Thursday, July 24, 2014

The Regulation Approach and the Middle Classes

I have just read an old paper of Alain Lipietz (1988) in order to understand what the Regulation Approach was all about. The paper is an English translation of a lecture by Alain Lipietz in Denmark, given in 1984!

Apart from the pleasure of reading Marxist vocabulary which I had more or less ignored since my college days (1979-80), I was amazed that the Regulation School had more or less identified the same problems and come to the same solutions that are mentioned elsewhere in this blog. The regulation approach is concerned with the way in which social relations are maintained and reproduced despite and through their conflictual character. In any social relations, there are sub-groups who are dominant and those who are not, and the latter would like to change the rules of the game. The social procedures and authority structures for the linked modification of norms are called forms of regulation. 

An example of the regulatory approach would be to ask why the librarians of the University of Burgundy keep accepting their working conditions (see previous blog) and don't revolt.

1.      Managers are suffering more: the conditions are worse on the floor where the managers sit. As a result, the people at the bottom, on other floors, relativize their own situation and have a sentiment that nothing can be done or at least, their own lot should be acceptable.
2.      There is no syndicate leader who is strong enough to make an issue of it.
3.      The managers have the sentiment that it is public money which is perhaps better rationed for other things.
4.      Any revolution or strike may stop the current benefits of a regular salary
5.      The threat of not having a future promotion
6.      Most of the workers being women may also play a role since women have a legacy of suffering.

Thus, accept for point 2, which we may also need study, the discourse and reasoning which lead to acceptance of conditions of being dominated, of having to accept conditions, which many in the rest of France do not have to bear, would form the subject of the Regulation Approach. There is a French law which allows people to stop work if the inside temperature falls to below 12°C. Therefore, there is a limit placed. But there is no French law on the maximum temperatures which have to be supported.

Coming back to Alain Lipietz, here is a summary of his overview of the problems of the developed world (I'll skip the terminology sections). Remember, he is in 1984 !!!!

The Fordist model worked well for the thirty Glorious years (1945-75) because productivity increases were matched by wage increases which in turn led to consumption demand increases and profitability, which led to capital accumulation and investments. Thus, a balance had been found in the growth of returns to capital and to labor.

The cause of the Fordist crisis was that productivity growth was reduced. This reduced profitability. This reduced investments. This reduced employment. This reduced consumption.

One way out was to internationalize and increase exports by setting up free trade zones such as the EU. But this internationalization led to pressure on the wage rate. The constraints on growth of wages meant that consumption of domestic goods fell (if imports went up). If all countries do the same, in the hope of recovering from exports, it means all over EU wages are not keeping up with productivity. This means inadequate consumption at the EU level.

A second way out was to export the Fordist model to other countries (NICs). They could then manufacture according to Fordist models and import OECD capital goods. This Peripheral Fordism meant that the problem was postponed by issuing Euro dollars: the Americans continued to consume thanks to credit. There were minor gains in productivity in the US and slowdown of capital accumulations. When credit stopped, the crisis emerged because the NIC were no longer able to pay the high interest rates. So monetarism was finally rejected and Reagan went back to Keynes: tax and defense spending to bring the economy back. Household consumption went up.

A third hope is whether technology and new innovation (in electronics) be able to raise productivity and profitability and solve this problem? The problem is that profitability alone is not enough. It has to be accompanied by mass consumption growth. This growth requires employment and wage increases. Otherwise, the increased productivity will lead to some well-paid skilled labor, others stagnant wage earners and increase in unemployment.

This means that consumption will not increase and recession will continue. One way would be to reduce the working hours massively and modify the wage relation.

Management lessons:
Can I say more? What it means is that if you have good workers who are demonstrating productivity increases, and you are not increasing their salaries, you are digging your own grave. Whether you distribute the wage increases specifically to the person who performs or generally to all your employees may involve other questions of motivation and management, but if you keep the increased profit for yourself, you are undermining your own long-term viability.

Another reminder of Marx, remember the Communist manifesto… this time its 1848 …..
"The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own grave-diggers."

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