Work and Employment in Post-Manufacturing Society – part three by Michael Shanks

We are now plainly in a sixth phase, where for the time being at least there is not enough demand to ensure full employment and investment opportunities are insufficent to prevent captial saturation. Kondratieff disciples would say that this was inevitable, that we are now in a period equivalent to that of 1873-1893, and that a major recovery in world trade and economic activity is unlikely before the 1990s. The OPEC price explosion of 1973 may have delivered the final coup de grace to the post-war boom, but its demise was inevitable anyway, as the forces which gave it its initial impetus began to run down.

In fact both unemployment and inflation were starting to grow in most Western countries from the mid-1960s, and by the start of the 1970s inflation had become a significant problem in many countries. The boom was starting to run out of steam before the oil producing countries put the boot in. According to this view, there is not much we can do to restore economic activity until the natural process of digestion has worked its way through the system, and new factors – the accumulating impact of new technology, the need to renew run-down capital, perhaps the emergence of major new markets in China and South East Asia – provide a base for lift-off around the end of the decade. Until then, while the shorter term cycles will provide fluctuations around the base level of activity, the upturns will be inadequate to restore full employment and the downturns will be severe.

However, the remarkable coincidence of dating – OPEC’s emergence coinciding with the centenary of the stock market crash which ended the railway boom – should not lead us to suppose that we are living through a straight re-run of the 1880s. In many ways the dilemma facing policy-makers is much more complex now than then. This is the first time in world history that economic depression has gone hand in hand with infation. This fact makes it very unlikely that governments will be prepared to undertake Keynesian-type reflation (expand the output by government stimulus) to boost activity, for fear that reflation will stimulate inflation faster than it will restore jobs. The fight against inflation has also pushed up interest rates throughout the world, thus further deterring new investment.

The other significant feature of the 1980s is that the “stagflation” is taking place against a packcloth of rapid technological innovation, and intense competition in manufacturing from the newly industrialised countries in East and South East Asia and elsewhere. This competition is pushing Western Europe and the USA – and, to a lesser but significant extent, Japan -even faster down the road to a service-based, post-manufacturing society.

To some extent, of course, this was what happened in the 1930s – and it is perhaps to the 1930s rather than teh 1880s that we should look for parallels to our present situation. (There are in fact more people out of work today in the UK – the worsthit of any major Western economy by the present recession – than at any time in the 1930s). In the 1930s, as today, increasing international competition in stagnant world markets led to rapid erosion of traditional industries -coal, textiles, heavy engineering; while the products of new technology – automobiles, aircraft, electronics, cinema – enjoyed the same kind of boom conditions as we associate today with the energy industries and computer software. Periods of recession do not slow down the process of economic change; rather they accelerate it. History does not suggest that technological innovation comes to a grinding halt in harsh economic conditions. What happens rather is that the life cycle of industries, from vigorous youth to declining senility, is accelerated. That is what we are witnessing today.

Of course, governments try to arrest the process by artificial means. In the 1930s the favoured process was the imposition of restrictions on imports, and the encouragement of cartels in threatened industries. So far we have avoided the same kind of headlong retreat into cartels and autarchy in the present recession, and the evidence of the long term harm which it engendered in the inter-war era is probably sufficiently strong to enable us to continue to resist the temptation. But a milder version of the same policy is being followed in industries like steel (the EEC’s “Davignon plan”), shipbuilding, textiles and automobiles, with “voluntary” restrictions on imports and “orderly marketing” arrangements to cushion the shock of competition and recession. Such arrangements on the whole do little good, but not too much harm. The run-down of traditional industries continues, though at a slightly less frightening pace.

The point that I am seeking to make is this. At the present time in Western Europe and North America we are living through a number of inter-related developments and it is important that we should separate them out in our minds if we are to make sense of where we are going. The most important long term trend is to move away from a manufacturing-based economy to one based on services, and particularly on knowlegdge-based activities. This trend is being accelerated by the erosion of our traditional manufacturing base resulting from stagnant world markets (the Kondratieff effect) and increasing Third World competition. The trend itself owes a great deal to the developments of technology, in two respects: the creation of new service industries on the one hand (see below), and the elimination of jobs in manufacturing – and, it must be said, in many of the service industries as well – by increased productivity through automation in one form or another.


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