FdCA Political Strategy document
ANALYSIS OF THE ECONOMIC PHASE
(approved at the 6h Congress of the FdCA, Cremona, June 2004)
1. In the document approved during the Florence Congress in 1997, the passage from the international economy's Keynesian period to the neo-liberalist model was described synthetically in the following table.
We left the final box relating to the control mechanism over the whole economic cycle empty on purpose, the problem not being even considered as it was hoped that the system would find its balance in the forces of the free market. Now, however, this conviction seems destined for the rubbish bin and with it the whole framework which guided the world's economic policies. Our task now is therefore to complete a third line in the table, one which describes the new tendencies in international capitalism.
2. In working out the second line of the table, we did not at that time analyse the causes of the passage from a Keynesian model to a neo-liberal one between the '70s and the '80s. But in order to understand the origin of the difficulties in the model adopted by international capitalism in the final two decades of the twentieth century, we now need to examine briefly the causes. Any interpretation which attributes purely economic reasons for the switch to a new theoretical system of reference (national debt, inflation, cost of welfare, excessive fiscal pressure) is doomed to failure, even though it may contain elements of the truth. It is also necessary to consider more strictly political reasons if we are to get a more complete idea of the period. At the end of the 1970s, the workers' movement was in decline all over the world, to the extent that it could no longer be considered a serious danger within the system. Furthermore, the alternative world of State Capitalism was entering a spiral of death which would bring about its dissolution within a decade. Its demise meant the disappearance of the system's political and economic rival. The apparent absence of enemies led the bourgeoisie of the industrial countries to believe that the Fordist mediation phase had come to an end, and that the time had come to re-establish systems of exploitation which could guarantee greater profits which would not be subject to reduction through taxation to cover social welfare costs or through high wages. The era of social involvement for the weaker classes was ending, to be replaced by a period of open conflict with no holds barred.
The level of high development of the productive forces and the processes of monopolistic and financial concentration made it necessary at the end of the 1980s to introduce, gradually at first, certain activities such as education and training, healthcare and pensions into the profit-making sector.
The activities of these sectors went from management by an administrative monopoly to economic management, a passage which in itself was capable of producing profit.
This resulted in a redefinition of the role and function of the State, and a distinction now needs to be made between State activity and public interest activity, such as services to the person or activities which directly or indirectly affect the quality of life of women and men.
3. Now that social mediation had become superfluous, in effect pointless, the costs borne thus far for welfare could now be transformed usefully into profit by privatising the services. The market therefore came into play as the only regulator of social life. The age of economic planning, which involved the economies of the whole world from the end of World War II to the early 1980s, gave way to free rein for competition. The spontaneous regulation which it was thought the market could provide the economic cycle (re-discovering the 19th-century myth of the "invisible hand") eliminated all thought of any other form of control. This is what we intended with the question mark in the previous table.
4. The market's pre-eminence, as dictated by the established economic theories, was accompanied, as a natural consequence, by a chase for short-term profit. The destination of invested capital became of secondary importance as the timescale for returns became the prime factor. Risk capital, used in the productive processes and therefore with long-term returns, saw a reduction in importance compared to its use in finance. This has resulted in a reduction of investment in technological research, considered as unprofitable in the short term. The relative lack of interest in technological development has tended to make the typologies of production more static, if we exclude the pervasive peak sectors such as electronics and information technology. The later survive on the market only thanks to a frenetic drive for renewal and constant updating, but the rest of industry, in particular heavy industry, has seen a slowdown in research for new production.
5. Previously, there were six avant-garde technologies which were considered central to the new productive system. Of these six, only three maintain any strategic value (though not an equal value): information technology, bio-technology and telecommunications. But just how central they are depends more on military needs and on the need for social control than on the needs of production. Also, telecommunications are required for the control of information, as well as for the above reasons; the profit linked to telecommunications is above all of financial origin (advertising) without in any way originating in the productive sector of electronics.
6. At the turn of the century we witnessed an explosion in shares in what was called the "new economy". This bubble (created mainly through speculation) was quickly brought under control, wreaking havoc on investors who had been attracted by the chance of a quick buck. It is a fact that one of the conditions which enabled the boom in shares in technology was the speed with which the e-economy can move capital. This situation of accentuated mobility of capital has today reached exceptional levels, though the real step forward was made between the 19th and 20th centuries with the invention of the telephone. This has two consequences. Firstly, an increased marginalization of investment in production, which provides returns only over an excessively long period. Secondly, it means that economic authorities are less able to control the economic cycle.
7. Thus, an end came to another era in which one type of industrial production was the symbol and the motor of a period in economic history. It had been the turn of the textiles industry during the first industrial revolution, chemicals and electricity during the second and electro-mechanic production from the Great Depression up to the 1970s. The second column of our table (dedicated to technology) has gradually lost its importance and the current era is characterized by the domination of finance alone.
8. The increasingly frantic process of spreading out the productive cycle to different places (often quite distant), the break-up of production units into various suppliers of parts of the final products, has had certain results which need to be examined. Firstly, it has put the spotlight on the problem of moving goods, leading to phenomenal development in the logistics sector and a central place for the construction of infrastructure. Secondly, channels of communication have acquired a fundamental strategic role - the so-called corridors - and it has been no accident that all the conflicts of the past fifteen years have taken place around them (be they already existing ones, in construction or in the planning stage).
9. The costs of the preparation for the necessary infrastructure are being borne by public funds and considerable investment is required. But the phase which the international economy has entered is tending towards a reduction of gross incomes and with them tax yields, and it is not possible to exceed certain limits in taxation without disturbing the whole system. Consequently, the required capital is often missing and work on the infrastructure is not affordable due to the excessively high costs.
10. Two phenomena have recently become entwined, two facts which we would do well to discern on a theoretical level: the fragmentation of production units and externalisation. The latter consists in farming out certain functions which were once covered within large companies (advertising, market research, research and development, computing systems, and so on), and which are now entrusted to external companies whose workers are often ex-employees of the parent company. This type of fragmentation of production has a future inasmuch as employment is more elastic, it removes certain fixed costs from the company, transferring them onto the subcontractor. The former, on the other hand, consists in the pure and simple dismemberment of the productive cycle into sectors which produce a partial product that requires other operators so that it can be completed and presented on the market. It is limited by the factors mentioned previously regarding the fluid circulation of goods and at times creates difficulty in the control of the productive cycle as a whole. Though there are evident signs of difficulty, the phase in which we currently find ourselves is still that of the fragmented cycle.
11. The increased importance in the world of finance has increased the verticalization of command over the international economy. A few dominant financial groups fight for control of the production and the market, trying to eliminate each other in the process. In this way, the pulverization of the productive cycle is matched with an increasingly accentuated concentration of ownership.
12. In recent years there has been much talk of the importance of competition but in reality, as in every phase of economic liberalism, true competition has actually diminished. Competition for the control of markets tends to eliminate adversaries and has thus greatly contributed to the centralization of control. A few large financial groups fight for domination over macro-areas of the globe and this is the only remaining form of competition. Accordingly, there has been a rapid decline in free enterprise and production for what were once niche markets have been re-absorbed into the great productive cycle. Some niche areas do remain but it is unlikely that new ones will appear, as happened in a massive way in the 1970s in the electronics sector, for example.
13. As we have already said, in a liberalist economic phase competition rewards the strongest company which gradually absorbs the smaller ones, often capitalizing the know-how they have developed thanks to their entrepreneurial ability or their inventiveness but which they were unable to make the most of in the market. The resulting concentration cannibalises the more innovative frontier enterprise, absorbing the intellectual heritage within the companies that survive. So, after a phase of development of open markets, there is a return to monopolistic concentration.
14. The tendency to concentrate production in certain areas of high economic development continues to be seen. This production is often carried out in close contact with depressed or under-developed areas or areas which are in economic recession, as in fact foreseen in Kenichi Ohmae's book, "The End of the Nation State". In this way, working conditions differ vastly from one area to another in a way that was once unthinkable: the result is the atomisation of the workforce with a sort of league table of up to 44 different types of contract. It is the prelude to the end of the National Labour Contract and a future system of different contracts, all much the same, or even a system of individual contract negotiations between companies and each single worker.
15. Regions and districts too are facing problems of diversification and are also beginning to be divided up. This is happening through horizontal stratification within single companies between different types of workers with different types of contract: see for example the working conditions of immigrant workers which have been approved through local contracts or, more generally, the situation created through the use of temporary employment agencies or as a result of law N°30. It is also happening on a geographic level from one place to another with the creation of high-development poles which can be compared to the neurons of the new productive body, transplanted into a system whose development is static, in decline or moribund.
16. These productive ganglions which are created are linked together by a network of roads that make up the corridors along which every war of the last twenty years has been fought, in order to win control over them. In the vicinity of these communication pathways there is a lively economy, whereas the further one travels away from them, the more sterile the situation becomes. Thus, we can witness the creation of strips of territory where production proceeds vigorously, almost in the manner of synapses which link the various poles of world production.
17. So, from the point of view of the productive system, a neuronal structure is being created, a structure which consists of poles of economic excellence, linked together by strips which are in a phase of development, and all this is immersed in a huge area destined for under-development. This new structure is replacing the old one which featured areas of development alternating with areas of under-development.
18. The real Achilles' heel of the neo-liberal model of production (if indeed we can correctly define in this way the current phase) can be seen in the absence of any real form of control over the cycle. The evolution of the process has been left to the automatic regulation of the market - an automatic system of checks and balances which (it was thought when resurrecting the obsolete 19th-century concept of the "invisible hand") the opposing forces would discover when the time came to allocate the goods. The consequence has been that over the last fifteen years the international economy has suffered from a continual, underlying sickness. There may not have been a destructive global crisis, but the whole period has been marked by ongoing turbulence and instability, at times dotted with minor insurrections. Neither has there been the much-vaunted recovery, as a series of unforeseeable and ever-changing causes has destroyed the analysts' rosy forecasts.
19. But de-regulation of the cycle, entrusted to the free play of the market, does not only produce uncertain development with the constant (but constantly unrealised) promise of a future boom. It also increases the margins open to speculation, providing a target for the most unscrupulous financiers. And with these margins there come the ever more frequent episodes of degeneration, the likes of which bring to mind past times, that period over a century ago when liberalism was rife (no surprise there), as were financial scandals such as the Banca di Roma scandal. Financial crises on the scale of the Parmalat affair or, on a global level, the Enron crisis had not been seen for quite some time.
20. The absence of some regulation other than the market (a privileged ground for politics) has also changed the rules of politics, its operational rules. The politician was once a professional go-between for the various economic forces, including the labour organizations. Obviously, the forces of the dominant class always prevailed but account was taken of the need to maintain an area of consensus and a minimum of social equilibrium. But this phase then gave way to one of politics as a pure and simple interface between the dominant classes who made the decisions and the others who simply accepted them: the politician as actor (and not just in name - see Reagan). Finally, we have reached the present situation where the businessmen have become the politicians (Cheney, Berlusconi, Shinawatra, etc.). When business takes direct control of politics, it is no surprise that we find a return of the idea of greater control on the cycle, control which is apparently public as it is being exercised by the Executive. In reality, however, it has never been more biased since the Executive and the business sector with an interest at stake are now one and the same.
21. In this context, the rules at the highest level, which should embody, in a global vision of society, the productive activity and distribution, are replaced with controls at ground level. This results in the creation of supranational organs of control, accountancy agencies to check and certify accounts, delegation of powers to the Central Banks or various regulatory authorities, where the controllers and the controlled are often one and the same. It is the age of the Authority. The Authorities are, however, weak and inefficient systems of control, something which the recent financial scandals are clear proof of.
So we arrive at the situation set out in the table which shows the modifications that have taken place throughout the last decade. The control mechanism over the productive cycle has yet to find anything other than a partial solution and therefore there remains the insecurity linked to this not inconsiderable aspect.
23. The control mechanism is not the only factor of instability. The phase of cutthroat economic competition clears the way for appetites for total domination, throwing open the doors to a new "gold rush". There has been a return, in fact, to the importance of owning strategic raw materials (oil, strategic materials, foodstuffs, etc.). In this race, the dominant power establishes a strong presence in the places of production, which produces international "sheriffs" and conflicts.
24. Oil, for example, continues to be a raw nerve in the international economy and there does not seem to be much hope of replacing it as the energetic motor of international economic development.
The search for new deposits has not provided any clear data and available forecasts regarding deposits are untrustworthy. Oil companies in the Caucasus tend to minimize the size of reserves in order to be in a stronger bargaining position with local governments, while the governments tend to emphasize them, for exactly the opposite reason. The fact remains that Georgia was recently placed under a US protectorate.
The co-existence of areas with diminishing production capacity (which coincide with the areas of high demand, for example the North Sea) and areas with increasing production capacity (the Caucasus, Persian Gulf, and so on) will result in an increasing importance being placed on these later areas in the geo-political arena, with a consequent increase in tensions.
25. Having established certain factors of instability in the system, the aim of this document is not only that of analysing the current situation, but also of attempting to predict its future evolution, something made necessary by these very factors. In order to do this we need to complete yet another line in our table, which will represent the intentions of capital in the coming decade.
26. It is not possible to hypothesize a return to a productive system where one sector acts as a driving force for the others, embodying an era. The economic scene will remain dominated by finance with its extreme mobility and all the negative consequences that speed of movement will necessarily involve: volatility with all the uncertainty and strategic short-sightedness that entails. It is this short-sightedness which binds finance to quick profit and limits long-term investment (in education, for example), which is the only form of investment that is capable of creating a stable system.
27. Big problems are appearing regarding the use of manpower, which is increasingly less qualified and continually converted to new tasks. We have seen how flexibility has created stratification in companies with a myriad of contract types and this has made management of the productive cycle even more difficult. Furthermore, there is a negative effect on the quality of labour (and therefore on the product) as a result of the fact that those entering the job markets are educated to lower standards and any work experience they have is of little value as the skills needed are easily learnt but soon become obsolete. These push factors can lead the workers, as the real actors of the production process, to rebuild their class unity almost in a partial way.
28. The phase of property concentration has not yet ended and entire industrial sectors are still being restructured on an international level. The car industry, for example, lurching along from one crisis to the next, is destined to end up with only a very few car-makers surviving throughout the world. The tendency is therefore towards the formation of monopolies in each sector.
29. With the growing financial concentration and the tendency towards productive pulverization, there is an increasing role for productive poles, centres of development surrounded by depressed areas, connected to each other along corridors which attract development along them. The neuronal structure of production will continue.
30. Instability has its costs in the long term and though it may be useful during a transitory phase in order to ease the process of property concentration, in time it becomes economically impossible to maintain. The case of the collapse of large companies with the inevitable negative effects they have brought, is a clear example. Authorities provide no real guarantee which can prevent the turbulence of the market and so there will be a return to some instrument of regulation. In the case of Europe, at least, this would appear to be once again a currency.
31. We can now add a further line to our table, taking into account what has just been said.
Neo-liberalism (which has never actually been fully applied) may have been useful for the break with Keynesism, but it has been twenty years since it was the theory of reference for economic operators.
There are new economic theories on the horizon.
32. Here are some examples, though none of them are truly capable of becoming the model of reference for the global system.
33. The strategies of domination outlined above do, however, encounter unforeseen obstacles. On the one hand, the permanent war of conquest gets bogged down. On the other hand, there develops rising opposition among the capitalist competitors of the dominant power. And then there is China. This promised land of a (potentially) bottomless market is itself becoming a competitor to fear - it does not acquire, except in a minimal way, but has no difficulty selling, thanks also to the hugely inferior labour costs and rapidly advancing technology.
34. But the main enemy, an enemy which once seemed bowed and broken, has once more reared its head. With the arrival of the new century there has been a boom in social protest. It exploded onto the world stage with the anti-globalization movement and the various Social Forums, the workers' movement has had a new lease of life, there is a growing refusal to go on putting up with wage reductions, and so on. Even "third-world" countries are now looking for a way to escape from the grip of the domination that was imposed on them and are beginning to resist the cures which for years have been forced on them, as we saw during the last WTO meeting in Dubai. The predictions of capital contained in the last line of our table are merely imperialistic aspirations. They have yet to come true.
Approved at the 6th National Congress of the Federazione dei Comunisti Anarchici, Cremona 19-20 June 2004