PRODUCTIVITY GROWTH AND

CAPITALIST STAGNATION
AL SZYMANSKI
RECENT YEARS IT HAS BECOME common for both
the
right (Reagan,
Thatcher,
and the economists associated
with
them)
as well as much of the left
(the
rising
share of
labor/profit squeeze
theorists
currently popular
in some Western
European
and U.S. academic
circles,
e.g.,
Bowles,
Gordon and
Weisskopf1)
to
emphasize
that a
primary
cause of the relative
economic
stagnation
of the 1970s and the economic crisis of the
1980s has been the decline in the rate of increase in labor
pro-
ductivity.
Both tend to attribute the decline in
productivity pri-
marily
to the loss of work incentives
-
a loss of worker motiva-
tion as a result of increased
job security,
and/or the increased
political power
of the
working
class manifested in a
rising
level
of social benefits that have
significantly
decreased the fear of re-
duced
living
standards encumbent on
unemployment.
There is also another
important contemporary
current
which
emphasizes productivity
as the essential cause of the
growing
economic
stagnation
of the 1970s and 1980s. This tend-
ency,
whose
Congressional
advocates have been labeled "Atari
Democrats,"
emphasizes
the failure of the state to devote suffi-
cient resources to
research,
development
and technical/scientific
education,
along
with the failure of
private industry
to invest
heavily
in
high technology
"sunrise" industries. This
approach
tends to look to
Japan
as its
model,
and to
emphasize
state
sup-
port
of "^industrialization"
policies (including
state
planning
and subsidized loan
participation
in
"high-tech" export-oriented
industries).
This
paper argues against
both
positions.
Instead it main-
1 Samuel Bowles,
David Gordon and Thomas
Weisskopf, Beyond
the Wasteland: A Demo-
cratic Alternative to Economic Decline
(New York, 1983).
295
296 SCIENCE & SOCIETY
tains that the cause of the
(exaggerated)
decline in
productivity
since the mid-1960s in both the U.S. and other advanced
capital-
ist countries is to be found
primarily
in the failure of effective
demand
(a
result
largely
of
stagnation
in the level of state ex-
penditures
and real
wages). Lastly,
it is
argued
that
attempts
to
increase
productivity
without
dealing
with the basic causes of its
decline
can,
to the extent
they
are
successful,
only aggravate
the
fundamental economic
problem
of the 1980s
-
the
tendency
for the value of
output
to outrun
purchasing power.
The Trends in
Output
Per Worker
The claim that there has been a radical decline in
productiv-
ity growth
over the course of the 1970s has been
exaggerated.
Victor Perlo has done a
thorough critique
of the U.S. Bureau of
Labor Statistics
(BLS)
measures of
productivity, showing
that
their
procedures
have
downwardly
biased their
principal
index
over the course of the 1960-1980
period.2 Harry Magdoff
has
made a similar
argument.3
The most
important
of these down-
ward biases are the BLS use of
money
value,
rather than
phys-
ical
volume,
as their measure of
output,
and the use of all em-
ployees
instead of
just
those
engaged
in actual
production
as the
measure of worker-hours
(see
Table
One).
Most of the decline in
the overall non-farm
output per employee
in the U.S. is due to
the shift to service and white-collar work
(where
the
possibility
of
productivity
increases are less than in
manufacturing),
the tend-
ency
to retain white-collar workers while
laying
off
production
workers in times of economic
downturn,
and the
increasing
im-
portance
of the factors left out of calculations of the value of
output, e.g., capital gains, capital consumption
and
inventory
ad-
justment
allowances,
and
unreported profits.
Nevertheless,
the decline in
physical output pçr production
worker,
while much less than the
proponents
of the failure of
worker incentive
argument
maintain,
has been
significant,
and
thus must be
explained.
Perlo's conclusion
-
that there has in
fact been no
problem
with
declining productivity;
that the
ap-
parent
decline is a result of statistical artifacts and trends outside
of
production;
and that the rate of
productivity
increase has
2 Victor
Perlo,
"The False Claim of
Declining Productivity
and Its Political
Use,"
Science
fc?
Society
(Summer, 1982).
3
Harry Magdoff,
"A Statistical
Fiction,"
The Nation
(July
10-17, 1982).
PRODUCTIVITY AND STAGNATION
297
Table One
Trends in the Rate
of
Increase in
Productivity
in the
US,
1960-1980
(Increase
Over Previous
Year)
1950-59 1960-69 1970-79 1980
Nonfarm
Business
Value of
output per
hour of all
employees
2.5% 2.5% 1.7% .8%
Manufacturing Only
Value of
output per
hour of
persons
en-
gaged
in
production
2.4 2.9 2.6 1.7
Quantity
of
output per
hour of
production
workers 4.3 3.9 3.3 2.8
Unemployment
Rate
(all
civilian
workers)
4.5 4.8 6.2 6.8
Sources: Economic
Report of
the
President, 1983,
Tables B-33 and B-41 for rows one and
four.
Victor
Perlo, 1982,
Table II for rows two and three.
merely
been restored to its
long-term average,
after an
excep-
tional boom caused
by historically specific
factors associated with
the aftermath of World War II
-
is not valid.
Something
funda-
mental
happened
to the rate of
productivity
increase in the
1960s and the 1970s. And this must be
explained.
The
tendency
for
productivity
in
manufacturing
to decline
has been the
general
trend in the
major
advanced
capitalist
countries
(see
Table
Two).
In
fact,
the decline in
output per
em-
ployee
in
manufacturing
between the 1960s and the 1970s was
more
pronounced
in almost all the other
major
industrial
capi-
talist countries than in the U.S. These
declines,
although exag-
gerated
in the
way
Perlo
discusses,
are real.
Further,
the
general
decline in
manufacturing productivity
is
closely
related to the
general
economic slowdown of the 1970s as indicated
by
the
trends in the
quantity
measures of
physical production
as well as
by
the measures of
gross
national
product
measured in
prices
and the
unemployment figures
(see OECD,
Main Economic Indi-
cators: Historical Statistics
1960-1979, 1980).
298 SCIENCE & SOCIETY
Table Two
Annual Rates
of
Growth in Value
of Output
Per
Employee
in
Manufacturing,
1960-1978
1960-1969 1970-1978
USA 3.2 2.8
France 7.6 6.1
West
Germany
7.1 6.4
Italy
9.9 5.2
Japan
7.9 5.7
Netherlands 9.9 7.8
Sweden 9.3 3.8
United
Kingdom
4.3 2.3
Source: U.S.
Department
of
Labor,
Handbook
of
Labor
Statistics,
1981: Table 179.
The
Lazy
Worker and
Productivity
Those who
emphasize
the lack of worker incentive in the
U.S.
usually
focus on the
importance
of the
"partial
socialization
of the
wage"
and the increased
proportion
of workers'
living
standards that are funded
by
the state. This "social
wage"
is said
to be
independent
of
performance
on the
job
(and
thus
allegedly
undermines work
discipline
and
produces
lower
productivity,
lower
profits,
lower investment and lower economic
growth).4
The
argument developed by
Bowles,
Gordon and
Weisskopf,
in
fact,
explicitly
maintains that the
primary
cause of the
productiv-
ity
decline has been the "cost of
losing your job":
as the
gap
be-
tween one's standard of
living
while
working
and that obtainable
without
working
has decreased over
time,
both the incentive to
4 See for
example
Samuel Bowles and Herbert
Gintis,
"The Crisis of Liberal Democrat-
ic
Capitalism:
The Case of the United
States,"
Politics and
Society,
Vol.
11,
No. 1
(1982);
Frances Piven and Richard
Cloward,
The New Class War
(New York, 1982);
Thomas
Weisskopf,
"Marxist
Perspectives
on
Cyclical
Crisis,"
in U.S.
Capitalism
in Cri-
sis,
published by
the Union for Radical Political Economics
(New York; 1978);
"Marx-
ian Crisis
Theory
and the Rate of Profit in the Postwar U.S.
Economy," Cambndge
Journal of
Economics,
3
(1979),
and "The Current Economic Crisis in Historical Per-
spective,"
Socialist
Review,
Vol.
11,
No. 3
(May-June, 1981);
and
Bowles, Gordon and
Weisskopf, op.
cit.
PRODUCTIVITY AND STAGNATION 299
Table Three
Trends in Social
Expenditures
in the
US,
1960-1979
I960 1970 1975 1979
As a
percentage of
total
social
welfare expenditures
Social
Security
and
Medicare 21.1% 25.3% 27.0% 30.8%
Public assistance
(includes
food
stamps)
7.8 11.3 14.2 15.1
Medicaid .9 3.6 4.7 5.5
Food
stamps
0 .4 1.6 1.5
Education 33.7 34.9 27.9 25.3
Unemployment
benefits 5.4 2.6 4.8 2.6
Social welfare
expenditures
as a
percentage
of
Personal Income 13.0 18.0 22.9 22.0
Unemployment payments
as %
weekly wage
35.2 35.6 37.2 35.9
Source: U.S.
Department
of
Commerce,
Statistical Abstract
of
the U.S.
for
1981,
1982:
320,
321,
340.
Economic
Report of
the
President,
1983: Table B-20
work and
productivity
have been
seriously
undermined.5
Total
government
funded social
expenditures
(all levels)
rose from 13.0%
of
personal
income in 1960 to 22.9%
in
1979,
leveling
off since the mid-1970s
(see
Table
Three).
The bulk of
this
expansion
occurred in the 1966 to 1972
period
(see
sources
for Table
Three).
The
75%
increase in the ratio of social ex-
penditures
to
personal
income which occurred over the
15-year
period
is,
of
course,
in line with what
Bowles,
et
al.,
claim. How-
ever,
it is most
unlikely
that a social
wage supplement
of
slightly
over 20%
(in
contrast with about
13%)
could make much differ-
ence in work motivation. The
great
bulk of the
working-class
liv-
5 These authors
actually argue
that it was
only
in the 1966-1973
period
(a time,
they
maintain,
which saw the
genesis
of the more serious economic crisis that was to fol-
low)
that the
primary
immediate cause of
declining productivity
was the
declining
cost of
losing
one's
job (ch. 5). They argue
that the
post-
1973
problem
was
primarily
one of
overproduction
caused
by
the reaction of the
corporations
and state to the
earlier
productivity
slowdown
(ch. 6).
300 SCIENCE & SOCIETY
ing
standard in the U.S. continues to be from
wages,
and it is to
what cash income can
buy
that the worker remains
primarily
ori-
ented.
The most
important component
of the social
wage
in terms
of effect on work motivation is the level of
unemployment
bene-
fits. Its ratio to the
regular wage
indicates the bulk of the de-
crease in one's income when one loses one's
job.
The least im-
portant parts
of the "social
wage"
for the
employed
are
disability
and retirement
benefits,
as well as the
major public
assistance
and welfare
programs,
the level of which
(at
least for the bulk of
the
working
class who are not near retirement
age, suffering
from chronic
illness,
or
marginal participants
in the labor
force)
is
usually
considered rather remote to their
daily
lives. The edu-
cation
subsidy,
it should be
noted,
is allocated
mostly
to the mid-
dle class
(and
skilled
workers),
whose children attend
college
and
disproportionately
benefit from other
programs.
Education ex-
penditures
could also be
regarded
as a
subsidy
to the
corpora-
tions, i.e.,
"socialization" of their
training expenses.6
Further it
should be noted that social
security
benefits are
similarly dispro-
portionately enjoyed by
the middle class and skilled
workers,
not
by
the
unemployment-prone,
low-income workers. In fact as
much as half of all social
expenditures
should
probably
be con-
sidered
supplements
to middle class and
semi-professional
in-
come.
In 1960
unemployment
benefits in the U.S.
averaged
35.2%
of the
weekly wage,
in
1979, 35.9%
(see
Table
Three).
Although
there was a
slight
increase in the
early
1970s the
average
then
slipped
back to the level
typical
of the 1960s. There has
not,
in
fact,
been
any
decrease in the cash loss from
losing
one's
job.
The
average monthly
value of food
stamps per recipient
in 1962
was
$7.66;
in 1970
$10.58;
in
1975, $21.42;
and in
1980, $34.34.
In
January
1982 the rules of
eligibility
allowed a
family
of four
with no income
$233
in
stamps.
Families with income were
eligi-
ble for the difference between this amount and
30%
of their to-
tal income
(less déductibles).
A
family
with a sole breadwinner
who had been
earning
the median
wage
in the U.S. in 1981 was
eligible
for
$124
worth of food
stamps (assuming only
the
standard
deduction)
when he went on
unemployment.
Thus,
6 See
James
O'Connor,
The Fiscal Crisis
of
the State
(New York, 1973).
PRODUCTIVITY AND STAGNATION 301
food
stamps together
with
unemployment
amounted to 45% of
the
average
worker's income before loss of
job
(the
value of food
stamps
amounted to about
9%
of a worker's former
income).
There was no
significant change
in the
importance
of food
stamps
over the
period
of the 1970s. Food
stamps plus
unemployment
benefits
together averaged
about
43-45%
of
workers'
job earnings throughout
this
period.
In the
1960s,
of
course,
before the
expansion
of the food
stamp program,
the
sum of food
supplements
and
unemployment
benefits was closer
to the level of
unemployment
benefits. Given the
relatively
mea-
ger
non-cash
supplements
available to the
unemployed
in the
U.S.
(mostly
food
stamps
and medicaid available to
supplement
unemployment payments),
it can not
realistically
be
argued
that
a
significant
decrease in the felt costs of
unemployment
occurred over the 1960-1980
period.
There is no direct evi-
dence that the increase in non-cash benefits over this time was
large enough
to affect workers' motivation.
It should also be remembered that
unemployment
benefits
are
not,
and are not felt
as,
permanent supplements.
One must
actively
seek and soon find another
job
-
and the chances are
that the new
job
will be less desirable and lower
paying
than the
previous
one
(the length
of time workers received
unemploy-
ment benefits
averaged
around 14 weeks over the 1960-1980
period).
This factor must be considered
together
with a
variety
of non-economic motivations to
keep
one's
job
(friends,
pride,
ridicule about
being
fired, etc.).
In
sum,
it is
simply
not credible that workers with families
would slacken their
output
to the
point
of
risking being
laid
off,
just
because their cash
plus
food
stamps
income would be 45%
of their
wage
for the short
period
when
they
were on
unemployment.
It would seem that the rather radical reduction
in
living
standards incumbent on a
lowering
of one's income
by
half,
plus
the
insecurity
associated with
looking
for
work,
per-
haps
in a different
town,
would be sufficient motivation to work
hard,
even if this were the workers'
only
incentive to work.
The
great
bulk of the increase in social
expenditures
over
the 1960-1979
period
occurred in
programs
of
marginal signifi-
cance for the
unemployed.
Social
Security
and medicare were
up
10.9
times,
education 5.1
times,
and
public
assistance
(including
medicaid and
foodstamps)
14.8 times. Social
Security
and medi-
302 SCIENCE & SOCIETY
care
together
rose from
21.1%
to 30.8% of total social
expendi-
tures,
while
public
assistance
grew
from 5.4%
to 15.1%
of the to-
tal. Meanwhile
unemployment
benefits
grew by only
3
times,
shrinking
from
5.4%
to
2.6%
of all state social
expenditures
(even
while the
unemployment
rate
rose).
Medicaid and similar med-
ical
programs
available to the
unemployed,
as well as to
long-
term,
low-income
people
(who
undoubtedly
utilize the bulk of
this as well as
foodstamp programs),
increased from
.9%
to 5.5%
of total social
expenditures
while
foodstamps
increased from
zero to
1.5%
(see
Table
Three).
About 2% of
personal
income in 1979
actually represented
resources utilized
by
the
unemployed
to sustain themselves
(unemployment
benefits, medicaid,
foodstamps),
while the
great
bulk of social
expenditures
were allocated to the retired
(dispro-
portionately
to the
higher
income
groups), permanently
disa-
bled,
long-term poor,
and to education
(which
largely
benefits
the middle
class).
Those who receive the
great proportion
of
state social
expenditures
are not workers in the labor force. And
they especially
are not
lower-skilled,
high unemployment-prone
workers. It is
deceptive
to assume that state
expenditures
on so-
cial
programs actually
available to those who lose their
jobs rep-
resent a comfortable
enough
alternative to
working
to
signifi-
cantly
reduce the fear of
losing
one's
job
(and
hence undermine
work
incentives).
If the "cost of
losing
one's
job"
was the
major
determinant
of the rate of increase in
productivity,
then it is to be
expected
that workers who had "the most to lose" would have the most
rapid
rates of increase in
productivity,
and workers with the least
to lose would have the lowest rates of
productivity
increase. It
would
appear
that workers in industries with the
highest wages
should have the
highest
rate of increase in
productivity.
Table
Four
displays
data for 36 basic
manufacturing
industries,
ranked
by
the rate of increase in value of
output per
hour of
production
workers in the 1973-1977/1978
period.
The
quartile
of
manufacturing
industries with the
highest
rate of increase in
productivity
over the 1973-1977/1978
period
(5.7%
per year)
had somewhat lower
wages
in both 1973 and
1978 than the
quartile
with the lowest rate of
growth
in
produc-
tivity
(10%
and
12% lower,
respectively).
The
prediction
that the
more a worker has to
lose,
the more
rapidly
will he or she in-
PRODUCTIVITY AND STAGNATION 303
Table Four
Increases in
Productivity
and
Wages by Industry Quartiles
(US, 1973-77/78)
Average
Annual
Increase in
Output
Per
Wages of
Production
Production Workers
(and
Ratio
Worker
of Wages
to
Mean)
197^
1978
Highest Productivity
Quartile1
5.7% $167.88 ( .95) $261.56 ( ,95)
Second
Productivity
Quartile2
3.1% $178.81 (1.01) $272.25 ( .99)
Third
Productivity
Quartile3
1.7% $174.51 ( .99) $270.97 ( .99)
Lowest
Productivity
Quartile4
.2% $186.56 (1.05) $295.47 (1.07)
Average
for all
Industries5 2.7% $176.94 (1.00) $275.07 (1.00)
1. These nine industries are:
hosiery,
malt
beverages,
bottled and canned soft
drinks,
synthetic
fibers,
grain
mill
products,
metal
cans,
paints
and allied
products,
tobacco
products,
radio and TV receivers.
2. These nine industries are:
pharmaceuticals,
motor vehicles and
equipment,
structural
clay products,
electrical
lamps·,
tires and inner
tubes,
major
household
appliances, pa-
per, paperboard
and
pulp
mills,
veneer and
plywood,
and
bakery products.
3. These nine industries are:
glass
containers,
canned fruits, aluminum
rolling
and draw-
ing, lighting
fixtures,
preserved
fruits and
vegetables, primary copper,
lead and
zinc,
copper rolling
and
drawing, sugar,
saw mills and
planing
mills.
4. These nine industries are: household
furniture,
hydraulic
cement,
petroleum
refining, candy,
footwear,
motors and
generators, soaps
and
detergents,
steel,
and
pri-
mary
aluminum.
5. All industries for which
comparable
data for both
productivity
and
wages
are available
are included.
Sources: U.S.
Department
of
Labor,
Employment
and
Earnings,
1981;
Handbook
of
Labor
Statistics,
Table 105.
crease
productivity
is
clearly
false. There is no
relationship
be-
tween those industries with the most
rapid
rate of increase in
productivity
and the "cost of
losing your job."
The worker incentive
approach
to the
productivity
slow-
down should also
predict
that in countries where income
security
programs represent
a
larger
share of the national
income, i.e.,
304 SCIENCE & SOCIETY
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PRODUCTIVITY AND STAGNATION
305
where
wage
labor is the most
socialized,
labor
discipline
should
be most
relaxed,
and hence
productivity
most
stagnant.
In
fact,
comparisons among
the advanced countries indicate that there is
no such relation. Of the
eight major
advanced
capitalist
coun-
tries,
the four with the most
rapid
rates of increase in
productiv-
ity
in the 1970-1978
period
had a somewhat
higher proportion
of their workers'
living
standards funded
through
state
pro-
grams
than did those with the least
rapid
rates of
growth
(36%
versus
33%) (see
Table
Five).
It should be noted that the ad-
vanced
capitalist
countries with the slowest increases in
produc-
tivity,
the U.S. and the
U.K.,
had two of the lowest levels of state
social
expenditures
of all advanced
capitalist
countries,
while the
country
with the
highest
level of the social
wage,
the
Netherlands
(44%),
had the most
rapid
rate of increase in
pro-
ductivity
(62%).
The correlation between the increase in
output
per
worker over the 1970-1978
period
and the ratio of all
gov-
ernment
spending
to GNP for the 17
major
O.E.C.D. countries
was +.29 in both 1970 and 1979.
It should also be noted
that,
contrary
to what is often
sug-
gested by
those who blame
high wages
for economic
problems,
a
comparison
of the advanced
capitalist
countries finds no rela-
tionship
of the kind
predicted
between
productivity
increase and
either
wages
or increases in
hourly compensation
over the
1970-1978
period
(see
Table
Five).
Table Five also demonstrates
that,
for the most
part,
those
countries with the most
rapidly increasing
share of
government
spending
in GDP had .the fastest rate of increase in
productivity.
The contrast between the Netherlands and
Japan
on the one
hand,
where
government spending
increased
by
over ten
per-
centage points
of GDP over the 1970-1978
period,
and the U.S.
and the U.K. on the
other,
where it
hardly grew
at
all,
is ex-
treme.
Bowles,
Gordon and
Weisskopf
in fact
recognize
that the
countries with the
highest
level of social welfare
expenditures
(and also,
it should be
noted,
the
highest degree
of
job security)
have had the most
rapid
increases in
productivity. They argue,
however,
that this is the case because U.S.
capitalism,
alone
among
the advanced
capitalist
countries,
has been unable to hu-
manize the work
process
so as to substitute the
positive
work in-
centives used in
Europe
and
Japan
for the
negative
incentives
306 SCIENCE & SOCIETY
which are
allegedly
dominant in the U.S.7
While there are differences in U.S. and Western
European
and
Japanese management techniques,
these are not
qualitative
as
suggested by
Bowles,
et al And
they certainly
have not been
the cause of the
disparate productivity patterns
in the U.S. and
Europe
and
Japan.
Workers in the basic unionized industries
have
generally
had a
high degree
of
job security
and benefits as
well as
fairly progressive management
that understands the role
of
positive
work incentives. In these basic U.S. industries
nega-
tive incentives
-
the threat of
being
fired or docked in
pay
-
have not been
primary
for some time.8
The worker incentive
approach ignores
the
development
of
modern
managerial theory
on how to increase workers'
output.
In
fact,
few
contemporary
mainstream
scholarly analyses
of the
U.S.
productivity
slowdown of the 1970s mention
loosening
of
labor
discipline
or failure of work incentives due to either
strong
unions,
substantial welfare benefits or increased
job security
as
an
important
factor. A
comprehensive survey
of U.S.
managers
found that 55%
disagreed
that "the best
way
to increase
output
is
by performance
incentives,"
and 77%
disagreed
that "the
average
unskilled worker is interested in
doing
as little as
possible." Only
10%
of
managers thought
that more worker incentive
programs
would be
"very important"
in
"improving productivity
in their
organizations,"
and
only
25%
thought
that "harder work"
by
em-
ployees
would be
"very
useful."9
7
They argue
as follows: "We do not believe that a decline in work
intensity
was the
only possible
outcome of the erosion of the
post-war corporate system.
Had the de-
cline in the cost of
job
loss,
for
example,
been
accompanied by
the
emergence
of
forms of work
place organization
less reliant on the stick of economic
insecurity
and
more effective in
profernng
the carrot of
workplace
commitment,
no decline in work
intensity
need have occurred.
Indeed,
output per
work hour
might
well have in-
creased. Sweden and other Northern
European
countries have
experienced rapid
productivity growth
with
systems
of labor coordination and allocation which
rely very
little on
unemployment
and other market-induced economic anxieties. The
productivity- retarding
effects of the decline in the cost of
job
loss thus do not reflect
human
nature,
or even
capitalism
in
general.
Rather,
the
relationship
between
output
per
work hour and the cost of
job
loss is an
aspect
of the
particular system
of domina-
tion which characterized the U.S.
economy
in the
postwar
era."
{Op.
cit.,
p. 435.)
8 See Michael
Burawoy, Manufactunng
Consent
(Berkeley, 1979);
Richard
Edwards,
Mi-
chael Reich and David
Gordon,
Labor Market
Segmentation (Lexington,
Mass., 1975);
Richard Edwards. Contested Terrain fNew York. 1979V
9
Raymond
Katzell and Daniel
Yankelovich, Work,
Productivity
and
Job Satisfaction
(New
York, 1975).
PRODUCTIVITY AND STAGNATION 307
Research on U.S.
managerial
attitudes towards
increasing
productivity points
to
job
enrichment,
workers'
participation, job
satisfaction and
job security
as more
promising ways
to raise
pro-
ductivity,
than
increasing
material incentives or
decreasing job
security.
For
example,
one
survey
of
managerial
attitudes found
that 87%
of U.S.
managers agreed
that
job
satisfaction leads to
greater productivity.
About
82%
also felt that
management
con-
cern for the welfare of
employees improves productivity.
Seventy-five percent
of
managers agreed
that
job
enrichment is
a
promising strategy
for
improving productivity.10
The incentive theorists attribute low
productivity
to the in-
creased
job security
of workers
(who
are thus less afraid of
being
fired).
If this is true we would
expect
that
long-term
trends in
productivity
should be
positively
associated with the
unemploy-
ment rate and
negatively
with the
percentage
of the labor force
in unions.
However,
we find
quite
the
opposite.
Increases in
productivity
in the U.S. were
greatest
in the 1950s and
1960s,
when
unemployment
was low. The decline in
productivity
over
the 1970s was associated with a rise in
unemployment.
For ex-
ample, during
the
1960s,
when the
unemployment
rate
averaged
4.8%,
the annual rate of
growth
of nonfarm
productivity per
employee
was 2.5%.
During
the
1970s,
when the
unemployment
rate
averaged
6.2%,
the
productivity growth
rate was 1.7%.
In
fact,
since the
mid-1960s,
as the
job security
of workers has
steadily
declined as measured
by
the
unemployment
rate,
the
rate of increase in
productivity
has also
just
as
steadily
declined.
It should be noted that the
U.S.,
along
with the
U.K.,
the
two
major capitalist
countries with the slowest increase in
pro-
ductivity
over most of the
post
World War II
period,
had a
sig-
nificantly higher
rate of
unemployment
than almost all other ad-
vanced
capitalist
countries. Over the
1960s,
when nonfarm
pro-
ductivity per employee
increased on
average
2.5%
a
year,
the
proportion
of the labor force in unions
averaged
29%.
By
con-
trast,
in the
1970s,
with
productivity averaging
an increase of
1.7%
a
year,
the
percentage
of the
nonagricultural
labor force in
unions
averaged
25%
(see
Tables One and
Eight).
Moreover,
the
U.S. has one of the weakest union movements of
any
advanced
capitalist country,
as well as the fewest
guaranteed rights
to a
10
Ibid.,
pp.
114-115.
308 SCIENCE & SOCIETY
job.
It is clear that
security
of
job
tenure can not be the
primary
factor
operating
to
produce
the decline in
productivity.
Bowles,
Gordon and
Weisskopf
attribute almost two-thirds
(63%)
of the
productivity
slowdown between 1948 and 1966 and
1966-1973
(when
productivity
declined from an
average
of
2.9%
to an
average
of 2.2% a
year)
to the decline in
intensity
of
work,
while
attributing
19%
to business
failures, 18%
to
rising
costs of
raw
materials,
and 16% to the trend in
capacity
utilization
(and
minus 15%
to the trends in
capital intensity).
It should be noted
that
they
do not claim that a decline in work
intensity played
a
primary
role in the far more
significant productivity
decline in
1948-1966 and 1973-1977
-
here
they
attribute
only
18%
of
the total
productivity
decline
(of
2.0
percentage points)
to the
decline in work
intensity.
To
quote
them:
The
"puzzle"
of the
productivity
slowdown has been solved. . . .
During
the first
phase
of the
crisis,
from 1966 to
1973,
the decline in the rate
of
productivity growth
was due to the erosion of
corporate power
-
particularly
the
weakening
of
corporate
control over the
intensity
of
work. From 1973 to
1979,
the further decline in
productivity growth
was the result both of the
continuing
erosion of the
postwar corporate
system
and the
counterproductive attempt
to restore that
system by
means of the Great
Repression.11
It would seem that the
relatively
minor decline in the rate of
productivity
increase from
2.9%
to
2.2%
a
year
would be un-
likely
to cause the kind of "Great
Repression"
and "cold bath"
over the course of the 1970s
they
attribute to it.
Indeed,
they
seem to
greatly exaggerate
the extent of
"repression"
as indica-
ted
by
more restrictive
monetary
and fiscal
policies,
the
leveling
off of state social
expenditures
and an increased
hostility
to un-
ions
among employers.
The 1970s
hardly
deserve the
descrip-
tion
"repressive."
Yet such an
exaggerated
characterization is
crucial for their
argument
about the 1970s and 1980s.
The most
important dynamic
element in the authors' "work
intensity"
variable is "the cost of
losing your job."
It would seem
that,
rather than the
highly
tenuous micromodel of workers mo-
tivated
by
the extent of concern about losses in
living
standards
incident on
being
fired,
a far more tenable
explanation
of the
correlation between "the cost of
losing your job"
and
productiv-
11
Bowles,
et
ai,
op.
cit.,
pp.
143ff. The
quoted passage
is on
p.
148.
PRODUCTIVITY AND STAGNATION 309
ity growth
is that both are affected
by
the level of
stagnation.
The most
dynamic component
of the "cost of
losing your
job"
variable is the
average
duration of
unemployment.
In fact
the correlation between the "cost of
losing your job"
and the "du-
ration of
unemployment"
was .95 over the 1948-1973
period
and .88 over the 1948-1979
period.
The correlations between
the increase in nonfarm
productivity
and the duration of
unemployment
were .39 and .32
respectively.
The other
component
of the "cost of
losing your job*
is the
ratio of the
wage
less
unemployment
benefits,
to the
wage plus
social
wage supplements.
This
variable,
it should be
noted,
has a
much smaller correlation with
changes
in
productivity
in the
1948-1973
period
than does "the cost of
losing your job,"
as well
as a much smaller correlation with this latter variable. This indi-
cates that
rising
social
expenditure
and the
alleged decreasing
incentive to work were
not,
as Bowles et al.
claim,
a
primary
cause of
productivity
decline. The correlation between this com-
ponent
and the "cost of
losing your job"
was .38 over the
1948-1973
period
and .36 over the 1948-1973
period
and .34
for the 1948-1979
period.
There were
strong
correlations between the annual in-
creases in both real
wages
and business sales and the increase in
nonfarm
productivity.
In the 1948-1973
period
these were .45
and .62
respectively;
and in the 1948-1979
period
.64 and .65.
The association between "the cost of
losing your job"
and the
rate of
productivity
increase must be attributed to the relation
between these two variables and economic
stagnation
(as
indica-
ted
by
the
unemployment
rate,
capacity
utilization or the dura-
tion of
unemployment),
not to
any
micromodel of
declining
work incentives.
Faced with the
many
difficulties and contradictions in their
argument,
Bowles et al.
go
so far as to renounce the claim
they
initially
made in
chapters
4-6 about the cause of the
productivity
slowdown
(and
to which
they
attribute all other
aspects
of the
economic
"crisis.")
When
discussing
the "cost of
capitalism"
to-
wards the end of their book
they argue
that the
problem
is not
one of
low-productivity
workers after
all, i.e.,
it is not the lack of
incentives that is the root cause of the
productivity
slowdown.
They
now
argue:
Our basic
point
is
very simple:
The
problem
in the U.S.
economy
to-
310 SCIENCE & SOCIETY
day
is not
low-productivity
workers but
low-productivity jobs.
Low-
productivity jobs
exist
(and
proliferate)
because
low-wage
workers are
abundant and make
low-productivity jobs profitable
for
employers.
The solution is to shift workers from
low-productivity
to
high-
productivity jobs.
12
In fact
throughout
the last
part
of their
book,
Bowles et al.
maintain that
productivity
is
primarily
a function of the failure
of
capital
to modernize
(and
not a
question
of worker motiva-
tion) (see
ch.
12). They
conclude with an
argument calling
for
active state
support
of
"high
tech"
(and
high productivity)
indus-
tries without
necessarily
an increase in state
spending.
The last
half of their book is
essentially
a radical version of the same
posi-
tion advocated
by
Felix
Rohatyn
and Robert
Reich,
the AFL-
CIO,
Timothy
Wirth,
et al. This
position
is taken
up
in the next
section.
Atari Democrats and
Productivity
The factors which are most often mentioned in the
manage-
rial and economic literature as
affecting
the rate of increase in
productivity
are:
"quality
of
labor,"
especially
its educational and
skill
level;
the
development
and
application
of advanced technol-
ogy;
and the
degree
of utilization of
machinery
and
equipment
(capital intensity).
For
example,
the U.S. Bureau of Labor's 1974
comparison
of
productivity growth among
the advanced
capital-
ist countries concluded that
"improvements
in the
quality
of la-
bor,
increased
availability
of
capital,
and advances in
technology
constitute the basic sources of
growth
in
output per
unit of labor
input."13
These are the factors to which the "Atari Democrats"
and others who
emphasize
the need for an industrial
policy
at-
tribute the decline in U.S.
productivity
in the 1970s
(usually
in
the context of some
degree
of national
planning
and state
financing
of
"high
tech"
industries,
as well as of
education,
re-
search and
development).
Total
non-military
research and
development expenditures
in the U.S. increased
slightly
between the mid-1960s and late
1970s
(it
was
1.20% of GNP in 1961 and
1.54%
in
1978).
The ra-
12
Ibid.,
p.
279.
ιό V.o.
Department
ot
Labor,
Productivity:
An International
Comparison (Washing-
ton, D.C., 1974).
PRODUCTIVITY AND STAGNATION 311
tio rose
significantly
in the three
major capitalist competitors
of
the U.S. In
Japan
it rose from 1.37%
in 1961 to 1.87%
in
1977;
in France from .97%
in 1961 to 1.35%
in
1978;
and in West
Germany
from 1.14%
in 1962 to 2.19%
in 1978. In the
U.K.,
however,
it
stayed
more or less constant between the 1960s and
1970s.14
Thus,
declining
research and
development expendi-
tures could not have been the cause of the
productivity
slow-
down of the 1970s.
The
proportion
of the U.S. GNP
spent
on education aver-
aged
4.3%
in the
1950s,
increased from 5.6% in 1961 to
7.5%
in
1969,
and
averaged
6.6%
for a decade. Over the first two-thirds
of the
1970s, however,
it
pretty
much held constant at about
7.6%
of
GNP,
declining
to 7.0%
in 1979.15
Moreover,
in the ma-
jor capitalist
countries
general
skill and educational levels in-
creased
significantly,
while in all
except
the U.K. educational ex-
penditures
also increased as a
proportion
of GNP.16
Thus,
it is
clear that deficiencies in
increasing
the educational and skill level
of their
populations
could not have been the cause of the decline
in
productivity
over the 1970s.
It does not
appear
that reduction in the ratio of investment
to GNP
(which
in turn would result in less
rapid
rates of
growth
of the
average efficiency
of
capital equipment)
was the
principal
cause of the decline in the rate of
growth
in
productivity
be-
tween the 1960s and 1970s. Over the 1960-1969
period
in the
U.S. the ratio of nonresidential fixed investment to GNP was
9.9%.
Over the 1970-1979
period
it was 10.5%.
In
Japan
the
rate of
private
domestic nonresidential fixed investment to GNP
was
15.7%
between 1960 and
1969,
and 18.3% between 1970
and 1979. In West
Germany
the
equivalent figures
were 8.5%
and
9.5%;
and for the U.K.
they
were 8.8% and 9.5%.17
In
summary,
the factors
emphasized by
the advocates of in-
dustrial
policy
have
not,
in
fact,
been the cause of the decline in
productivity
in the advanced
capitalist
countries. It is
probably
true, however,
that to the extent some countries
might
out-
perform
others in
plowing money
into research and
develop-
14 See U.S. National Science Foundation,
Science Indicators,
1981:
Appendix,
Table 1.4.
15
Digest of
Educational
Statistics,
1982.
16 See
O.E.C.D.,
National Accounts
1963-80,
Vol.
II,
Annex I.
17 Economic
Report of
the
President, 1983,
Table
B-2; O.E.C.D.,
Main Economic Indicators:
Historical
Statistics, 1960-1979,
1980.
312
SCIENCE & SOCIETY
ment,
in
upgrading
the skills of their labor
force,
in
increasing
investment in
"high
tech"
industries,
and in
developing
a
coordinated industrial
policy, they
will have somewhat
higher
rates of increase in
productivity
relative to others.
However,
it
can not be
expected
that the
general
(world level)
of
declining
productivity
could be reversed
by
such efforts
(at
least not if
undertaken without a
significant expansion
of total state
spend-
ing)·
Effective
Demand and
Productivity
Contrary
to both the incentive theorists and the Atari demo-
crats,
the
principal
cause of the decline in
productivity
has been
the
growing difficulty
of
realization, i.e.,
the secular
stagnation
of effective demand. As the rate of
growth
of demand declines
and as
capacity
utilization shrinks and
unemployment grows
(be-
cause the entire
output
can not be
profitably
sold),
workers are
not laid off as
rapidly
as
output
declines. Businesses tend to hold
on to their workers in
expectation
of a business
upturn, assign
workers to less
productive
uses,
and relax
managerial pressure
on
production.
Further,
as real
wages stagnate
or decline be-
cause of
rising unemployment, capital
loses its incentive to intro-
duce
labor-saving machinery
in order to
dispense
with
expensive
labor-power.
On the other
hand,
during periods
of
strong
de-
mand,
"speed up"
occurs,
as well as
pressure
to
assign
workers to
the most
productive
uses so as to fulfill the rush of orders.
Moreover,
as the reserve
army
of the
unemployed
is
exhausted,
real
wages
rise,
and
capital acquires
a
strong
incentive to intro-
duce
labor-saving technology.
Both the
periods
of downturn and
upturn
have
reinforcing
feedback mechanisms. As businesses
lay
off workers in an at-
tempt
to
produce
the same
output
with a lower
wage
bill
(i.e.,
at-
tempt
to increase
productivity), they
shrink total demand
(by
the
amount of the
wages
of the laid-off
workers).
Smaller demand
leads to lower sales and
cutting
back of
output
and thus to an
unanticipated
further decline in
productivity.
On an
upswing
in
the
economy
the
rehiring
of
workers,
in
anticipation
of a future
increase in demand and
sales,
can
produce
a
symmetrical posi-
tive
feedback,
actually increasing
demand and hence
increasing
productivity.
Those who
argue
that the economic
problems
of the
capital-
PRODUCTIVITY AND STAGNATION 313
ist world are at base due to the failure of
productivity
are
wrong.
Such theorists have the direction of causation backwards. In
fact,
the
problem
is
fundamentally
one of insufficient
demand,
an in-
sufficiency
of demand which causes
(rather
than is an effect
of)
a
productivity
slowdown. The
problem
then shifts from
examining
work incentives
(as
do
supply-side
conservatives like Thatcher
and
Reagan,
as well as
supply-side
radicals like
Bowles,
Gordon
and
Weisskopf)
or failure of
state-supported
research and devel-
opment,
education,
capital spending
and industrial
policy
(as
do
supply-side
liberals),
to the causes of the
long-term
slowdown in
the rate of
growth
of effective demand.
While
comparison
of the trends in
productivity
over the
1973-1977/1978
period
in the various industrial sectors of the
U.S. shows a relation in the
opposite
direction from that
predict-
ed
by
the
decreasing
"cost of
losing your job" position,
it also
shows a
very strong positive relationship
between the increase in
productivity
and the increase in
output
over the same
period
(a
good
indicator of the trend in effective demand over
longer
time
periods)
(see
Table
Four).
The
quartile
of industries with
the most
rapidly increasing
rate of increase in
productivity
had
an
average
annual rate of increase in
output
of 3.2%
over the
1973-1977/1978
period.
Meanwhile,
the
quartile
of industries
with the slowest rate of increase in
productivity
had a
negative
(-.5%)
rate of increase in
output,
i.e.,
they apparently
faced a
declining
demand for their
product
(see
Table
Four).
This is
strong
evidence that the
primary
determinant of
productivity
is
the movement in effective demand.
During
the 1950-1966
period,
when the
average
annual in-
crease in overall
productivity
in the U.S. was
2.6%
a
year,
real
wages (weekly private gross earnings
in
manufacturing) grew by
an
average
of
2.2%
a
year
(see
Table
Six).
In the 1967-1978
pe-
riod,
when nonfarm
private productivity
increased
by only
1.7%
a
year,
real
wages
increased at an annual rate of
only
.3%.
Fur-
ther,
the decline in real
wages
led the decline in
productivity.
Real
wages peaked
in 1972 at
$198
a week
(in
1967
dollars),
declining
to
$170
by
1981,
while the rate of overall
productivity
increase
collapsed
in 1977-1978
(although
it slowed before this
time).
This is
strong
evidence that the decline in
working-class
purchasing power, by significantly constraining
the
growth
of ef-
fective
demand,
negatively
affected
productivity.
This was even-
314
SCIENCE & SOCIETY
Table Six
Average
Annual
Earnings of Employees:
US 1 900-1 9801
(%
increase
by
decade)
1900-1910 +22.4% 1940-1950 +40.8%
1910-1920 +10.7% 1950-1960 +31.8%
1920-1930 +24.1% 1960-1970 +13.2%
1930-1940 +13.1% 1970-1980
-
7.5%
Trends in
Wages
and
Compensation
in the US2
Annual Rate
of
Increase In Annual Rate
of
Increase
Average Weekly
Gross in
Output
Per
Employee
Earnings
in
Manufacturing (Nonfarm
Private Business
(1967 Constant
Dollars) Sector)
1950-59 2.5 2.5
1960-69 1.5 2.5
1970-79
-
.3 1.7
1950-66 2.2 2.6
1967-78 .3 1.7
1979-82 -2.9
-
.1
1. Source: Historical Statistics
of
the
U.S.,
1975: 164.
Statistical Abstract
of
the U.S.
for
1982-83,
p.
401.
2. Source: Economic
Report of
the President
1983,
B-41.
U.S.
Department
of
Commerce,
National Income and Product
Accounts,
1929-1976,
Table 8.1 and
Survey of
Current
Business,
July
1982.
tually brought
home to
capital
in the form of a
major drag
on
the
expansion
of total consumer
purchasing power
that resulted
in the
slowing
of
output
in
wage goods
industries
(after
a
period
of
increasing
debt),
as well as
by
a curtailment of investment
plans
(after
a
period
of an
expanding
investment share in the
GDP).
These tendencies in turn were manifested in the
slowing
of the rate of
growth
in
output per
worker,
since
output
declines
more
quickly
than
employment.
The reversal in the
long-term growth
of real
wages
in the
U.S. which occurred in the
early
1970s
(after
a slowdown around
1966)
has been
spectacular.
Real
wages
increased at least 10% a
decade
throughout
the 20th
century, including
even the 1930s.
The most
rapid
rate of increase was in the 1940s and 1950s. But
in the 1970s the
average
annual
earnings
of
employees
in the
PRODUCTIVITY AND STAGNATION 315
U.S.
actually
decreased
by
7.5%. This radical reversal of the
long-term
trend could
hardly help having
a
major impact
on the
rate of
growth
in
output per
worker. The more business has
tried to
improve
its
position by laying
off
workers,
increasing
output per
worker or
reducing wages,
the more it has collective-
ly aggravated
the
problem
of effective
demand,
thereby aggra-
vating
the
"productivity problem"
as well as
putting
further
pres-
sure on
wages
to decline.
Along
with the
growth
in
aggregate
real
wages,
the most im-
portant
factor in
producing growth
in
long-run
demand within
modern advanced
capitalist
economies has been the
growth
of
state
expenditures.
From the turn of the
century through
1975
the share of state
spending
in the U.S.
economy
increased,
and
along
with it effective demand for the
expanding output
of
pri-
vate
capital.
In the 1960s state
spending grew
from
26.9%
to
30.4%
of the
GNP;
it
peaked
at 34.5%
in
1975,
declining
to
31.1%
in 1979. The turnaround in the
long-term tendency
for
the state to increase its share of total
spending
occurred in
1975,
two to three
years
before the
precipitous
decline in the overall
growth
rate of
productivity. Again
it would
appear
that the
slackening
of effective
demand,
because of the cutbacks in
gov-
ernment
spending,
could well have been manifested in
industry
lowering
its
output
to
correspond
to its
declining
sales,
thus
producing
a
declining
rate of
growth
in
productivity
(for
the
reasons outlined at the
beginning
of this
section).
The
comparative
evidence from
eight leading capitalist
countries on the association of the rates of
productivity growth
and the measures of trends in effective demand
generally
lends
support
to the above conclusion. The four advanced
capitalist
countries with the most
rapid
rates of increase in
productivity
in
the 1970-1978
period averaged
an increase in real
hourly
com-
pensation
of 41%
over the same
period.
In
contrast,
the four
countries with the slowest rate of
growth
in
productivity
in the
1970-1978
period averaged
a 27%
rate of
growth
in real
wages
(see
Table
Five).
It should be noted that the
U.S.,
one of the two
countries with the slowest rate of
growth
in
productivity,
had the
slowest rate of
growth
in real
compensation
in the
period
(10%).
It
appears
that the double
positive
effect of
rapidly rising
real
wages
on
productivity, operating
both
through expanding
de-
mand
(and
hence
sales)
and in
providing
a
strong
incentive for
316 SCIENCE & SOCIETY
Table Seven
US Government
Spending
(all leveh)
as a
Percentage of
GNP,
1929-1981
1929 9.9% 1973 30.6
1932 18.3 1974 32.1
1939 19.3 1975 34.5
1950 21.3 1976 33.5
1955 24.5 1977 32.5
1960 26.9 1978 31.5
1965 27.2 1979 31.1
1970 31.6 1980 33.1
1971 31.7 1981 33.5
1972 31.3
Sources: U.S.
Department
of
Commerce,
National Income and Product Accounts
of
the
U.S.,
1929-1976: Table 3 and 1.1 and 3.1.
U.S.
Department
of
Commerce,
Survey of
Current Business,
July
1982 and Octo-
ber 1982.
capital
to introduce
labor-saving
(and
hence more
productive)
machinery
and
processes,
is
operative.
The four advanced
capitalist
countries with the
highest
rate
of increase in
output per
hour in
manufacturing
over the
1970-1978
period
also had a
significantly
more
rapidly growing
share of state
spending
in their national
products
(an
average
of
9.4
percentage points
of
GDP),
than did the four with the
slowest rate of increase in
productivity
(an
average
of 6.8
per-
centage points
of
GDP) (see
Table
Five).
Again,
the case of the
U.S.,
where the state's share of GDP was
stagnant
over the 1970s
(and
which also had one of the lowest rates of increase in
pro-
ductivity),
contrasts
strongly
with the cases of the
Netherlands,
West
Germany,
France and
Japan,
where both state
spending
and
productivity grew
much more
rapidly
than in the U.S. over
the 1970s. The evidence is substantial that the slowdown in
pro-
ductivity
was caused
by
the slow
growth
in effective demand
manifested both in the trends in real
wages
and the trends in
state
spending.
To what then should we attribute the
tendency
for real
wages
and state
spending
to
decline,
and the
consequent
tenden-
cy
toward economic
stagnation,
one of whose effects
appears
as
productivity
decline? The Marxist literature on the causes of
PRODUCTIVITY AND STAGNATION 317
Table
Eight
The Increase in
Monopoly
Power and Its Correlates in the U.S.

1960 1970 1980
The Fortune
top
100 industrials
as a
percentage
of GDP of non-
financial
corporate
business 48.2 51.3 72.5
Percentage
in unions
(nonagricultural
labor
force)
31.4 27.3 24.8
l
Rate of
unemployment
(five
year moving average)
6.0 4.7 7.2
1
1977.
Sources: U.S.
Department
of
Commerce,
1977 Census
of Manufactures
,
Vol.
1,
Subject
Statistics,
Table 4.
U.S.
Department
of
Commerce,
Statistical Abstract
of
the
U.S.,
for
1981,
p.
544,
553; 1974,
p.
485; 1982-1983,
p.
376.
U.S.
Department
of
Labor,
Handbook
of
Labor Statistics, 1980,
Table 1 and Table
165.
U.S.
Department
of
Commerce,
National Income and Product Accounts
1929-1976,
Table 1-13.
Economic
Report of
the
President, 1983,
Table B-45.
overproduction/overaccumulation problems
focuses on either:
(a)
the
rising
rate of
exploitation
of
workers,
and
consequently
the
rising
share of the economic
surplus
in the national
income,
effected
by
a
disproportionate
share of labor's
product going
to
business
through
the
operation
of the reserve
army
of labor in
keeping wages
down;
or
(b)
the
growing strength
of
monopoly
corporations,
which are able to secure for themselves a
larger
proportion
of the national income
through
the exercise of their
tremendous
power
in labor and
commodity
markets,
as well as
over state
policies.18
The trends in the U.S.
economy,
as well as
those in the other advanced
capitalist
countries,
are
compatible
with either
explanation
(see
Table
Eight).
Over the course of the late 1960s and
throughout
the 1970s
it
appears
both that the reserve
army
of labor in the U.S. was
considerably augmented,
and that the
degree
of
monopolization
(as
measured
by
share of
sales)
significantly
increased. The five-
year moving average
of
unemployment
increased from
3.9%
in
18 See Albert
Szymanski,
"The
Overproduction Theory
of Economic Crisis: A
History,"
mimeo
(Eugene, Oregon: University
of
Oregon, Department
of
Sociology,
1974).
318
SCIENCE & SOCIETY
1967 to
7.2%
in
1980,
while the ratio of the sales of the
top
100
Fortune industrials to the GDP of nonfinancial
corporate
busi-
ness increased even more
dramatically
(see
Table
Eight).
Which-
ever
tendency might
have been
primary
in
inducing stagnation,
it seems its immediate effect has been to increase the share of
the national income
accruing
to
capital
at the
expense
of labor.
The share of
corporate profits
(net
or
gross) plus
net inter-
est in the U.S. national income
(with
or without
inventory
and
capital consumption adjustments)
has
steadily
increased since the
1950s,
reaching highs
in the last
part
of the 1970s and
early
1980s
(see
Table
Nine).
Although
not as
strong,
the
long-term
trend in the share of
corporate profits plus corporate
net inter-
est
(with
or without
inventory
and
capital consumption adjust-
ments)
in the
corporate
GDP has shown a similar
pattern.
These
trends for the U.S. are reinforced
by
the
comparative
data which
show
that,
in
general,
those countries where the share of
wages
and salaries has been
growing
most
rapidly
have had the
highest
rates of increase in
productivity,
and in
general
have had the
least serious economic
problems
in the 1970s and 1980s
(see
Ta-
ble
Five).
The claim common to those around
Reagan
and Thatcher
that economic
prosperity
can be restored
by increasing profits
Table Nine
Profit
Shares in the US
Economy,
1950-1981
(After
Corporate
Income
Taxes)
As a
Percentage of
National Income
Corporate Profits
with
Inventory
and
Capital
Con-
Corporate Profits sumption Adjust-
Plus All Net ments Plus All
Interest Net Interest
1950-1959
9.5% 7.9%
1960-1969 10.5 10.7
1970-1979 13.2 11.5
1980-1981 16.3 13.8
Sources: U.S.
Department
of Commerce: National Income and Product
Accounts, 1929-76,
Tables 1.11 and 1.13 and
Survey of
Current
Business,
July
1982.
PRODUCTIVITY AND STAGNATION 319
through getting
more work out of the
working
class for less
wages (through increasing
the costs of
being
fired,
decreasing
job security,
and a
general
cut-back in the state's role in the
economy)
is
faulty.
Likewise,
the liberal
corporatist
and social-
democratic solutions of
austerity
with
job security,
workers'
par-
ticipation,
and
corporate-union-government
coordinated nation-
al
planning
are not viable.19
Moreover,
the
proposals
of those
who
hope
to restore economic
prosperity through
increased
R&D
spending, heavy
subsidies to education and
job retraining
programs,
and state
supported
investment in
high technology
in-
dustries
(probably
with a
high
level of
state-labor-corporation
coordination)
are not
likely
to succeed.
The
hope
that the U.S. can be
pulled
out of its economic re-
cession
by stressing
the
development
of
high-tech export-
oriented industries will
only
be frustrated
by parallel develop-
ments in the other advanced
capitalist
economies. There is room
for
only
so
many Japans
in a world
choking
for lack of
purchasing power.
The effort to
permanently
enhance demand
through improving
the balance of merchandise trade
by
ex-
porting high technology products
can be
expected
to be neutral-
ized
by:
(1)
the similar efforts of the other advanced
capitalist
countries
(which
will either flood U.S. markets or be
kept
out
through
restrictive trade
policies
whose
counterparts
in the oth-
er advanced
capitalist
countries will frustrate U.S.
export
ef-
forts);
and
(2)
the lack of
purchasing power
in the less devel-
oped capitalist
countries,
whose
export
markets can be
expected
to continue to be
depressed by
the
stagnation
of effective de-
mand in the advanced countries and
by
the
necessity
to
repay
their debt to the transnational banks.
Since the decline in
productivity
over the decade of the
1970s
was,
in
good
measure,
an effect of the failure of effective
19 Samuel Bowles,
"The Post-
Key
nesian
Capital-Labor
Stalemate," Socialist Review 65
(September-October,
1982),
for
example, making
a case for a social-democratic
(or
Eurocommunist) solution,
argues:
"With the accumulation
process
now constrained
primarily by
conditions of
exploitation,
immediate material interests of
particular
groups
of workers are now often in
conflict,
and
consumption
restraint
(not
the more
rapid expansion
of
working-class consumption) appears
to be a
necessary part
of
any
growth strategy.
The kinds of
organization
and the forms of
ideological
intervention
required
under these new conditions to secure the
unity
of
workers, their coalition
with
nonworkers,
and the
compatibility
of their immediate interests with the
expan-
sion of material
output,
have
challenged
the
existing political capacities
of the labor
movement and its associated
political parties. Despite
considerable attention to these
320 SCIENCE & SOCIETY
demand,
attempts
to increase
productivity
without
increasing
ef-
fective
demand,
while
they might possibly
be successful in
slight-
ly increasing
the value of
output per employed
worker,
are not
likely
to
produce
economic
prosperity.
In
fact,
the more success-
ful such measures of
increasing output per
worker
are,
the more
the fundamental economic
problem
is
likely
to be
aggravated.
Greater
output per
worker almost
certainly
means a
greater
mass of
goods seeking buyers
without a
comparable
increase in
workers'
purchasing power.
Thus,
increasing productivity
-
by
increasing
worker
participation, job
enrichment,
or
job security,
by increasing
research and
development,
or
by expanding
subsi-
dized education
-
is
very likely
to
aggravate
rather than alleviate
the crisis of effective
demand,
just
as would measures which in-
crease
output by increasing
the "cost of
losing your job"
and de-
creasing job security.
Attempts
to increase
productivity by subsidizing private
in-
vestment and
developing high technology
industries, however,
could be
expected
to have a
positive
effect on
alleviating
eco-
nomic
stagnation
in the advanced
capitalist
countries to the ex-
tent that state
funding
of
high technology
investment involves a
significant
increase in total
capital spending,
and hence
provides
a net economic stimulus. Increased investment both increases
employment
(and
hence workers'
purchasing power)
in
high
technology
industries,
and increases demand for the
products
of
capital goods
industries.
However,
the more effective such investment is in
increasing productivity
(and
it would not be carried out in a mas-
sive and
protracted
manner unless it were
effective),
the more
goods
will be
seeking buyers
and hence the more serious the fu-
ture
gap
between
supply
and effective
demand,
and thus the
greater
the
problem
for the
capitalist
state to overcome. It would
appear
that
eventually
the Kaleckian failure of business confi-
dence would
again
become
operative
to limit
ever-expanding
state
expenditures.20
issues in the Communist
Party
of
Italy
and in other left
organizations, politically
via-
ble mechanisms for
organizing
a rational structure of
consumption among
workers
and nonworkers
(including
the difficult choices
posed by
the
reality
of the 'less
now,
more later'
tradeoff)
have
proved
difficult to
create,
or even to
propose" (p. 82).
20 See Michael Kalecki,
Selected
Essays
in the
Dynamics of
the
Capitalist Economy (Cambridge,
1971).
PRODUCTIVITY AND STAGNATION 321
Conclusion
Concentrating
on
productivity
as a cause of economic
stag-
nation is misdirected. Either the
capitalist
state must take meas-
ures to
significantly
increase effective demand
(which
in addition
to
restoring prosperity,
would increase the rate of increase in
productivity),
or a new
organization
of the
economy
and/or
po-
litical
process
must
supersede
the
existing
one. And there would
undoubtedly
be
increasing
difficulties in a
capitalist
state which
continues to
expand
its share of the national
product,
not the
least of which is the
growing (perceived
and
perhaps eventually
real)
threat to the
system
of
private property
in a
society
in
which the state both controls most of the national
product
and
also maintains democratic forms.
If the
capitalist
state resumes the
post-World
War II com-
mitment to maintain
prosperity
(which
centered on
expanding
state
spending
and
facilitating fairly rapid
increases in real
wages),
then the resultant
encouragement
of
expanded output
and
continually increasing productivity
would
require
an ever
higher percentage
of the GNP to be
spent by
the state. Contin-
ued
expansion
of state
spending
is
likely
to result in an eventual
popular challenge
to the basic
principles
of
private capitalism.21
Such a condition
may
have
already
been reached in the social-
democratic countries of Northern
Europe,
where over half of
the GDP is now
being spent by
the state. Indeed it
appears
that
the
potential
of
social-democracy may
well have been exhausted
in Scandinavia and the Low Countries. The social-democratic
option may,
however,
possibly
still be exercised in such still low-
state-spending
countries as the U.S. and
Japan
-
although
not
without
great political struggle
in the U.S.
The
rising proportion
of the national
product
that
passes
through
the state
(the
condition of
maintaining prosperity)
means that an ever
larger proportion
of all
spending
becomes
potentially subject
to democratic intervention
by
the
electorate,
and hence
increasingly
threatens the
profit principle.
If effective
anti-tax movements and the
power
of
big
business continue to
block the ever
increasing
state
spending
needed to maintain
prosperity, stagnation
will become a
permanent part
of ad-
vanced
capitalist
economies,
at least until either the establishment
21 Ibid.
322 SCIENCE & SOCIETY
of an authoritarian
(in
the U.S.
perhaps
social-democratic)
state
or socialist revolution intervenes. In
general
the
compatibility
of
parliamentary
forms and
monopoly capital
can be
expected
to
become ever more tenuous.
It is
increasingly likely
that maintenance of
monopoly capi-
talism will
require
the transcendence of formal
democracy
in fa-
vor of the authoritarian state forms now
typical
of the less devel-
oped capitalist
societies
(and
most of Central and Southern
Europe
before World War
II).
Such
regimes
would institute con-
servative
pro-business
state
planning,
in which the banks and
corporations
are
closely integrated,
thus
guaranteeing
that the
spending necessary
to restore
profitability
would be
actively sup-
ported by
business
(as
in Nazi
Germany
after
1933).
To
quote
Kalecki:
The dislike of Government
spending policy
as such is overcome under
fascism
by
the fact that the State
machinery
is under the direct control
of a
partnership
of
big
business with fascist
upstarts.
The
necessity
for
the
myth
of "sound finance" which served to
prevent
the Government
from
offsetting
a confidence crisis
by spending,
is removed.
The dislike of Government
spending,
whether on
public
invest-
ment or
consumption,
is overcome
by concentrating
Government ex-
penditure
on armaments.
Finally, "discipline
in the factories" and
"po-
litical
stability"
under full
employment
are maintained
by
the "new or-
der,"
which
ranges
from the
suppression
of the trade unions to the
concentration
camps.
Political
pressure replaces
the economic
pressure
of
unemployment.
One of the
important
functions of
fascism,
as
typified by
the Nazi
system,
was to remove the
capitalist objections
to full
employment.22
The real alternative to such a business-based authoritarian
and interventionist state would be a new economic structure
which would
guarantee through
democratic
planning
that all
output
finds uses in either
expanding production
or
consump-
tion. If
capitalism
can not
(humanly) organize
the distribution of
the tremendous wealth its
physical plant
can
produce,
then so-
cialism will arise out of its contradictions.
Department of Sociology
University of Oregon
22 Ibid.,
p.
141.

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