargaining power in their relationships with their employers. The low sk ill content of work in these industries and the ease with which new producers can ente r and exit the market makes individual workers (and indeed entire plants) highly expendable. Although retail firms are the most powerfu l and profitable firms in the clothing industry, retail workers do not see much of the benefits of their empl oyers’ position in the system of production. Job quality and wages in the retail sector ar e poor. Retail employs the highest percentage of part-time employ ees in the American economy (approximately 48 percent as of 1996) (Duggan 2001: 101). Un ion density has historically been far below the national average, a nd has declined steeply sin ce the 1970s (see Figure 14). Although management gurus tout the economic benefits of retail firms that employ an empowered, well-trained workforce (see Stone 1995: 177-9), retail jobs continue to experience a “trend towards the deskilling of work to create jobs that can be filled with

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169Figure 14: U.S. Department and Discount Stores: Percent Union Members, 1983-2005 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 19831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005 Source: cheaper workers,” (Duggan 2001: 102). Retail ers have sought to achieve greater efficiency and flexibility by investing in information technology and refining their distribution systems, rather than by changi ng their human resource practices (Bailey and Bernhardt 1997: 190). Intense price co mpetition, especially among discount mass merchandisers, causes productivity gains and cost savings to tend to result in lower sale prices rather than higher wa ges (Bailey and Bernhardt 1997: 195). Turnover in the retail industry is high and rising, keeping em ployee productivity low and providing a disincentive for employers to invest in trai ning for their employees (Duggan 1997: 103). This “churning” of employees also keeps wages low and stifles unionization (Dicker 2002: 16). Wal-Mart, the largest retailer (and in fact the larg est private sector employer) in the United States, has engaged in an active, constant and fi erce anti-union campaign

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170 which includes the termination of pro-uni on employees for minor transgressions, a 24hour “Union Hotline” for store managers to ca ll if they suspect union activity, and the banning union organizers from Wal-Mart prope rty (Dicker 2002). Lean retailing is essentially increasing the efficiency of the industry without increasi ng the productivity of the workforce, by reducing waste or outsour cing it down the commodity chain. Bailey and Bernhardt write that “we may be witn essing the emergence of a service business sector that is at once highly rationalized a nd productive and yet also labor-intensive and low-wage,” (1997: 195). In the apparel industry, work conditions have either remained poor or worsened with the development and diffusion of lean re tailing. Lean retailing and the contract system have helped to bring about the return of the apparel sweatshop, both in the United States and abroad. The sweatshop system in the American appare l industry had been largely eliminated in the early decades of th e twentieth century by the efforts of apparel unions such as the Interna tional Ladies’ Garment Workers Union (ILGWU) and the Amalgamated Clothing Workers’ Union (ACWU). The apparel industry at the turn of the twentieth century was much the same as it is today. Production was dominated by small contract shops that filled orders for larg e manufacturers (or “jobbers”), who relied on cutthroat competition among the contractors to keep costs down (Tyler 1995: 22-3). Workers were segmented between relatively secure and well-paid jobs in large manufacturers and contingent, hazardous, and difficult work in contract shops. Contractors and their workers were at the merc y of the manufacturers, since “there were always too few manufacturers and jobbers offering work and too many contractors and workers competing for the bundle,” (Tyler 1995: 23). The unions, which adopted a

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171 quasi-industrial organizing strategy much ear lier than their c ounterparts in other industries, eventually were able to serve as a regulating force in the industry. Unions forced manufacturers to only do business with unionized contractors, thereby halting the “race to the bottom” of cutthroat cost competition among the contractors. But as production became increasingly international following World War II, the unions were unable to maintain their monopoly on apparel la bor and their power to act as regulating agents began to wane (Tyler 1995: 26270). Without strong unions to regulate employment in the myriad of small cont ract shops that dominate apparel production, competition for the business of merchandisers and retailers has produced cutthroat cost competition that has led to the degradation of wages and working conditions and brought about the return of the sweatshop in the garmen t districts of cities like New York and Los Angeles. The dramatic decline of union densit y in the apparel industry over the past two decades is illustrated in Figures 15 and 16. Flexible production systems, such as modular production, are considered by many experts to be the key to apparel producers’ future competitive success in the market environment created by lean retailing (Abernathy et al 1999: 108). Yet, as noted above, their diffusion so far has been limited. M odular production is c onsidered by proponents to be both more efficient and flexible as well as creating more empowering and fulfilling work for employees. According to Berg et al modules allow the integration of learning and problem solving into the production pro cess (1996: 370). Furthermore, the authors write, Module workers have more influence over how the garment is assembled, are more likely to know how to adjust their machines, have greater opportunity to learn new things and be creative, and are more likely to find their work cha llenging. Workers in modules also have more influence than tho se in bundles over specific tasks or work

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172Figure 15: U.S. Apparel, Textile, and Footwear Prod uction Industries: Percent Union Members, 1983-2005 0.00 5.00 10.00 15.00 20.00 25.00 19831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005 Source: Figure 16: Textile Cutting and Sewing Machin e Operators, Percent Union Members 1983-2005 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.01983 1 984 1 985 198 6 198 7 1988 1989 1 990 1 991 199 2 1993 1994 1 995 1 996 199 7 199 8 1999 2000 2 001 2 002 200 3 2004 2005 Textile Cutting Machine Operators Textile Sewing Machine Operators Source:

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173assignments and over product quality improveme nt. In addition, module workers have the ability to regulate and coordinate their own work processes. Workers in modules are more likely than those in the bundle system to have responsibility for setting production goals, selecting work methods, and stopping pr oduction to deal with quality problems. They are also more likely to get adequate time to meet and solve problems (Berg et al 1996: 362). The evidence, however, belies this description. Berg et al note that module workers are neither more satisfied by nor more committed to their jobs, and actually report increased levels of stress (1996: 369). Ian Taplin writes that changes in the organization of work in the apparel industry are largely cosmetic (i.e., teams as a glorified system of job rotation) and oriented more towards th e intensification through peer pressure or monitoring via microelectronic technology (1995: 428-30). Both team-based production and computer monitoring systems have been implemented in ways which allow producers to keep the benefits of a low-wage, unskilled workforce wh ile gaining the benefits of flexibility and more intensive, fast-paced work (Taplin 1995). Most apparel producers continue to rely on some form of the progressive bundle system and numerical, rather than functional, flexibility in th eir workforce. In both large and small producers, “the sewers primarily ha ve to work quickly and without mistakes and do not have to worry about matters a bove and beyond the work station,” (Sels and Huys 1999: 125). Seasonal fluctuations in demand, high employee turnover, the ease of entry and exit which creates a continuous chur ning of apparel producers, the low skilland capital-intensity of production, inte nse international co mpetition, and the traditionally “low-road” approach to labor rela tions in the industry have all predisposed apparel producers to pursue in tensification rather than work reorganization in order to achieve the flexibility demande d by lean retailing and the globalized production SSA. Apparel workers are contingent workers, ty pically employed only when their work is

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174 needed and paid for the exact amount of work performed (Bonacich and Appelbaum 2000: 188). Workers in the industry experience health and safety risks, and are paid piece wages (payment based on number of operati ons performed or units completed) that frequently put them below minimum wage (Bonacich and Appelbaum 2000: 177-8). Workers typically have no benefits or job security (including fr equent layoffs with seasonal fluctuations in demand), in many cases must purchase their own tools and equipment, and industrial homework (workers taking work home with them or simply working from their homes) is common (Bonacich and Appelbaum 2000: 183-5). Workers in the small contract shops al so report frequent bullying, abuse, and mistreatment by their employers (B onacich and Appelbaum 2000: 189). There is significant divergence between th e larger manufacturers, which are more visible and generally treat their workers bett er, and small contract shops which operate below the radar and frequent break labor, em ployment and workplace safety laws. The managerial strategy and labor relations mode l being implemented in both large and small apparel producers, nonetheless, is simila r, and the work conditions in the small contractors provides downward pressure on wages and other costs in larger manufacturers. Further, th e ‘tiered’ organization of th e industry and the dispersed organization of employment embodied in th e contract system makes union organization extremely difficult. As Jennifer Hurley wr ites, “subcontracting allows businesses to break up their production locations and the result is that many workers do not know who their co-workers are, so they cannot un ite with them; nor do they know who their employers are, so they cannot unite against them,” (2005: 129). The organization of the contract system makes organization efforts not only difficult, but somewhat futile. While

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175 the direct labor cost embodied in a garment is an extremely low proportion of the total sales price (for example, six dollars of a one hundred dollar dress), the profit margins of the contractors who employ the workers to se w the garment is extremely small (Bonacich and Appelbaum 2000: 2). There is no room fo r small contractors to raise wages without raising prices, and in the fi ercely competitive environment of the apparel industry this would most likely put them out of busine ss. As Bonacich and Appelbaum note, “contractors can truthfully te ll their workers that, if they unionize, their shop will be boycotted by almost all manufact urers and will not receive the work it needs to remain in business. The contracting system enables ma nufacturers to distance themselves from any contracting shops that show any signs of labor trouble,” (2000: 139). The organization of the commodity chain s uppresses unionization efforts at nearly all points in the production system, with the exception of some large manufacturers whose market power enables them to afford higher wages and better working conditions for their employees. Although it would be th eoretically possible to raise wages for production workers by as much as one hundred percent without subs tantially increasing the retail sale prices of th e garments they produce (Pollin et al 2001), in practice this would require a coordinated effort by reta ilers, merchandisers, la rge manufacturers and contract shops which would be an enor mously difficult undertaking. Reviving the successful strategy of the ILGWU, the Union of Needletrades, Industrial, and Textile Employees (UNITE) began experimenting in the 1990s with organizing campaigns designed to force large manuf acturers to agree to only cont ract with union shops. The strategy had limited success (Bonacich and Appelbaum 2000: 267). This strategy has promise because it allows for the unionizati on of the small, dispersed subcontractors

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176 without fear of them losing c ontracts. On the other hand, it fails to solve the problems posed by competition among large manufactur ers as well as the pressure on manufacturing networks from retailers. Other organizing strategies have included exploiting merchandisers’ and retailers’ sens itivity to maintaining a positive public image by publicizing abuses and poor treatment of workers in their subcontractors. This strategy led to some notable successe s, such as union recognition in maquiladoras in El Salvador’s previously union-free export proc essing zone, but these successes have been modest and ephemeral (Anner 2003). Workers in the textile industry are consider ably better off than their counterparts in apparel production. Although historically a very anti-union indus try, recent trends in the textile industry are actually indicate a more favorable environment for unionization efforts. Geographically concentrated in the American southeast, the textile industry has relied on a combination of paternalism, violent suppression, and state and local government support to resist unionization (T ruchil 1988: 61-3; 102). Constant relocation of production further south and dramatic fail ures to organize textile workers in the twenties and thirties led to low rates of uni onization and a low propensity to strike, as well as low average wages in the industry (Truchil 1988: 145). More recently, however, increasing productivity and an increasing sk ill content of labo r have reduced the importance of wages as a source of competitive advantage in the American textile industry (Chaykowski et al 1994: 382-5). This is, in part due to incentives provided to textile firms to invest in technology and m echanization by the federal government in the 1960s in order to address the threat of fo reign competition (Tru chil 1988: 111-2). The increasing technological sophistic ation of textile capital and growing economies of scale

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177 have raised entry barriers and reduced co mpetition, while the increasing productivity and skill content of labor have reduced the downward pressure on wages, providing a somewhat favorable environment for organized labor, in stark contrast with conditions in the retail and apparel industries. Workers in each of the industries compri sing the textile-appare l-retail commodity chain face disparate conditions and represent divergent interests, yet their fates are intertwined. Outside of textile producers and some large apparel manufacturers, the prospects for workers in any one plant to union ize are limited. Attempting to coordinate and simultaneously organize workers across the different nodes and tiers of the commodity chain (especially those which tran scend national borders), however, would be a task of Herculean magnitude. The clothing in dustry is an excellent example of how the very structure of a production system can seve rely restrict the ability of workers to individually or collectively impr ove their conditions of employ ment. It also demonstrates very explicitly that a flexible production sy stem consistent with the lean production paradigm can be less empowering and more exploitative and intensive towards workers while still meeting the requi rements of quality, flexibilit y, adaptability, and waste reduction. It also illustrates that the ente rprise corporatist m odel being advocated by many proponents of lean production is not appl icable to all cases and industries, as organizing at the level of the individual plant or firm would be futile in the context of the apparel or retail industries, where compe tition is intense and profit margins are slim.

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178 VIII. CONCLUSION In this thesis, I have a ttempted to demonstr ate that the globalization of production has weakened the power and efficacy of labor unions in the United States. I have done this by describing the globalization of produc tion as a set of transformations in the institutional structure of the economy a nd in the organization of production, and describing how these transformations have impacted workers and unions in the American economy. Through case studies on the automobile and clothing industries, I have shown how the way in which these transformations have materialized in the specific contexts of two industries with different competitive cond itions, organizational st ructures, and levels of capital-intensity, and have produced very disparate and dissimilar outcomes for the workers in these industries. In what follows, I will offer a summary of my argument and key findings. I will then proceed to offer a few remarks on the implications of these findings on public policy, union strategies, and the larger debate about the importance and implications of the globalization of production.

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179 SUMMARY OF ARGUMENT AND KEY FINDINGS I have argued that the globa lization of production represents a set of interrelated transformations in the macro-institutiona l structure of the economy and in the organization of production. These transformati ons are responsible for the changes in the competitive conditions, the employment relationshi p, and the role of the state in relation to the economy which are characteristic of and associated with the globalization of production. The changing circumstances and economic conditions which these transformations have produced, and the failure of labor unions to understand, appreciate, and effectively respond to them, have been re sponsible for the rapid and sustained decline in the membership, power, and efficacy of organized labor in the United States. The theoretical framework I have used to present my argument is the social structure of accumulation approach. This approach emphasizes the importance of the institutional structures of cap italist economies and the way in which their interaction with forms of production organization and systems of labor control helps to determine levels of aggregate economic growth, the profit rates of individual firms, a nd the distribution of power, resources, and wealth among different classes, groups, and individuals in the economy. A social structure of accumulation c onsists of those inst itutions which effect, regulate, or impinge upon the process of accumulation (investment, production, and exchange), and is necessary for the hea lthy functioning of a cap italist economy. The consolidation of a social structure of accu mulation is associated with a period of economic growth and expansion, while the br eakdown and decay of the social structure of accumulation is associated with a period of protracted crisis and stagnation. From this period of crisis and the instability and turm oil it produces arise the ideas, organizational

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180 innovations, and institutional responses which wi ll eventually be consolidated into the next social structure of accumulation. These social structures of accumulati on, therefore, represent and demarcate successive, qualitatively distinct stages of cap italist development. Each social structure of accumulation is associated with a specifi c techno-economic paradigm and a specific form of production organization. The SSA creates the enabling conditions for rapid capital accumulation by providing an institut ional milieu in which the maximum potential of these techno-economic and organizationa l paradigms can be realized. I have attempted to substantiate this argument by examining in detail the transition from the segmentation SSA (1945-1970s) to the globa lized production SSA (1970s-present). The segmentation social structure of accu mulation was born of the crisis of the Great Depression and consolidated during the mass mobilization of the Second World War. These two dramatic experiences result ed in an institutional structure which was predicated on the achievement of stability and security through rational planning and bureaucratic management. The Fordist mass production paradigm, with achieved predominance under segmentation, was based on similar principles. Fordism depended on the realization of economies of scale through the producti on of large quantities of standardized products, and theref ore benefited from healthy and stable levels of aggregate demand capable of absorbing large numbers of consumer goods. Co rporations relied on rational planning, complex bureaucratic hierarch ies, and rigidly defined systems of job classifications to manage their enterprises. The globalized production social structur e of accumulation, in contrast, was born of the stagflation crisis of the 1970s. Duri ng this period, the stabi lity and security of

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181 segmentation and Fordism began to be percei ved as rigidity and inflexibility, and the institutional structure which produced th e globalized production SSA would place a premium on flexibility, creative destruction, a nd network-based forms of organization. The lean production paradigm, which evolved with and became dominant under the globalized production SSA, is based on the pursuit of constant innovation and costreduction, and the use of high levels of pressu re and stress to find and eliminate sources of slack or waste in networks and syst ems of production. Lean production emphasizes flexibility and the quick response by firms to changes in technology or fluctuations in consumer demand. I have shown how, in the automobile industry, lean production has taken the form of a cooperative labor relations strategy cons istent with enterpri se corporatism. Automobile producers have sought to harness workers’ knowle dge generated at the point of production, emphasizing continuous improve ment (the continuous refinement of products and processes and the rapid comme rcialization of innova tions). Since the automobile industry is a capitaland technol ogy-intensive industry in which innovations at the point of production are an important s ource of competitive advantage, management has sought (by consent or coercion) to elicit greater contributions from workers in the production process. There has been an emphasis on functional flexibility, the implementation of team-based forms of work organization and the investments in the training and multi-skilling of workers so that th ey can be deployed at different points in the production system where needed. I have also shown that, in the clothing industry, the lean production paradigm has been applied in a manner which has resu lted in a labor re lations strategy of

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182 intensification. The clothing industry is a low-technology, labor-intensive industry where information generated at the point of sale (information on consumer demand) is the most important source of competitive advantage. Therefore, quick response and flexibility have been achieved by integrating inform ation systems and streamlining distribution channels, while increasing the pace, intensity, and insecurity of work at the point of production. Flexibility has b een primarily numerical rath er than functional, with production networks and indivi dual producers constantly adjusting the size of the workforce in response to fluctuations in demand. The institutional structures and organizat ional strategies of labor unions, which were consolidated under the segmentation SSA were well adapted to the Fordist mass production paradigm. Industrial unionism was based on the “one shop, one union” principle in which bargaining units were coterminous with the workplace and workers were organized according to industry rather than occupation or craft. Job control unionism was based on a contractual, adve rsarial relationship between unions and management. It relied on complex systems of job classifications, se niority-based pay and job security structures, and exchanged union control over the content and conditions of individual jobs for management’s unchall enged prerogative over strategic decisionmaking. Unions became centralized and adopt ed a bureaucratic organizational structure which mirrored that of the Fordist corporation. These institutional structures and organi zational strategies, however, are not well adapted to the lean production paradigm. The failure of labor unions in the United States to transform and adapt to th e realities of lean producti on and the globalized production SSA have drastically reduced their ability to maintain or expand their membership, bring

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183 benefits and protections to work ers, or effectively exercise power in the workplace. At a deeper level, it has weakened unions’ legitim acy and public image in American society.

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184 IMPLICATIONS OF FINDINGS FOR PUBLIC POLICY, UNIONS, AND RESEARCHERS I will now offer a few remarks on what I believe is the relevance of my findings to public policy, organized labor, and re searchers studying th e globalization of production. I will refrain from making speci fic recommendations regarding policies or organizational strategies, sin ce this is beyond the scope of my research, and limit the following to recommendations at the broader conceptual level. With regard to public policy, my find ings suggest that several changes are overdue in the legal frameworks dealing with collective bargaining and unions. The most important pieces of legislation, which establis hed the bipartite mode l of labor relations and encouraged industrial and job control fo rms of unionism, were written and passed to confront the realities of the mass producti on paradigm and the segmentation SSA. The National Labor Relations Act, which establis hed the National Labor Relations Board that conducts union certification elec tions and deals with unfair la bor practice complaints, is biased towards an adversarial, “one shop, one union” model of unionism It specifies the bargaining unit as the workplace (rather than, for example, the work team, occupation or enterprise) and stipulates that union certification requires th e union to receive a majority of the vote in elections among the entire ba rgaining unit, to represent and bargain on behalf of the entire unit. This makes successf ul certification difficu lt in all except very specific conditions, for example, in an or ganization of production where interests among workers are tied to their geogra phical location of employment. Legislation to restore the balance of power between labor and capital and to reverse the decline in the membership, power, and efficacy of organized labor needs to be

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185 adapted to the conditions of the lean produc tion paradigm and the globalized production social structure of accumulation. If not, th ey will empower workers and unions only at the expense of economic growth and innovation and will, in the long run, do even more damage to the labor movement as it comes to be seen as a selfish, conservative or reactionary force. For example, laws which pr omote job or employment security need to be reconciled with the demand for flexibility which is a ubiquitous characteristic of the globalized production SSA. Laws granting workers greater prot ection from intimidation, fear of unemployment, or the relocati on of their jobs could increas e workers’ bargaining power while not necessarily restricti ng firms’ flexibility, other than the “low road” flexibility represented by depressing wages, “churning” employees and chasing low-wage labor around the country and globe. In industries such as apparel, where the ability of firms to distance themselves from immoral or illegal labor practices has allowed core firms to benefit from the poor wages and working condi tions in their supplie rs, legislation which makes them legally responsible for the labor practices of their suppliers could eliminate some of the downward pressure on wages and profits in contractors. Similarly, laws requiring the registration of the firms that make up fragmented production networks would allow for the monitoring of such ne tworks and the working conditions in each firm, enabling the legal protection of workers or at the least certifi cation of products as sweatshop-free. These are a few examples of how public policy can be designed to protect or empower workers without being se lf-defeating and inhibiting profitability or economic growth.

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186 With regard to labor unions, there are seve ral ways in which they may be able to increase their effectiveness in spite of their current, disadvantaged position. Fundamentally, I believe that the problem is organized labor’s singular emphasis on increasing membership as a solution to its d eclining power and efficacy. On the contrary, it is my opinion that unions must increase thei r power and efficacy if they want to expand their membership. Organized labor achieved dramatic and sustained success when it was able to effectively position itsel f as a tool for workers to increase their power in relation to management. The union contract has b een the key instrument used to empower workers since the 1930s, by legally obligating ma nagement to bargain with labor unions representing a majority of the workplace. The contract, however, was only effective because it was combined with independent sources of power developed by workers – their ability to withhold their labor (strike), occupy the f actory, or engage in other forms of collective action to disrupt production. Workers have lost their independent sources of power as the ability to perform labor ha s been progressively devalued by redundancy, automation and an increasingly informationbased economy. As I mentioned in Chapter VI, workers in industries such as autom obile production, which exploit information generated at the point of production as a sour ce of competitive advantage, may be able to develop an independent source of power through their ability to withhold information. In more labor-intensive and competitive industries such as apparel, however, this would not be an effective strategy. The only source of power workers may have in these industries may be their ability to bankrupt a firm by striking or shutting down production, which would involve a particularly high-stakes, reckless model of uni on organization which may nonetheless hold promise.

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187 A similar criticism can be leveled at a ttempts by unions, as well as advocates and researchers, to foster an internationalist or ganizational strategy to combat the increasingly transnational character of production under gl obalization. With the proliferation of transnational production systems and th e increasing power and importance of multinational corporations in the glob al economy, it may well be the case that internationalism as a union organizational st rategy is necessary. However, a strong international labor movement requires strong domestic labor movements. Internationalism should not be seen as a so lution to the declining power and membership of national unions, but rather as a strate gy which would follow or coincide with the strengthening of organized labor domesticall y. Furthermore, internationalism must be based not on ideological or st rategic desirability of uniting workers across borders, but on the principle of uniting workers with sh ared interests wherever they reside geographically. Not all workers in one countr y, let alone in the global economy, have the same set of immediate material interests. While they may share some general, abstract class interests, these have not proven to be a particularly effective foundation for constructing a labor movement. It is much more prudent and realistic to identify those workers in those production networks who sh are common material interests from which they can realize immediate, ta ngible benefits if they succe ssfully organize. The primary purpose of labor unions, and the key to their pa st successes, has always been their ability to empower and produce benefits for their me mberships. Solidarity and the advancement of class-based interests may be worthy goals but they are necessarily secondary in importance.

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188 Unions are also increasingly unable to de liver the same types of benefits they brought workers under segmentation and mass production. The steadily rising wages and benefits of the capital-labor accord are more difficult to secure in an economy characterized by much slower and more uncer tain demand growth, greater instability, and lower rates of profit. Unions would have a much greater chance of success if they focused on achieving long-term, strategic contro l of enterprises rather than contractuallynegotiated material benefits. Strategic c ontrol would allow unions to introduce employee ownership and profit shari ng programs which empowered workers and linked their compensation to the firm’s performance. It would also prevent the whipsawing, intimidation, and capital flight which help keep wages depressed in mobile industries such as manufacturing. Management’s coopera tive philosophy and agenda also enhances this strategy’s chance of success, as it bri ngs workers into a position of self-management which would actually give them a material incentive in cooperat ion and make more realistic the claim that their interests actually were the same as those of the enterprise. Finally, with regard to th e relevance of my findings for researchers studying the globalization of production, I hope to have emph asized that changes in the organization of production and the economy should always be understood within a broader historical context and within the context of capitalism as a system. Rather than being consumed by the uniqueness of economic transformations, we should analyze these transformations in the context of the larger trajectory of econo mic, political, and technological development which have ultimately led to each transformation. As I have argued that these transformations are ultimately historically contingent, neither consciously planned nor

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189 purely accidental, this deeper historical understanding can make much more discernible both the similarities and contrasts between an ongoing transformation and those which have preceded it. Similarly, analyzing transformations in the organization of production and the institutional structure of the economy within the context of capitalism as a system makes possible a much greater understa nding of the relationship betw een the transformations in the economy and the changes they produce in so ciety, in terms of bot h the trajectory of political, economic, and technological deve lopment as well as the more immediate distribution of power, resources, and wealth among individuals, classes, and groups. I believe that this sort of approach to st udying phenomenon such as the globalization of production will help contribute to a much rich er, more meaningful body of research in the field of political economy.

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190 REFERENCES Abernathy, Frederick H., John T. Dunlop, Ja nice H. Hammond, David Weil, Timothy F. Bresnahan, and B. Peter Pashigan. 1995. “The Information-Integrated Channel: A Study of the U.S. Apparel Industry in Transition.” Brookings Papers on Economic Activity: Microeconomics 1995: 175-246. Abernathy, Frederick H., John T. Dunlop, Janice H. Hammond, and David Weil. 1999. A Stitch in Time: Lean Retailing and the Transfo rmation of Manufacturing—Lessons from the Apparel and Textile Industries. Oxford University Press: New York. Abernathy, Frederick H., John T. Dunlop, Janice H. Hammond, and David Weil. 2004. “Globalization in the Apparel a nd Textile Industries: What is New and What is Not?” In Locating Global Advantage: Industry Dynam ics in the International Economy, edited by Martin Kenney and Richard Florida. St anford University Press: Stanford. Adler, Paul. 1995. “‘Democratic Taylorism’ : The Toyota Production System at NUMMI. In Lean Work: Empowerment and Exploita tion in the Global Auto Industry edited by Steve Babson. Wayne State University: Detroit. Anderson, Cynthia D., Michael D. Schulma n, and Phillip J. W ood. 2001. “Globalization and Uncertainty: The Restructuring of Southern Textiles.” Social Problems 48.4: 478498. Anner, Mark. 2003. “Segmented Production, Ne tworked Solidarity: Labor’s Response to Economic Globalization in the Americas .” Unpublished. Atkinson, Robert D. 2004. The Past and Future of America’s Economy: Long Waves of Innovation that Power Cycles of Growth Edward Elgar: Cheltenham, UK. Babson, Steve. 1995a. “Lean Production and Labo r: Empowerment and Exploitation.” In Lean Work: Empowerment and Exploita tion in the Global Auto Industry edited by Steve Babson. Wayne State University: Detroit. Babson, Steve. 1995b. “Whose Team? Lean Production at Mazda U.S.A.” In Lean Work: Empowerment and Exploitation in the Global Auto Industry edited by Steve Babson. Wayne State University: Detroit.

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191 Babson, Steve. 1996. “UAW, Lean Production, and Labor-Management Relations at AutoAlliance.” In North American Auto Unions in Crisis: Lean Production as Contested Terrain edited by William C. Green and Erne st J. Yanarella. SUNY: Albany. Babson, Steve. 1999. The Unfinished Struggle: Turning Points in American Labor, 1877Present Rowman & Littlefield: Lanham. Bailey, Thomas R. and Annete D. Bernhardt. 1997. “In Search of the High Road in a Low-Wage Industry.” Politics & Society 25.2: 179-201. Baldwin, Robert E. 2003. The Decline of US Labor Unions and the Role of Trade Institute for Internationa l Economics: Washington. Bartezzaghi, Emilio. 1999. “The evolution of production models: is a new paradigm emerging?” International Journal of Oper ations & Production Management 19.2: 229250. Begin, James P. and Edwin F. Beal. 1989. The Practice of Collective Bargaining. 8th Edition. Irwin: Homewood, IL. Belzowskiu, Bruce M. 1998. “R einventing Chrysler.” In One Best Way? Trajectories and Industrial Models of the Wo rld’s Automobile Producers Edited by Michel Freyessenet, Andrew Mair, Koichi Shimizu, and Giuseppe Volpato. Oxford University Press: New York. Benera, Lourdes. 2001. “Shif ting the Risk: New Employment Patterns, Informalization, and Women’s Work.” International Journal of Politics, Culture, and Society 15.1: 27-53. Berg, Peter, Eileen Appelbaum, Thomas Bailey, and Arne L. Kalleberg. 1996. “The Performance Effects of Modular Pr oduction in the A pparel Industry.” Industrial Relations 35.3: 356-373. Bluestone, Barry and Irving Bluestone. 1992. Negotiating the Future: A Labor Perspective on American Business Basic Books: New York. Bonacich, Edna and Richard P. Appelbaum. 2000. Behind the Label: Inequality in the Los Angeles Apparel Industry University of California: Berkeley. Bordenave, Gerard. 1998. “Globalization at th e Heart of Organizati onal Change: Crisis and Recovery at the Ford Motor Company.” In One Best Way? Trajectories and Industrial Models of the Wo rld’s Automobile Producers Edited by Michel Freyessenet, Andrew Mair, Koichi Shimizu, and Giuseppe Volpato. Oxford University Press: New York.

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