Where have all the robots gone? Globalization and labor relations

Looking back over the two and a half decades of globalization and neoliberal economic policy that have swept the world since the Soviet Union’s collapse, Western experts have noted an unexpected trend: steadily declining labour productivity growth.

Various explanations have been offered, from the idea of innovation cycles to the exhaustion of the technological development paradigm (which seems especially odd against the background of the recent proclamations of the triumph of the information revolution). But Marxist sociologists foresaw the inevitability of just such a turn of events back in the early 1990s, and this trend had nothing to do with a crisis in scientific knowledge. The prevailing logic that labour relations have followed over the last 25 years is the real reason for this unavoidable stagnation in labour productivity.

Capital’s search for ever cheaper labour markets is a fundamental principle of neoliberal globalization. The trade unions call this a "downhill race," when investment goes to wherever wages are lower, standards laxer, state regulation looser, and workers less well-organized and less capable of defending their rights. Paradoxically, governments’ chances of developing their economies with success depend on their ability to ensure that the public receives as few benefits and profits as possible from this development. As soon as economic growth starts to push wages upwards and a strengthening middle class makes demands for a better quality of life, environmental and social standards and so on, these countries’ investment attractiveness starts to fall and capital leaves in search of other markets. 

It was not ideological victories that secured neoliberalism’s triumph in the West. There is also no evidence that the capitalist economy has become any more efficient over the last 25 years. The contrary is more likely true. Corruption levels have shot up, non-rational losses and unproductive costs have also increased sharply (just think, for example, of the insane advertising budgets, the effectiveness of which analysts think is basically zero, except when they scare off potential consumers, in which case their effectiveness is negative). But labour market globalization has dramatically changed the balance of power in production in the old industrialized countries, from Germany to Russia and from Canada to Argentina. The spectre of fleeing capital frightens governments and trade unions into agreeing to abandon regulation and degrade or flout labour and environmental standards.

The trade union movement has become seriously weakened over these years. The relocation of industrial jobs to China and other Asian countries went hand-in-hand with a changing labour market in Europe, Russia, Canada and the US. An ever increasing number of people work in the services sector now, at home or in offices, or are employed in the public sector. Such workers are far less organized, and do not have strong trade unions or traditions of struggling for their rights in an organized way.

The decrease of industrial jobs seems to reflect the historic trend in technological progress, namely, that as labour productivity grows, more and more people will be free to move into creative, intellectual and socially-oriented activity. Alas, this is not the case, or rather, not entirely the case. Despite what mid-20th century forecasts predicted, on the global scale it is not robots that are squeezing people out of jobs, but people squeezing out the robots. The robotics sensations, demonstrations of which are received with such public enthusiasm at various exhibitions, more or less reproduce concepts and designs from the 1960s, but for the most part have no relation to production, where relations and technology typical for the European factories of the early 17th century dominate. These backward production facilities turn out to be highly competitive thanks to very low wages and the lack of workers' rights.

Employment in "old" industrial countries is maintained because some tasks simply cannot be accomplished without modern production facilities and the people to work in them, and at the same time, the demand for unskilled and low-skilled labour continues to grow in the services sector. You can relocate computer assembly or production of construction equipment to China, but delivery of goods or construction will nonetheless take place in Europe. People still need to sweep streets, wash office floors and cook hamburgers in fast food restaurants. No one is going to go from Paris to Mumbai for a cheaper burger, or to Beijing just because a haircut is twice as cheap there.   

We should not imagine that downward pressure on wages is the only social impact resulting from these labour market processes. They also block vertical mobility. Industrial society’s strong point was that people could climb the qualifications and career ladders over the course of their lives, starting out as a cleaner and ending up as factory director. But for this to work, you needed a lot of mid-level jobs that the more active young people can move into, raising their qualifications and status along the way. Today, we no longer have this mass of mid-level jobs. There is a huge mass of "bad" jobs, and a very small number of "good" jobs requiring high levels of training and knowledge, and often connections, too (having social connections is often essential for effective work in this sector). The bulk of mid-level jobs are being relocated to Asia, but they end up as dead-end options there, because the next level up in the global production, technology and management chains is thousands of kilometers away. The result is a near insurmountable gap between the mass of low-skilled people at the bottom and the "working aristocracy." A social ghetto is formed at the bottom, and it is nearly impossible to break free. Some people do succeed, but the average odds are ever slimmer. At the top of the qualifications hierarchy, we see a serious shortage of personnel. Wages can be unjustifiably high in this upper segment, but this does not in any way signify growing strength of the working class in general, as the gap between the class’s upper and lower segments continues to widen and the groups grow farther apart. 

Capital does not enjoy unlimited freedom of movement of course, and the bounds of our planet are also finite. No matter how much transnational corporations grumble about how the Chinese have grown lazy and want too much money for their labour, they cannot just relocate businesses to Africa or Polynesia, because these places offer neither the infrastructure nor the personnel that many facilities need. Nor do these places offer such a large quantity of workers ready to toil in even the most technologically backward factories. But these last years have seen a drastic drop in wages in the principle countries of the "center." A German or American worker is already cheaper than a Chinese one if we take their respective skills and labour quality into account. The return of some jobs to the "old industrialised countries" is practically inevitable now and is already starting to happen. It is still an open question, though, what forms this will take, what pace and scale we can expect and what consequences will follow.

Ultimately, the biggest problem of neoliberal globalization is not that the cheap labour economy has objective limitations, but that it undermines demand. This reveals one of capitalism’s classic contradictions: between the logic of accumulation and the logic of consumption. Accumulating capital requires efforts to keep costs to a minimum, above all by keeping wages low. But at the same time, what for the individual company is a bid to keep labour costs down, for the economy in general becomes a drop or slowdown in solvent demand. Your goods become cheaper, but people still do not buy them because they cannot afford it. This is happening on a global scale, affecting not just the "old industrialized countries," but also China. 

This is at the heart of the global crisis playing out today. Trends of this kind were typical of the early industrial era (just recall the crises of the 19th century and the Late Victorian Depression). These crises found their resolution either in battles to carve up markets anew, or in revolutions and social reform. In the latter case, society puts limits on the freedom of capital, and at the same time created incentives for more intensive economic development. Costly labour created demand for new and more productive technology, and high wages stimulated consumption growth, and most important of all, pushed up demand for higher quality goods and services that in turn required more highly qualified specialists. All of this together helped to develop science, education and culture. In the modern neoliberal system these high value sectors are increasingly divorced from general socioeconomic development needs (replaced at best with private orders and applied tasks). The result is that science and education undergo degradation, and civil servants complain about scientists' and teachers’ lack of results and constantly introduce new performance control models, without having the slightest understanding of what they need to control and why.

A return to a high-cost labour economy is urgent now, just as it was at the start of the 20th century, but it cannot take place without a radical redistribution of production, protectionism and social and political transformation. In other words, this transition will be no less dramatic and painful than a century ago.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.