Author’s Note: My book The Invisible Handcuffs of Capitalism (Monthly Review Press, 2011), from which this article is adapted, tells the story of how orthodox economists have systematically excluded all consideration of work, workers, and working conditions from mainstream economic theory, as well as the damage created as a result of that distortion.
Neoclassical economists are concerned about the workers’ transactions with capital, but they care little about the workers themselves or their working conditions. Workers merely accept a wage bargain, go to work, and finally collect a wage.
What happens at the workplace is irrelevant. The wage bargain is presumed to be voluntary, agreeable to both workers and their employers. In fact, the relationship between labor and capital is anything but voluntary.
Capitalism uses a variety of weapons to make labor conform to its needs. The book compares this control to a Procrustean bed.
According to Greek legend, Procrustes was an innkeeper who made his guests fit into an iron bed. He stretched the short ones and amputated the tall ones until they were the proper dimensions.
Monetary policy is a Procrustean weapon. What follows is adapted from the book. It tells the story of how the Federal Reserve System sadistically wields monetary policy to keep wages low.
*******************
Economist Edwin Dickens has written a series of significant articles analyzing the minutes of the meetings, dating back to the 1950s, of the Open Market Committee of the Federal Reserve Board. (The Committee is the main policy-making body of the Board.) Dickens’s research shows convincingly that the Federal Reserve’s partisan behavior is designed to tilt the economy in the direction of the wealthy by making workers more compliant.
Dickens reported numerous occasions when participants voted to tighten the money supply just before major union contracts were about to expire. The minutes indicate that the specific intent was to force employers to be less generous with their wage offers during contract negotiations.1
A recent study formalized Dickens’s work by attempting to distinguish whether the policy actions of the Federal Reserve were responses to inflation or to low unemployment. The study concluded that “a baseless fear of full employment,” rather than the prevention of inflation, was the guiding principal of the Federal Reserve.2 The conclusion of this study should come as little surprise to people familiar with the Federal Reserve’s obsession with the danger of high wages.
Defenders of such policies justify the temporary restriction of job creation, contending that the Federal Reserve is merely trying to curb excessive growth. According to this school of thought, the Federal Reserve is simply preventing the kind of excesses that lead to severe recessions or depressions. Slowing down growth today may be necessary to provide for a higher sustainable growth rate in the future. Most economists argue that the cumulative effect of even a fairly small increase in growth rate can be substantial—more than enough to compensate for a temporary slowdown.
The defenders are wrong. Periodic slowdowns that the Federal Reserve engineers to undermine wage growth are unlikely to stimulate economic growth. In fact, according to a study by the Bank for International Settlements, slowdowns actually seem to diminish, rather than promote, long-term growth.3
Over and above the dramatic effects of intentionally engineered slowdowns, the steady effort to keep wages in check also probably reduces the rate of growth. As economists continually warn, the cumulative effect of a reduced rate of economic growth can be substantial. This loss must count as another cost of Procrusteanism.
In the 1920s, John Maynard Keynes described the effect of this sort of monetary policy on workers: “the object of credit restriction…is to withdraw from employers the financial means to employ labour at the existing level of wages and prices. The policy can only attain its end by intensifying unemployment without limit, until the workers are ready to accept the necessary reduction of money wages under the pressure of hard facts.”4
Keynes’s description of this policy seemed to frame it as a form of Procrustean class warfare. “Those who are attacked first are faced with a depression of their standard of life, because the cost of living will not fall until all the others have been successfully attacked too; and, therefore, they are justified in defending themselves…they are bound to resist so long as they can; and it must be war, until those who are economically weakest are beaten to the ground.”5
Keynes concluded, “It is a policy, nevertheless, from which any humane or judicious person must shrink.”6
The Federal Reserve’s fight against wages can be intense. In 1979, shortly after taking the reins at the Federal Reserve, Paul Volcker announced new operating procedures and a determination to hold inflation in check. At first, many powerful people doubted whether Volcker would be willing to follow through with his plans, which were sure to create enormous casualties.
A front-page story in the Wall Street Journal, “Monetary Medicine: Fed’s ‘Cure’ is Likely to Hurt in Short Run by Depressing Economy, Analysts Say,” expressed this sentiment. The paper noted, “Among those who are skeptical that the Fed will really stick to an aggregate target is Alan Greenspan…who questions whether, if unemployment begins to climb significantly, monetary authorities will have the fortitude to ‘stick to the new policy.’”7
Around this time, and possibly in response to the article, Volcker invited the editor of the paper’s editorial page, his deputy, and the features editor to a lunch at the New York branch bank of the Federal Reserve. Volcker asked his guests, “When there’s blood all over the floor, will you guys still support me?” The deputy editor responded affirmatively, later proudly recollecting, “There was blood indeed, as overextended Latin borrowers and American farmers were caught out by a return to a sound dollar. But we held fast.”8
Volcker’s militaristic analogy (expressed privately to the staff of the Wall Street Journal) let the cat out of the bag. The effort to tame inflation was, in reality, mostly a class war. In fact, Volcker himself had intended to spill blood. He expressed his intentions in another way:
[Volcker] carried in his pocket a little card on which he kept track of the latest wage settlements by major labor unions. From time to time, he called various people around the country and took soundings on the status of current contract negotiations. What is the UAW asking for? What does organized labor think? Volcker wanted wages to fall, the faster the better. In crude terms, the Fed was determined to break labor.9
Volcker tightened the money supply to such an extreme degree that the United States experienced what was then the worst economic downturn since the Great Depression. Volcker only let up when the collateral damage became too great. Mexico, which owed a great deal of money to U.S. banks, seemed to be on the brink of bankruptcy, thereby threatening the U.S. banking system. Citibank was effectively bankrupt.
Later Michael Mussa, director of the Department of Research at the International Monetary Fund, looked back fondly at Volcker’s accomplishment. Mussa continued the military analogy, praising Volcker’s victory in vanquishing “the demon of inflation”:
“The Federal Reserve had to show that when faced with the painful choice between maintaining a tight monetary policy to fight inflation and easing monetary policy to combat recession, it would choose to fight inflation. In other words to establish its credibility, the Federal Reserve had to demonstrate its willingness to spill blood, lots of blood, other people’s blood.”10
Interestingly, the intended enemy of this war—the workers—went unmentioned in this recollection, as did the collateral damage to farmers and the Latin Americans. But what had workers done to make the state treat them as enemies? Were these people culpable of some evil act for wanting more than a pittance?
The Federal Reserve serves the needs of the powerful. Its role is to protect capital against the interests of labor. In order to maintain labor discipline, the Federal Reserve Board is entrusted with the task of maintaining a level of unemployment high enough to keep workers fearful of losing their jobs.
Just compare the bloodlust of those leading the attack on labor with the lax disciplinary mechanisms for the corporate elite. Based on an extensive survey of major corporations, Michael Jensen, a professor emeritus at Harvard’s Graduate School of Business, found 94 percent of all contracts for chief executives prevent them from being fired for unsatisfactory work without a big severance package. In 44 percent of the contracts, this protection even included those convicted of fraud or embezzlement.11 This should be a national scandal.
As Warren Buffett told his shareholders, “Getting fired can produce a particularly bountiful payday for a CEO. Indeed, he can ‘earn’ more in that single day, while cleaning out his desk, than an American worker earns in a lifetime of cleaning toilets. Forget the old maxim about nothing succeeding like success: Today, in the executive suite, the all-too-prevalent rule is that nothing succeeds like failure.”12
Soon afterward, Stanley O’Neal proved Buffett to be correct. In 2007, after announcing an initial estimate that his firm had lost almost $8 billion that quarter, Merrill Lynch let him go with $161.5 million in stock, options, and other retirement benefits. One compensation expert said, “I wish my performance was so bad that I could get $160 million to leave.”13 As the economic crisis unfolded, O’Neal’s successor, as well as a host of other failed executives, collected comparable rewards.
Sado-monetarism is not so much a matter of monetary discipline, as most economists would have it, but of class discipline. In the 1960s, Harry Johnson, a conservative professor from the University of Chicago, writing in a journal dominated by the conservative perspective of his school, offered a shockingly honest evaluation of the class bias of monetary policy.
“From one important point of view, indeed, the avoidance of inflation and the maintenance of full employment can be most usefully regarded as conflicting class interests of the bourgeoisie and the proletariat, respectively, the conflict being resolvable only by the test of relative political power in the society and its resolution involving no reference to an overriding concept of the social welfare.”14
The level of unemployment provides a rough indication of the difficulty of getting a new job. But what about the probability of getting an equally desirable job? Recent economic changes have made such prospects increasingly unfavorable. In today’s job market, losing a well-paying job generally means downward mobility—having to settle for less-desirable employment in the future.
Not surprisingly, unemployment takes a heavy toll on people’s psyche. Unemployment and the threat of future downward mobility mean humiliation not only for the worker, but also for the entire family. Losing access to what one considers a normal level of consumption can be a wrenching family experience.
Children and spouses suffer embarrassment when they are unable to afford the kind of consumption to which they had become accustomed. Being unemployed is more stressful than divorce or marital separation.15 People can get over the pain of divorce or separation, but the psychological toll of unemployment lingers.
Psychologists have found that people who have lost a limb are naturally unhappy about their condition, but, after a while, they return to their previous level of happiness. But the unemployed do not. Richard Layard, a highly-respected British economist who recently turned to the subject of happiness, observed, “So unemployment is a very special problem. Moreover, it hurts as much after one or two years of unemployment as it does at the beginning. In that sense you do not habituate to it (though it hurts less if other people are out of work too). And even when you are back at work, you still feel its effects as a psychological scar.”16
Psychologists also know that dread—the anticipatory fear of a likely experience—can be even worse than the event itself. So long as workers feel a strong dread of unemployment, a lower threshold of unemployment will be sufficient to make workers compliant.
This psychological knowledge played an important role in setting economic policy during the late 1990s. At the time, the economy was growing. Low interest rates first fueled the dot.com bubble, and then, after its collapse, led to the housing bubble. Unemployment was creeping downward. Wages were increasing, but only modestly.
Even so, business feared that unemployment was headed to dangerously low levels. Yet Alan Greenspan, Chairman of the Federal Reserve Board, refused to increase interest rates, knowing that despite lower unemployment, the dread of unemployment (engendered by the memories of more than twenty years of successful employer and government class warfare) by itself was sufficient to keep wages in check.
One major factor in the intensification of dread was the effect of globalization. Greenspan understood that he did not have to use the powers of the Federal Reserve to create unemployment. The pool of unemployment had expanded to include hundreds of millions of workers outside the United States.
Workers who make strong demands are likely to be met by an employer threat to move production offshore. In this environment, the dangers of higher wages and declining labor discipline were insignificant. This realization gave Greenspan confidence to keep interest rates low. The high stock market and housing prices were not a matter of concern for him.
Greenspan’s confidence was a reflection of what George Orwell called “the haunting terror of unemployment.” In Orwell’s words, “the working man demands…the indispensable minimum without which human life cannot be lived at all. Enough to eat, freedom from the haunting terror of unemployment, the knowledge that your children will get a fair chance.”17
Greenspan explained his monetary strategy in similar, but less eloquent, terms, bluntly noting the state of what he called the “traumatized worker.” He was not referring to the traumatization of the unemployed workers, but rather that of the employed workers who dreaded the possibility of unemployment.
Traumatization refers to a condition that causes people to suffer serious disorders—the kind with potentially grave consequences. The association of post-traumatic stress disorder and the threat of unemployment might seem farfetched, if the source were someone less eminent than Alan Greenspan.
As Robert Woodward reported, Greenspan saw the traumatized worker as “someone who felt job insecurity in the changing economy and so was resigned to accepting smaller wage increases. He had talked with business leaders who said their workers were not agitating and were fearful that their skills might not be marketable if they were forced to change jobs.”18
With wages held in check while the economy boomed, inequality soared during the late 1990s. In 1997, responding to a question from Representative Patrick Kennedy, Greenspan, who made a science of public evasiveness, blamed the resulting growth in inequality on technology and education, while excusing his own contribution. “It is a development which I feel uncomfortable with. There is nothing monetary policy can do to address that, and it is outside the scope, so far as I am concerned, of the issues with which we deal.”19
I do not believe that Greenspan ever used the expression “traumatized worker” in his public pronouncements. He always chose his words carefully, and he perfected a language that was legendary for its obscurity. Still, his less inflammatory words conveyed the same message.
For example, he testified before Congress that, “The rate of pay increase still was markedly less than historical relationships with labor market conditions would have predicted. Atypical restraint on compensation increases has been evident for a few years now and appears to be mainly the consequence of greater worker insecurity.”20
Greenspan was correct in his assessment of the situation facing workers. He had numbers to back him up, reporting that, “As recently as 1981, in the depths of a recession, International Survey Research found twelve percent of workers fearful of losing their jobs. In today’s tightest labor market in two generations, the same organization has recently found thirty seven percent concerned about job loss.”21
Greenspan was not the only official at the Federal Reserve who appreciated the benefit of low unemployment without wage increases. One of the governors of the Federal Reserve, Edward W. Kelley, Jr., spoke up at a meeting of the Open Market Committee about “the good results that we are getting now.” He went on to say:
I don’t know how much, (sic) has to do with the so-called traumatized worker. How long is the American workforce going to remain quiescent without the compensation increases that it thinks it should get? When employment is as strong as it is right now, I don’t think we can depend on having permanently favorable results in that area. This has been a rather big key to the present happy macro situation where we have a high capacity utilization rate and a relatively low inflation rate. We all feel rather good about that.22
Economists also realized what was happening to labor. Not long after Greenspan’s comments about identifying speculative bubbles, Nobel Laureate Paul Samuelson told a conference sponsored by the Federal Reserve Bank of Boston that “America’s labor force surprised us with a new flexibility and a new tolerance for accepting mediocre jobs.”23
Work stoppages offer a quantitative measure that suggests how effectively labor was tamed. Between 1966 and 1974, the number of work stoppages involving 1,000 workers or more never fell below 250. The average was 352, with a peak of 424 in 1974. Work stoppages then began to fall off rapidly, reaching a low point of fourteen in 2003, and rising slightly to twenty-one in 2007.24 Then as the economic crisis took hold, many workers had to accept serious declines in wages and benefits.
And while one might expect that lower wages would cut into consumer demand, according to a study in the Journal of Consumer Research, “people use consumer purchases to compensate for psychological states of insecurity.”25 Many families had to take on considerable debt to maintain their standard of living, and this debt reinforced the dangers of unemployment.
Workers’ acceptance of mediocre jobs at modest wages paid handsome dividends for business, creating more demand (through debt), while making workers even more fearful of losing their jobs. In addition, workers’ insecurity also meant that they were less likely to quit in search of better employment, allowing employers to avoid the costs of recruiting and retraining replacement workers. Perhaps best of all, employers could enjoy this bounty without having to call upon the Federal Reserve to slow down the economy.
Of course, the stresses and fears of traumatization will probably interfere with performance on the job, although business is not likely to notice. After all, work, workers, and working conditions remain far from view as long as workers give no indication that they are not following orders.
William McChesney Martin, chairman of the Federal Reserve between 1951 and 1970, used to say that the job of the Fed was to take away the punch bowl when the party gets going. With labor traumatized, the Federal Reserve no longer had to maintain a watchful eye over the economy. Instead, the Fed carelessly spiked the punch bowl with low interest rates and limited oversight of the financial system, fueling a series of bubbles during the Greenspan years.
The bursting of those bubbles ultimately traumatized much of the world. Although Greenspan was confident that labor was in no position to challenge capital, much of the rest of the economic punditry were still obsessed with keeping labor in check—so much so that they were unable to pay attention to the impending disaster.
In stark contrast to the sadistic attitude toward labor, when speculative excesses or some other miscalculation create adverse economic conditions that threaten to harm powerful business interests, especially in finance, the Fed is almost certain to rush in to the rescue. Then, they will throw money at business interests—hanging labor out to dry.
Prof. Michael Perelman(michael.perelman [at] gmail.com) teaches economics at California State University at Chico. His many books include Railroading Economics and The Invisible Handcuffs of Capitalism, both published by Monthly Review Press.
Notes
- Edwin Dickens, “The Great Inflation and U.S. Monetary Policy in the Late 1960s: A Political Economy Approach,” Social Concept, 9, no. 1 (July 1995): 49–82; and “The Federal Reserve’s Tight Monetary Policy during the 1973–75 Recession: A Survey of Possible Interpretations,” The Review of Radical Political Economics, 29, no. 3 (Summer 1997): 79–91.
- ↩ James K. Galbraith, Olivier Giovannoni, and Ann J. Russo, “The Fed’s Real Reaction Function Monetary Policy, Inflation, Unemployment, Inequality, and Presidential Politics,” Levy Economics Institute Working Paper no. 511, August 2007, http://levy.org.
- ↩ Valerie Cerra and Sweta Chaman Saxena, “Growth Dynamics: The Myth of Economic Recovery,” American Economic Review 98, no. 1 (March 2008): 439–57.
- ↩ John Maynard Keynes, “The Economic Consequences of Mr. Churchill (1925),” in Essays in Persuasion, vol. 9: The Collected Works of John Maynard Keynes, ed., Donald Moggridge (London: Macmillan, 1972), 218.
- ↩ Ibid., 211.
- ↩ Ibid., 218.
- ↩ Wall Street Journal, October 9, 1979.
- ↩ George Melloan, “Some Reflections on my 32 Years with Bartley,” Wall Street Journal, December 16, 2003.
- ↩ William Greider, Secrets of the Temple (New York: Simon and Schuster, 1987), 429.
- ↩ Michael Mussa, “U.S. Monetary Policy in the 1980s,” in Martin Feldstein, ed., American Economic Policy in the 1980s (Chicago: University of Chicago Press, 1994), 81, 112.
- ↩ Louis Uchitelle, “Advocate of Paying Chiefs Well Revises Thinking,” New York Times, September 28, 2007.
- ↩ Warren Buffett, “Annual Letter to the Shareholders of Berkshire Hathaway Inc. 2005,” http:// berkshirehathaway.com.
- ↩ Walter Hamilton and Kathy M. Kristof, “Merrill Lynch Chief Resigns,” Los Angeles Times, October 31, 2007, http://articles.latimes.com.
- ↩ Harry G. Johnson, “Problems of Efficiency in Monetary Management,” Journal of Political Economy 76, no. 5 (September 1968): 986.
- ↩ Andrew E Clark and James J. Oswald, “Unhappiness and Unemployment,” The Economic Journal 104, no. 424 (May 1994): 658.
- ↩ Richard Layard, Happiness: Lessons from a New Science (New York: Penguin Press, 2005), 67.
- ↩ George Orwell, “Looking Back on the Spanish War (1943),” in The Collected Essays, Journalism and Letters, vol. 2: My Country Right or Left, 1940–1943 (New York: Harcourt Brace and World, 1968), 265.
- ↩ Bob Woodward, Maestro: Greenspan’s Fed and the American Boom (New York: Simon & Schuster, 2000), 163.
- ↩ Alan Greenspan, “Testimony Before the Subcommittee on Domestic and International Monetary Policy of the Committee on Banking and Financial Services House of Representatives,” March 5, 1997, http://commdocs.house.gov.
- ↩ Alan Greenspan, “Statement Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, February 26, 1997,” Federal Reserve Bulletin 83, no. 4 (April 1997): 254.
- ↩ Alan Greenspan, “The Interaction of Education and Economic Change: Address to the 81st Annual Meeting of the American Council on Education,” Washington, D.C., February 16, 1999, http://federalreserve.gov.
- ↩ Governor Edward W. Kelley Jr., “Federal Open Market Committee Meeting Transcripts,” August 22, 1995, http://federalreserve.gov.
- ↩ Paul A. Samuelson, “Summing Up On Business Cycles: Opening Address,” in Jeffrey C. Fuhrer and Scott Schuh, eds., Beyond Shocks: What Causes Business Cycles, Federal Reserve Bank of Boston Conference Series 42 (Boston: Federal Reserve Bank of Boston, 1998), http://bos.frb.org, 36.
- ↩ United States Department of Labor, Bureau of Labor Statistics, “Major Work Stoppages in 2007,” February 13, 2008, http://bls.gov.
- ↩ Derek D. Rucker and Adam D. Galinsky, “Desire to Acquire: Powerlessness and Compensatory Consumption,” Journal of Consumer Research 35, no. 2 (August 2008): 257.
http://monthlyreview.org/2012/04/01/sado-monetarism
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How Market Tyranny Stifles The Economy By Stunting Workers
Thursday, 15 September 2011 09:49 Written by Elaine Graham-Leigh
8 0
Work in capitalist society is not only exploitative but crushes creativity and wastes intelligence, argues Michael Perelman. But is it possible for this to be changed without fundamental social transformation?
Michael Perelman, The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles The Economy By Stunting Workers (Monthly Review Press 2011), 360pp.
That capitalism is not a rewarding or healthy system for the vast majority of workers may not come as news to most of us, but as Perelman points out in this interesting book, such understanding has never been part of mainstream economics. Following Adam Smith, capitalist economics has concentrated on transactions – the operation of the market – to the exclusion of production, and therefore of the conditions under which production happens. The result, Perelman argues, is not just appalling conditions for workers but, in capitalist terms an even worse consequence, the diminution of profits.
Perelman characterises capitalist management of the workforce as ‘Procrustian’, after the mythological ancient Greek bandit Procrustes, who would torture travellers to death by strapping them to a bed and then either stretching them to fit, or lopping off any bits of limbs which overhung it. For Perelman, the metaphor captures not only the brutality of labour relations under capitalism, but the way in which workers are objectified into human capital. In this state, they are not expected to have ideas or creative input of their own, but to have to fit themselves into preconceived roles, regardless of any additional abilities they could apply if they were allowed to do so. The ‘we don’t pay you to think’ style of management, which Perelman’s students report to him is their usual experience in their jobs, is a particularly Procrustian one.
The results are not of course restricted to wasted talents, as Perelman makes clear by recounting the industrial accidents, mine disasters and air crashes which can be attributed to management’s dogged adherence to practices their workforce could have told them were likely to be disastrous. However, since Perelman’s case is that capitalism’s failure to make the most of its workers is a failure in its own terms, the focus falls on the wastefulness of Procrustian practices.
The obvious questions here are why, if this way of treating workers is a mistake in capitalist terms, are economists and employers so wedded to it. In the myth, there is no reason for Procrustes’ behaviour: he tortures and murders people because he is a bandit and that is what bandits do. However, while it would be a mistake to assume that capitalists always act rationally in their own best interests, metaphorical Procrustianism clearly requires more of an explanation.
For Perelman, the roots of the problem lie with Adam Smith. In part, this is Smith’s failure to see workers and production as of equal importance to commercial transactions, which is compounded by the perpetuation of this orthodoxy in modern mainstream economics. The orthodoxy is enforced both by the professional consequences for those few economists who have tried to suggest more worker-centric models, and by a sense that spending too much time on such messy things as workers is somehow unscientific. Perelman points out that economics suffers from ‘physics envy’, meaning that there is an inbuilt tendency both for atomisation and a preference for the quantifiable over the subjective experience of workers. However, Perelman also sees a line between Adam Smith’s thinking and dangerous, antagonistic workplaces today, and he provides an informative account of Smith’s thinking about work and workers to support this observation.
When Smith did notice the conditions of production, and the workers actually doing the producing, he tended to attribute the productive capacity of industrialised workers to the way their jobs were organised, Perelman argues. According to Smith, it was the division of production into a number of discrete, repetitive tasks, each carried out by different workers or groups of workers, which was key to allowing production to increase. The example Perelman gives is Smith’s discussion of a pin factory near his home in Kirkcaldy. Smith noted that the men who worked there produced large numbers of pins in a day, whereas each man, untrained and on his own, would have been hard put to it to make a single pin in the same time. It might appear that the key here was the machinery in the factory, and others have pointed out how Smith’s pin factory discussion exposes the limits of his understanding of industrial production (that he used a small pin factory to stand for large scale industrial enterprises was only one of them). However, it is clear that to Smith technological developments seemed less important in increasing production than did the regimentation of the workforce.
While Adam Smith may have believed that this way of organising workers was the key to maximising production, it is unlikely that many modern CEOs still do. The management theory most obviously descended from this view is Taylorism, from its progenitor Frederick Taylor (1856-1915), which aims to maximise managerial control by breaking jobs up into simple, repetitive tasks, each performed by a different worker, coupled with lots of supervision. This sounds immediately familiar, but it is worth noting that it is regarded as decidedly old fashioned in theory. Taylor’s belief that workers are motivated only by their wages and that there is no point in trying to make their jobs interesting, as long as they are paid, has been replaced by various types of human relations theory, seeing motivation from interest in the other job as key to productivity. The persistence of Taylorism in practice has, Perelman shows, little to do with getting more out of workers. It is about control and fear.
For Perelman, this motivation again can be traced back to Adam Smith. Smith’s reputation is as a liberal, a believer in the ‘invisible hand’ of the market rather than more authoritarian options, but Perelman highlights here that he was concerned with how the working class could be kept under control, as well as forced to use some of their leisure time for what Smith saw as socially desirable pursuits, like joining militias to prepare them for military service. This attitude to the working class is reflected by modern managers for whom breaking jobs up into separate simple tasks is a way of replacing skilled workers, who have power by virtue of the difficulty and expense involved in replacing them, with unskilled labour, easily interchangeable with new recruits from the reserve army of labour and consequently more fearful and compliant.
Perelman provides some interesting examples of corporations’ fear of their workers. At General Motors the senior management floors at head office are separated by locked and guarded doors from the rest of the building, and the lifts will only stop there with a special executive key. At a company called Tiger Mill, management saw that workers’ access to management financial information was allowing them to make helpful suggestions to improve production, and concluded that they should be kicked off the system as they were putting management out of a job. Add to this the costs of supervising and guarding workers, and the effects of workers fighting back, and it all adds up to an antagonistic system and a colossal waste of resources.
Perelman is very clear on the nature and cause of the problem, but his suggestion of the solution is less so. He argues, rightly, that the dignity of workers, seeing them as rounded human beings, as opposed to as human capital, should be central, but there is little here to indicate how such a re-orientation might be brought about. The conclusion that this change would then inevitably cause the end of class divisions seems similarly to be missing several intermediate steps.
The issue is the extent to which you believe that it is possible for capitalism to change this aspect of the system. Perelman’s designation of the system he discusses as ‘Procrustian’ suggests that on some level at least he considers it not to be an essential aspect of capitalism. The additional descriptor implies that while capitalist labour relations may be Procrustian now, it would be possible to have a capitalist system that was not. However, the fact that for the last fifty years management theorists have been pointing out that boring and bullying workers are not the ways to maximise their productivity, while Taylorism is as prevalent as ever, implies that this style of management is more intrinsic to capitalism than Perelman would like to think.
Missing from Perelman’s account of work and working relations is the understanding that labour under capitalism is inherently exploitative. Regardless of how pleasant or unpleasant the conditions are for the individual worker, their employer’s profits come from the surplus value of their labour – the value they generate for which they do not get paid. Allowing workers to make suggestions by sticking Post Its on the cars they make, as at Toyota, may allow those workers to feel rather more engaged with their jobs than their counterparts at Ford, but it does not change the central fact that both companies are in business through exploiting their workers. More respect for human dignity, and less thinking about ‘human capital’, would indeed be a step forward for workers who have to endure dangerous and unpleasant working conditions every day, but eliding workplace hierarchies would not by itself eliminate the class system. Class conflict may not be good for workplace relations, but we will not see the end of class without it.
In the end, Perelman’s work seems to belong to the wide category of works which are effectively calling for proletarian revolution without admitting, or perhaps knowing, that that is the conclusion to which their arguments point. However, it is a useful and interesting addition to the body of work by writers like Richard Sennett that discuss the effects of capitalism on the experience of work, even if you might look elsewhere for a more explicitly revolutionary consideration of what we might do about it.
http://www.counterfire.org/index.php/articles/book-reviews/14652-the-invisible-handcuffs-of-capitalism
The Invisible Handcuffs of Capitalism
How Market Tyranny Stifles the Economy by Stunting Workers
Paperback, 280 pages
ISBN-13:
978-1-58367-229-7Cloth (ISBN-13:
978-1-58367-230-3)
Released: January 2011e-book available!Kindle,
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Mainstream, or more formally, neoclassical, economics claims to be a science. But as Michael Perelman makes clear in his latest book, nothing could be further from the truth. While a science must be rooted in material reality, mainstream economics ignores or distorts the most fundamental aspect of this reality: that the vast majority of people must, out of necessity, labor on behalf of others, transformed into nothing but a means to the end of maximum profits for their employers. The nature of the work we do and the conditions under which we do it profoundly shape our lives. And yet, both of these factors are peripheral to mainstream economics.
By sweeping labor under the rug, mainstream economists hide the nature of capitalism, making it appear to be a system based upon equal exchange rather than exploitation inside every workplace. Perelman describes this illusion as the “invisible handcuffs” of capitalism and traces its roots back to Adam Smith and his contemporaries and their disdain for working people. He argues that far from being a basically fair system of exchanges regulated by the “invisible hand” of the market, capitalism handcuffs working men and women (and children too) through the very labor process itself. Neoclassical economics attempts to rationalize these handcuffs and tells workers that they are responsible for their own conditions. What we need to do instead, Perelman suggests, is eliminate the handcuffs through collective actions and build a society that we direct ourselves.
“Workers, working conditions, and work itself rarely draw the attention, let alone concern, of employers or economists. Michael Perelman fills the void with this sweeping review of Procrusteanism—the economic institutions and practices that force people to accept the discipline of the market. His account of the degradation of labor gives us a sequel to Harry Braverman’s Labor and Monopoly Capital.”
—Richard B. Du Boff, professor emeritus of economics, Bryn Mawr College
“When so much punditry around us is devoted to finding market-based solutions to our current woes, this book is a blast of fresh air, reminding us that the market is an increasingly destructive institution. Perelman shows how the market, instead of serving humanity, is now a Procrustean monster, demanding imperiously that humanity fit to its own constraints. The market gives power to the destructive practices of business and finance while stifling the creative potential of labor to address urgent social needs. Perelman subjects to withering criticism both the market and the economists who pray to this false god—a tonic read in these times of economic disarray!”
—Paul Adler, Chair in Business Policy,
Department of Management & Organization, Marshall School of Business, USC
Michael Perelman is professor of economics at California State University at Chico, and the author of numerous books, including Steal This Idea and Railroading Economics./p>
http://monthlyreview.org/press/books/pb2297/
- 2008년 7월 21일
michaelperelman.wordpress.com/ - unsettling economics
Second Chapter of The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers. Posted July 22, 2008. Filed under: ...