Will Trump Deliver for the Rust Belt Voter?

U.S. factories produce twice as much stuff as they did in 1984, but with one-third fewer workers.

Mick Brooks explains why Donald Trump's plan to re-industrialise America's heartland is a false promise.

Rust Belts
by Mick Brooks

There has been a massive deindustrialisation of formerly industrial areas, not only in the USA but in all the advanced capitalist countries. There are two causes suspected for being responsible for this process. They are increasing productivity and the relocation of industry.

Marx saw the accumulation of capital as the motor of capitalist development. Driven by competition among themselves, capitalists are forced to accumulate a large part of the surplus produced by the working class in order to undercut their rivals. Commodities are produced cheaper because productivity has increased and they embody less labour time. Capital accumulation consists of the increase in constant capital (especially plant and machinery) relative to living labour in the production process. The extreme instance of this is virtually complete automation in the modern factory.

This increase in productivity inevitably means that fewer workers will be needed to produce the same amount of commodities. Here is an example from a study of US steel minimills. Over the period 1963 – 2002 the output of steel from these minimills remained broadly stable. Over the same period 75% of US steel workers lost their jobs. Output per worker had gone up five times over. There is no evidence that these jobs relocated to Mexico or anywhere else. They just disappeared. http://microeconomicinsights.org/productivity-impact-new-technology-evidence-us-steel-industry/

So the problem is not, as Donald Trump would like you to believe, reducible to trade. And protectionism is not the answer.  Nor is the problem confined to the USA. It has been going on in all the advanced capitalist countries. The first stage in the deindustrialisation of the American rust belt was actually the removal of manufacturing industry to the ‘right to work’ states in the South.

Manufacturing is much more amenable to these startling increases in productivity than services.

I dislike the expression service sector – bond dealers and corporation lawyers have little in common with care workers and shop assistants except that none of them works in industry. Rising productivity is much more difficult to achieve in services. I don’t think bar staff are pulling pints in pubs any faster than they did 200 years ago. In many cases measures of productivity are meaningless. For instance a teacher may teach a larger class (more outputs for the same input), but of course they are giving less attention to each pupil.

In the case of steel production deindustrialisation in the USA has not been caused by the relocation of industry elsewhere. In other instances, it has.  John Smith’s recent book ‘Imperialism in the Twenty-First Century’ gives some examples. In the first chapter he deals with the T-shirt, the iPhone and the cup of coffee. What has happened in all three cases is that the production process has been broken down into what are called value-chains. Routine processes are shipped abroad to take advantage of cheap labour. Other aspects, such as research and marketing are retained in the USA.

In some figures I have seen, wages in countries like Bangladesh are 3% of the US rates. Low wages provide the incentive to relocate, particularly for labour intensive industries. This has always been the case. The difference, as Richard Baldwin explains in ‘The Great Convergence’, is that the revolution in communications has enabled low wages to be harnessed to the latest technology transferred to poor nations: “South Carolina workers are competing ...with the nearly unbeatable combination of US know-how and Mexican wages.”

I believe jobs in mass production of labour intensive industries such as textiles and clothing have disappeared for ever from the advanced capitalist countries, though luxury manufacture may cling on. It is obvious to me that no amount of protectionism or tearing up of trade treaties by Donald Trump or anyone else will reverse that process in view of the huge wage differentials between nations.

Though big chunks of industry have been relocated to less developed countries in search of cheap labour. The world has not deindustrialised. More manufactured goods are produced globally than ever before. 

How important is technology compared to trade in shedding jobs? Though calculations are difficult the Financial Times survey on 23.11.16 (‘Cut out of the Factory Revival’) quotes Michael Hicks of Ball State University, that 13% of manufacturing jobs were lost to trade from 2000 to 2010, while the remainder were lost because of productivity increases.

Two hundred years ago every country in the world saw about half of the population directly engaged in farming or related activities to produce food and other agricultural products. Now it is 3% or less in all the advanced capitalist countries – and some of the agricultural processes are in fact quite industrial in nature. The proportion of the workforce engaged in agriculture in less developed countries is not much higher, and is falling fast as agribusiness displaces peasant production. The reason has been the rising productivity in agriculture.

The same process has been going on in many manufacturing activities. The era of the first industrial revolution, when some factories in the advanced capitalist countries employed more than ten thousand workers, has gone. These conditions persist in countries such as China, but for how long? The cost-cutting process is relentless. Wages have risen sharply in China, and capital is looking elsewhere for still cheaper labour.

Marx defined productive labour as the labour of those directly producing surplus value. As he says, “To be a productive labourer is, therefore, not a piece of luck, but a misfortune”. Following Ricardo, he saw the increase in productivity among productive workers as inevitably leading to a relative increase of unproductive workers in the economy, because fewer and fewer productive workers can produce a bigger and bigger surplus to maintain them. This is what has been happening. Unproductive workers in this sense doesn’t mean ‘useless’ – it means those such as teachers and nurses who don’t directly produce surplus value for a boss:

“Assume that the productivity of industry is so advanced that whereas earlier two-thirds of the population were directly engaged in material production, now it is only one-third...Equally distributed, all [that is, the whole population] would have ²/₃ more time for unproductive labour and leisure.” Bang on, Karl. 

“But in capitalist production everything seems and in fact is contradictory... Those two-thirds of the population consist partly of the owners of profit and rent, partly of unproductive labourers (who also, owing to competition, are badly paid...It can be supposed that—with the exception of the horde of flunkeys, the soldiers, sailors, police, lower officials and so on, mistresses, grooms, clowns and jugglers—these unproductive labourers will on the whole have a higher level of culture than the unproductive workers had previously, and in particular that ill-paid artists, musicians, lawyers, physicians, scholars, schoolmasters, inventors, etc., will also have increased in number.” (Theories of Surplus Value Part I)

So, instead of the rise of productivity allowing us all to work shorter hours it causes relatively secure, well-paid jobs to be destroyed and  replaced by precarious employment where people are scuffling about trying to make a living the best way they can. Sound familiar?

Is there anything we can do to preserve jobs? The relocation of industry to the South represented a conscious decision by American capitalists to exploit different levels of worker protection in different States of the USA. Likewise farm wages have been reduced in Britain. Here’s one way how. Jobs in Lincolnshire harvesting vegetables are advertised in Poland and not in Lincolnshire or anywhere else in the UK. The Corbyn-led Labour party is pledged to end this transparent racket. So trade union and political pressure can help but we should recognise that we are up against powerful processes to seek out the cheapest cheap labour in the world which are an inevitable trend in modern capitalism.

The FT feature of 23.11.16 goes into more detail. US manufacturing has lost 5 million jobs (30% of the total) since 2000, but manufacturing output in 2015 is 32% up on its 2007-9 nadir. The article gives the case of Eastman in Buffalo where labour represents only 3% of total costs. Here is where reshoring might work, but it is not going to create the millions of jobs needed to revive the American rust belt. The Reshoring Initiative claims 265,000 jobs have been created since 2010 in the USA, but that only represents 5% of the jobs lost in the country since 2000.

It is a fantasy to argue for the reshoring of routine, unskilled jobs such as those in the furniture or clothing industries back to the USA. Apart from anything else, it would deprive workers in less developed countries such as Bangladesh of such precarious, poorly paid employment as they have. It would be the reverse of an internationalist policy. We can argue, even under capitalism, for the need for skills retraining and an orientation to a high skills, high paid workforce within the economies of advanced capitalist countries.

In 1930 Keynes wrote an essay, ‘Economic Possibilities for our Grandchildren’. In it he speculated about what we would do with all our leisure time after working a three hour day. It hasn’t happened!

A radical reduction in the number of hours worked should be a principal demand for the labour movement.