Capital & Class, June 2011, 35 (2)

Behind the News The TEKEL resistance movement: Reminiscences on class struggle Capital & Class 35(2) 179–187 © The Au...

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Behind the News

The TEKEL resistance movement: Reminiscences on class struggle

Capital & Class 35(2) 179–187 © The Author(s) 2011 Reprints and permission: sagepub. co.uk/journalsPermissions.nav DOI: 10.1177/0309816811403857 c&c.sagepub.com

Metin Özug ˘urlu Ankara University, Turkey

Abstract This study presents some theoretical considerations of the TEKEL workers’ resistance movement in Turkey, focusing on four points. Those are: working-class formation in tension with identity formation; precariousness, which is examined by employing analytical distinctions between forms and modes of employment; the struggle for rights as a new pattern of class struggle; and the neoliberal citizenship regime, which implies sweeping labourers as a class away from the ‘political society’ in favour of engagement with their cultural identities. Keywords precariousness, working-class formations, neoliberal citizenship, TEKEL workers’ resistance in Turkey

Corresponding author: Metin Özug ˘ urlu, Ankara University, Turkey E-mail: [email protected] Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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Some brief information on TEKEL workers’ resistance TEKEL is a privatised former state economic enterprise – the state monopoly of tobacco and alcoholic beverages – which employs 12,000 workers in 43 factories and workplaces in 21 cities across Turkey. British-American Tobacco, the new owners, sacked thousands of workers at the beginning of 2009. TEKEL workers decided to resist the ‘4-C’ status by which their average monthly wages were reduced from TL1,200 (roughly US$800) to TL800 (roughly US$550), and the fact that they were offered job contracts of 10 months, with no guarantee of renewal. They gathered in Ankara, the capital city, occupied the streets of one of its central squares, Sakarya, and lived there in makeshift tents in the freezing cold of winter for 78 days, from 15 December 2009 to 2 March 2010. For more information, see Savran (2010a) and Yeldan (2010).

Introduction Andrew Sayer (2005) begins his book, The Moral Significance of Class, by writing, ‘Class is an embarrassing and unsettling subject’. It is a fair point, since in the present day there is probably no other state of sociality like the class that includes us, while at the same time so rarely imposing its focal characteristics on us. The reverse is probably unthinkable, since with our subjectivities, embedded in unequal relations of exploitation and power, if it were to be declared to our faces each and every moment of our daily lives that we were mortals whose labour is daily exploited and who are always oppressed, we would be living either as obedient slaves or as rebels. ‘Obedience and revolt’ is the name of a less debated study by Barrington Moore whose full name is Injustice: The Social Basis of Obedience and Revolt. There, he examines the tragedy of the German working class which ends with fascism, and the question to which he seeks an answer is the following: ‘Why do the people not revolt, but obey?’ Following a correct strategy, he first looks into the roots of revolt. Turkey’s TEKEL workers’ resistance tents1 are extremely relevant to the answers at which Moore arrived, and I will return to this point.

Those whose fates unite while their lives are being fragmented Contemporary class studies concentrate on the internal differentiation, fracturing and dissolution of the class capacity. To shift the analytical interest from similarities and commonalities to differences has become a methodological obsession in mainstream social science approaches. Yet we cannot explain the current content of contemporary Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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class studies only through this tendency. The main reasons for differentiation within the working class are related to the characteristics of the labour market, both inside and outside the firm, which have turned out to be highly flexible. This is a fact. But there is another fact as well: that there is a major tendency that horizontally cuts across the segmented labour market and diversified forms of employment, and consequently once more homogenises differences within the class over a common line of fate. This tendency is the precarisation of work. The point to remember is that the new working class consists of those whose destinies are being united while their lives are being fragmented. The TEKEL workers’ resistance tents made the way this class dialectic operates visible. In and around the makeshift tent encampment of the TEKEL workers, which lasted from December 2009 to March 2010, I was able to observe how the workers, who are part of the traditional manufacturing industry strata that has been already largely liquidated, conform so closely to the newly emerging worker typology. The traditional manufacturing industry worker, who also forms the backbone of the trade union movement in Turkey, is phlegmatic: he or she makes decisions following long consideration, is subjected to organisational hierarchy, is disciplined, obeys the decisions taken, and knows how to sit at the negotiation table. There were remainders of these qualities in the TEKEL workers. But there were also the following qualities: they took decisions very rapidly, and the resistance movement was part of the trade union organisation, but it did not stop at that point – it also developed the organisation. The workers took their decisions based on grassroots initiatives within the movement; and although they maintained . the formal organisational hierarchy of the trade union (Tek-Gıda l¸s – the Turkish Trade Union of Tobacco and Food Workers), all the resisters potentially became both the spokespersons, activists and mass of the resistance. They set up the resistance committee in collaboration with their trade union’s formal hierarchy within the struggle. This committee started to lead the tent movement by improving its organisational and administrative capacity over the course of resistance. Their place of resistance, namely ‘tent city’, became in a short time a location of labourer solidarity for organised, unorganised, collective and individual initiatives generated from every part of Turkey, and the tent city’s inhabitants were accompanied by an influx of materials such as blankets, clothes, foods and medical goods, as well as by solidarity visitors during the 78 days. Socialist organisations, and particularly their young activists, who lived together with the workers in the tent city, played a crucial role in carrying out some of the small-scale and detailed tasks of daily life. In sum, as Sungur Savran (2010b) observes, ‘The tent city in Sakarya turned into a Mecca for all kinds of opposition movements and created an immense impetus for a class consciousness in all, TEKEL workers and visitors alike. Everything was shared, from food to beds to ideas.’ In this atmosphere, the demands of the TEKEL workers were not of the kind that could be placed on the negotiation table: is it possible to put rights under negotiation? Thus, in the TEKEL resistance movement, we saw the new within the traditional, and we heard the first bullet in the last one. And we remembered the key question of building a united working-class struggle under present-day circumstances. The question was this: can the trend towards precarious work which is homogenising the working class be the organising impetus for a united class movement? The 78 days of the TEKEL resistance tents were almost a pilot study for an affirmative answer to be given to that question. This ‘pilot study’ highlights at least two instructive lessons. The first is about dominant trade union traditions, which still seek a policy of class compromise with the neoliberal Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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agenda. This tradition, which continues to dominate the Trade Unions Confederation of Turkey (Türk-Is¸), seems to be a vital internal obstacle for generalising sectional or local labour resistances. TEKEL resisters applied massive pressure. by demanding a ‘general strike, general resistance’ of the top bureaucracy of the Türk-l¸s , who were forced to take decisions, together with other workers’ and public employees’ confederations, such as the following programme of action: one-hour work stoppages every Friday; a demonstration in Ankara; solidarity strikes; and a general strike. The result was, however, lots of thunder but no rain. The right-wing section of the union bureaucracies, especially, made considerable efforts to nullify each planned action, and consequently we witnessed the unusual public revolt of the workers against the union bureaucracy. The second lesson is for the socialist movement in Turkey. For socialists, the TEKEL workers’ resistance was the first movement in a long time whose norms and values quickly become hegemonic within the organised labour movement. The reason is quite simple: during the TEKEL resistance, left-wing parties and organisations demonstrated enormous efforts in terms of class solidarity, rather than substituting themselves for the TEKEL workers. Without grasping the multi-layered characteristics of the fact of the precarisation of work, it will also be difficult to grasp the embarrassing and unsettling influence the TEKEL resistance created. At the first level, precarious work expresses ‘employment with a certain time span’, most of which is also informal. At this level, precariousness is an alternative term that means the same thing, in empirical terms, as ‘temporary’, ‘seasonal’ and ‘part-time’ employment. Work is an activity organised according to the profit and competition priorities of capital, directly subjected to market imperatives; and precariousness is a fundamental requirement of such a type of work. Precariousness, thus, has a conceptual dimension that directly defines the mode of work, as well as being a certain form of employment.3 The objective of making the work precarious can only be attained by liquidating the achievements of the working class; and this is exactly the situation. This fact is also conditioning the new class movement, and the working-class movement is essentially posing its own struggle as a defence of its achieved rights.

A struggle for rights: Contemporary patterns of class conflict The TEKEL resisters put their demands into the framework of a rights’ struggle. Despite the fact that bourgeois scientists tried to rank rights as secondary by applying the label ‘positive rights’, a right is a right: it cannot be made subject to negotiation. In other words, for the worker, her or his rights are his or her conditions within the struggle. The TEKEL resisters did not make their gained rights an issue of negotiation: it was the government that attempted to set the terms of the negotiation, behaving like a classic party to a collective agreement by making partial improvements to the so called 4-C status (which forces the workers of the privatised state tobacco enterprises to work under precarious employment conditions, without job security and with wage and social benefit cuts). It was also the government that stepped back, compromising from its initial position and expecting the TEKEL workers to compromise too, and to meet them at a ‘reasonable’ point. It tried to achieve this . expectation not through the TEKEL resisters, but through the top officials of Türk-l¸s, who were seen as their addressee by the government. And Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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indeed there is nothing unusual in this, since the TEKEL resisters stated that they could sit at the negotiation table only following the acceptance of their rights and conditions, at which point they could negotiate, for instance, over wage levels. In short, the leitmotiv of the fight between the TEKEL resisters and the government was directly constituted by the concept of rights. It must be remembered that the concept of right has a particular power, related to the fact that it implies that which is fair or correct, and that it provides its holder sovereignty within a certain sphere: within that sphere, the holder of a right has freedom, claims, power and immunity. Starting from the 18th century, the bourgeoisie had worn this idea of the concept of right as a kind of armour, which protected its own class power. Who knows: perhaps at the threshold of the third millennium, the power inherent in the concept is changing hands! Hence, while the capitalistic characteristic of the administrative power is becoming increasingly visible on a global scale, what is left of the armour is a rusty mass of iron. In the initial stages of the resistance, the AKP government tried to dispense with the aforementioned special power of the concept of right. Indeed, Prime Minister Erdog˘an himself said, ‘This is no longer a struggle to achieve rights,’ and, echoing a saying in Turkish,2 posited himself as the defender of ‘orphan’s rights’ against the TEKEL resisters. It should be mentioned that the discourse concerning ‘orphan’s rights’ is a ‘counter-right’, with its full meaning, in terms of the subjective rights approach: the principle is based on the well-known paternalistic ‘eternal right’ approach, which is even more backward than the famous abstract ‘legal subject’ principle of the bourgeoisie. However, a response to the prime minister from his own world of meanings came without delay. An orphan from the orphanage in Ankara Gölbas¸ı who was visiting the TEKEL tents addressed workers over the microphone: ‘We, as orphans renounce our rights for the sake of TEKEL workers’. The TEKEL resistance, independent of the subjective intents of the resisters, deciphered the real content of the institution of neoliberal citizenship which is now being rapidly introduced by the AKP government, and it once more reminded us of the positive characteristics of being a society. The essence of the institution of neoliberal citizenship is based on pushing labouring classes, who are producing goods and services, as a class, out of the ‘political society’ (we might also call this, like the state, the arena of the struggle between the classes). However, it does not end there, for if it did, the public sphere would only consist of a kind of club for the ruling classes. However, the contemporary oligarchs have the tendency of making social actors – who have no capacity to intervene in the relations of distribution from within the political sphere – a jurisprudential component of the political society in what is almost an instance of global ‘social engineering’. According to this engineering wonder, also known as governance, those who are pushed out of the political society due to their class positions are reinvited via their cultural identities to the very same sphere from which they were first excluded. As also especially shown by the Latin American countries’ experiences,3 capital’s aforementioned citizenship project has the result not of emancipating the suppressed cultural identities, but making the political society – if the term is appropriate – classless. Hence the TEKEL resistance movement, with its symbolic meaning, is also a resistance against the uprooting of the working class from political society; and the prime minister’s definition of the resistance as an ‘invasion’ is a requirement of the citizenship status he wants to settle. Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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There may be those who consider a connection of the TEKEL resistance with citizenship status to be an exaggeration. In a country in which the intensity of trade union organisation is around the level of 5 per cent, where half of employment is informal, where structural unemployment is in the 15-20 per cent interval and where work in its totality is being precarised, to add to these factors, it is clear that the comprehensive influence of the collective and individual rights of the workers would also be restricted. Thus, as a result of the exclusion of workers from the political society as a class, the institutionalised distinction between class positions and the citizenship status of the workers, which at the same time constitutes the essence of ‘bourgeois democracies’, becomes meaningless, and the distance between each of these positions is closed off in a manner that can be conceived in daily life practices. As an example, in field studies, we have begun to hear a new pretext for being organised in trade unions. The pretext is so simple: ‘in order to be seen as a human being’; ‘in order to protect my dignity.’ Finally, it might be said that in the eyes of labourers, the rules and norms that legitimise social inequalities have turned out to be illegitimate, and a deep feeling of injustice and a strong moral outrage have been accumulating for a long time in the hearts of the dispossessed. When it comes to ‘moral outrage’, this means that the time has come; now I can return to Barrington Moore as I promised at the beginning of this article.

The class content of moral outrage While looking at the TEKEL resistance in the light of the contribution by Barrington Moore, in contrast with Moore it would be necessary to give the analytical priority to class struggle, and thus to revise Moore’s question by revising it with EP Thompson.4 The question is simple: How do workers become aware of themselves as a class? This question carries us to the roots of revolt. The TEKEL resistance movement was a veritable teaching laboratory in terms of our understanding of how moral outrage exploded outwards in terms of class conflict, and how this language of struggle enjoyed sympathy and support in the eyes of all society’s oppressed. As is known, TEKEL workers constituted a community over which forms of solidarity and values serving the ruling class had considerable influence. That a majority of them had voted in favour of AKP is the most commonly known dimension of this situation. And the number of workers with engagements beyond the position of being mere voters was not few, either. Added to that, forms of social relations and values such as fellow townsmenship, regionalism, ethno-centrism, nationalism and mainly patriarchy also existed among the workers at considerable levels. Perhaps the most distinguishing aspect of the TEKEL movement is the fascinating transformation that took place in the whole set of forms of relations and values that serve the ruling class. Public opinion and especially left public opinion conceived this transformation as ‘becoming left-wing when being right-wing’. And the symbol of this conception was a phrase uttered by a TEKEL resister: ‘[referring to the Muslim style of praying] Now we are communists five times a day’. Without doubt, this is a great rupture and it is very valuable. But the real transformation occurred exactly in the sense for which Barrington Moore was searching; the TEKEL workers who have gender-, ethnic- and religion-/ Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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sect-based identities, and moreover who bear the entire indications of the identitybased political confrontation, almost reconstructed the identities they posses in terms of labour-capital conflict during the resistance.

The resistance process was also experienced as a process of building a cultural ground that, relatively speaking, emancipated the women (and the men, as long as they could get free of patriarchy), and where Kurdish workers could. freely express their languages, the Alevi workers their sect beliefs, and the workers from lzmir (an Aegean city) their love for Atatürk. The workers from the Black Sea region played their traditional folkloric dances together with accompanying Kurdish music, and the Kurdish workers played their regional folk dances accompanied by Black Sea musical instruments. TEKEL resisters found and revealed this creative symbolism, which transformed contrasts into mutualism. This culture is working-class culture. The identity that emerged out of this culture is working-class identity. The class identity (unfortunately or fortunately) does not belong on the same plane as the other social identities: if the knowledge of the relations of exploitation were open to daily life experience, it would be possible for us to talk about a class identity on the same plane as the ethnic or religious identities. Exactly for this reason, when you wear a class identity, you do not have to divorce yourself from your other cultural affinities. It is enough that you redefine the cultural ties you possess in terms of labour–capital conflicts that condition your material life. Since class is not a fixed state (or you may call it a ‘fixed and closed subject position’), but a mesh of linkages, its appeal is not an appeal to ‘be me’, but to ‘find the self’ in you. This appeal has a material counterpart – it is not an invitation made for subjective intentions. In Turkey, where the tensions of what is almost an ‘ethnic civil war’ are being experienced together with cultural identities, each of which is politicised in its own fields, I suppose this de facto appeal, which has an objective counterpart in concrete life, underlies the hope the TEKEL resistance created. Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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As a conclusion If the process is examined as a whole, it could be stated quite fairly that Prime Minister Erdog˘an, who personally took the ropes in his hand, together with his staff, followed what was tantamount to warfare tactics against the TEKEL workers. First came the attempts to cut off the social, psychological and material supply channels of the resistance, by various means. Most of the authorised spokespeople of political power, together with their party organisations, mass media, banks and civil administration, made attempts to injure the characters of the TEKEL workers and to break down their self-esteem. They tried to break down and dissolve the resistance movement by devaluating the resisters. AKP made great efforts to give the message to society that it would defeat the movement, and it did not neglect the tricky strikes. While the TEKEL workers were removing their resistance tents following the decision of the Supreme Court [to extend the TEKEL workers’ official time limit to accept passing to 4-C status], Prime Minister Erdog˘an could only say, ‘We will never permit such a thing to happen again.’ This phrase is a clear expression of the moral defeat of the government party in the face of the TEKEL resistance.

Acknowledgements All the photographs in this article were taken by the photographer Hüseyin Türk. A version of this article was first published in Turkish, in a book on the TEKEL resistance.

Endnotes 1. For a study in which this subject is more comprehensively treated, see Savul (2008). 2. The term ‘orphan’s rights’, rooted in the Islamic faith, is one of the key idioms in the discourse of mainstream politics in Turkey. It refers an asset that belongs to the entire community, for

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whose safety the governors take responsibility. By referring to ‘orphan’s rights’, Prime Minister Erdog˘an was implying that accepting the demands of TEKEL workers would mean spending the public budget wastefully. 3. For one example, see Chartock (2009). 4. For my study in which this theoretical framework is dealt with in a wider manner in order to include the connection of moral outrage and class consciousness, see Özug˘urlu M (2005).

References Chartock S (2009) Ethnodevelopment in Latin America: Political competition and the making of ethnically targeted participatory policy in Ecuador, Peru and Guatemala, 1985-2005. Unpublished Ph.D. thesis, Department of Politics, Princeton University. Marshall TH, Bottomore T (2000) Yurttas¸lık ve Toplumsal Sınıflar (Citizenship and Social Classes) (trans. Ayhan Kaya). Ankara: Gündog˘an Yayınları. Özug˘urlu A (2005) Poverty or Social Reproduction of Labour: Life in Çöplük District. Unpublished Ph.D. thesis, Department of Sociology, METU. . Özug˘urlu M (2005) Anadolu’da Küresel Fabrikanın Dog˘us¸u: Yeni I¸sçilik Örüntülerinin Sosyolojisi (The Emergence . of the Global Factory in Anatolia: Sociology of Patterns For Working Class Formations). lstanbul: Halkevleri Emek Çalıs¸maları Merkezi Yayını. Özug˘urlu M (2010) TEKEL Direnis¸i: Sınıflar Mücadelesi Uzerine Anımsamalar. In Gökhan . Bulut (ed.) Tekel Direnis¸inin Is¸ıg˘ında Gelenekselden Yeniye I¸sçi Sınıfı Hareketi. Ankara: Nota Bene, pp. 45–62. Savul G (2008) Güvencesiz . istihdam, örgütsel dönüs¸üm ve çalıs¸ma üzerine etkileri. Unpublished graduate thesis, ÇEEl ABD, FPS, Ankara University. Savran S (2010a) Turkey: The working class (literally) takes the stages. The Bullet Socialist Project E-bulletin 299, 23 January. Savran S (2010b) The ‘Sakarya Commune’ wins the first round! Europe Solidaire Sans Frontières E-bulletin, article 16757, 16 March. Online at <www.europe-solidaire.org>. Sayer A (2005) Moral Significance of Class. London: Routledge. Yeldan E (2010) TEKEL workers’ resistance: Re-awakening of the proletariat in Turkey. 30 January, online at <www.sendika.org>.

Author biography Metin Özug˘urlu works at the Department of Industrial Relations and Labour Economics in the Faculty of Political Science, Ankara University, Turkey. As a lecturer, he offers undergraduate and graduate courses on research method, methodology, Marxism, industrial relations theories and social policy. He is the author of the book, The Emergence of the Global Factory in Anatolia (in Turkish).


Aspiration problems for the Indian rural poor: Research on self-help groups and micro-finance


Jamie Morgan University of Helsinki

Wendy Olsen University of Manchester

Abstract Our paper explores how poor rural households in India are increasingly accumulating debt through micro-finance initiatives channelled through local selfhelp groups (SHGs). The aim of micro-finance and SHGs is to provide a cheap source of capital for investment in self-sustaining economic practices – typified by the Velugu programme. However, the reality of micro-finance has been more complicated. It has created a class- and caste-related debt-dependency and vulnerability whilst also channelling poor households, and women in particular, into subordinate areas of the economy, which ultimately serve to maintain fundamental inequalities in Indian society. The initiatives may, in addition, be viewed as aspects of broader processes of financialisation. Keywords micro-finance, debt-dependence, financialisation, India, self-help groups [O]ne can deduce the importance of the ‘cultural aspect’, even in practical (collective) activity. An historical act can only be performed by ‘collective’ man, and this presupposes the attainment of a ‘cultural-social’ unity through which a multiplicity of dispersed wills, with heterogeneous aims, are welded together with a single aim, on the basis of an equal and common conception of the Corresponding author: Jamie Morgan, University of Helsinki Email: [email protected]


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world, both general and particular, operating in transitory bursts (in emotional ways) or permanently, where the intellectual base is so well rooted, assimilated, and experienced that it becomes passion. (Gramsci, 1971: 349)

Introduction When one returns from abstraction to real-world contexts, one confronts a messy interconnection of causal processes. This is particularly so in periods and locations undergoing significant change. It is widely acknowledged that India, as one of the BRIC economies, is undergoing rapid urban transformations that are subject to global and local forces. There have also been a number of changes in the conditions of the rural poor. Bonded labour still occurs that ties the very poorest, often of Dalit or ‘scheduled castes’ (SC), to long-term farming servitude on another’s land; but the traditional labour relations of the very poorest have diversified.1 Poor rural households now undertake a range of activities (Harriss-White, 2003; Brass, 2008; Breman et al., 2009).2 Migrant work, often in construction or regional industries and particularly amongst males, has grown. Remittances by migrants and new attitudes amongst landlords to how they might use their land and capital have begun to change local land and labour relations. The growing problem of periodic flood and drought in some regions has also produced change (Bosher et al., 2007). With change have come new issues of social and economic mobility. In keeping with many processes that weave global, national and local threads, new circumstances have created both positive and negative aspects: opportunity, but also insecurity. The combination of micro-finance implemented through forms of initiatives between the state and different kinds of banks – state-backed, commercial, cooperatives - and self-help groups (SHG), which administer local pools of capital for small loans, provides one such example (Morduch, 1999; Karmaker, 2005 & 2008; Srinivasan, 2009). Rural women in particular have been prime movers and beneficiaries of SHGs. Though various problems have been highlighted, the SHGs are widely considered to be a source of solidarity and of empowerment (Meenai, 2005, 2006). Often it is the household that ultimately holds any debt, but the women who administer it. Debt has been used in a number of different ways (e.g. Collins et al., 2009). Its use often goes beyond the original intentions of micro-finance, ranging from short-term urgent medical needs (often related to injuries or illness suffered by migrant workers), to specific investments, either directly in (usually tenant) farming or in small business activities that can be undertaken from the home. The use of this debt by the poor can be conceived of as ‘rational’ in the pursuit of development and survival strategies that are responding to new circumstances and opportunities. In this context, micro-finance in general and SHGs in particular are a preferred alternative to the usury of traditional local moneylenders. The terms and conditions are better, the lending more flexible, and, if the borrower experiences difficulty, the SHG, of which the borrower is also a member, is also liable to be more patient and understanding as a collective. Importantly, however, our research indicates that the accumulation of debt is not just a straight decision regarding investment in development and survival strategies. It is not purely rational in the discredited sense of the term used by mainstream economists. It is rather a more complex rationale.


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Poor households can be both channelled and seduced into taking on levels of debt that are dangerous. This danger occurs in a variety of ways. Often the debt is invested in small business or employment activities that can be undertaken from home by women as part of or in addition to farming and other domestic labour duties that they are increasingly undertaking as men engage in temporary migrant work. This is in many respects a self-limiting form of activity for women. It is a new response to old gender constraints. This is because it focuses women on a narrow range of investment possibilities. As such, the focus tends to be on mainly low-skilled work at the bottom end of supply chains. This can produce contradictory effects. Many projects focus on integrating women into economic decision-making in a market environment. This tends to be restricted to representatives from collectives. At the same time, the positioning of the majority of women working in informal ways reinforces rural women’s restricted role in the public sphere and women’s exclusion from employment in the formal economy. This in turn produces further contradictory effects in terms of empowerment initiatives. Disadvantaged women are formally encouraged into varieties of education and training, but also face a further resistance based on actual need within time constraints. Ultimately, debt can produce a gender-initiated economic vulnerability for poor rural households, irrespective of whether the work is wage-based or a genuine small business (Johnson, 2005).3 Here, self-limiting is also a form of channelling. This is because the narrow experience pool of the SHG and available investment opportunities set out at higher levels in a micro-finance project can mean the use of debt by the rural poor is focused in common ways. The very success of SHGs then tends to individually replicate the same activities. This is especially a problem where the invested activity is itself not fully collectivised and risk remains with the individual (and their household). Individuation creates both competition and a fallacy of composition, where the many doing what the few had previously done undermines the viability of the activity. The net result is that the original debt becomes more difficult to service. This, in turn, is exacerbated by an additional dimension of the SHGs. In so far as SHGs are a form of empowerment, they are also a signal of status. The act of participation can also be a form of seduction, in which members take on levels of debt that seem highly risky irrespective of subsequently emerging issues of channelling. For the economically vulnerable, the ‘hybridity of debt’, i.e. the multiple sources and reasons for taking it on, including to meet unexpected events, can produce sudden adverse consequences. We describe this complex of issues as aspiration problems. Their concrete expression exhibits numerous varying forms. In the following paper, we discuss ongoing field research from two villages in the western Chittoor District in the state of Andhra Pradesh, in south India,4 carried out by ourselves and by our colleagues. We set out the general rise in micro-finance, participation in SHGs, and the rise in debt levels. We then look specifically at the rise in cow ownership. Cow ownership provides an excellent example of aspiration problems. It is an important form of survival-strategy investment in the local rural context. But it is also subject to channelling pressures creating a fallacy of composition, and can also be linked to members’ undertaking highly risky levels of debt based on status issues. We argue that investment in cow ownership within the context of a complex of aspiration problems has created new problems of economic vulnerability and downward mobility for some, even though it arises from poverty alleviation initiatives.


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In a final section, we also argue that the form and limits of development policy have been oxygenated by neoliberalism. Development policy and micro-finance initiatives have become a narrow solution to problems produced and perpetuated by the broader system. Our research indicates that complexes of aspiration problems must be accounted for if locally focused poverty alleviation projects are to be fully effective. One cannot ignore the socio-economic hybridity of debt use. We present our own work as contributing to constructive critical understandings of micro-finance and SHGs within socio-cultural economics (e.g. Mahmud, 2003; Geurin, 2006; Bhukuth et al., 2007).5

Micro-finance and self-help groups Micro-finance is most prominently associated with the 2005 Nobel Prize winner, Muhammad Yunnus. Yunnus set up the Grameen Bank in Bangladesh following the famine of 1974. Yunnus’s main innovation was to offer low-interest-rate loans to those with no collateral to meet the need for small investments in farm and business capital. On a standard banking model, the sums involved would be insignificant (but administratively costly) and those in receipt of the loans would be deemed a poor credit risk. Yunnus’s model, however, reconceptualised small-scale socially responsible lending as a ‘win-win’ scenario. It combined development goals and profit. It gave the poor access to renewable lines of credit and freed them from usury, enabling them to plan effectively for the future as well as respond to unforeseen circumstances. The model was adopted by the World Bank and supported by James Wolfensohn.6 It has become the basis for numerous local community-based development programmes in countries as different as the USA and Bolivia. As it has spread, the basic model of micro-finance has diversified. For example, some initiatives also offer other financial services such as forms of insurance; in some cases, collateral can be required; and the size of loans can vary significantly. However, core features remain. Most programmes involve a multi-party relationship between a designated bank, the state and a local community group, often augmented by a global organisation such as the World Bank. The state and the global organisation provide a broad development goal (a micro-finance project), oversight, additional capital and/or subsidies to the system. The local community group functions as an intermediary that provides a collective contract with the bank. The contract has served three functions. First, the collective is deemed to provide local discipline to repay in the absence of collateral, e.g. through the collective risk of the loss of access to credit. Second, local knowledge weeds out potential borrowers who are genuine credit risks. Third, local experience provides a pool of expertise for investment advice (within the broad remit of the goals set in the project). These local community groups have become a more varied collection of self-help groups (SHGs). Often, because of issues of literacy and problems of record keeping, they are initiated and supported by NGOs. The purpose and remit of the NGO can, as with the form of the micro-finance project itself, then impact on the SHG. Many SHGs have also become conduits for savings programmes as well as lending. It was initially thought that the very poor who lacked collateral would also be unable to save. However, micro-finance organisations now cover a wider variety of degrees of poverty. It also emerged that even the very poor could sometimes save and would be motivated to do so if they had confidence in the system. A track record of small-scale saving has often become a measure for members in Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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SHGs in order to establish their credentials as recipients of micro-finance. It indicates reliability and commitment, and can then be a potential source of collateral, though the original model did not require this. Small-scale saving through SHGs is a typical practice in the villages in Andhra Pradesh discussed hereafter.7

Micro-finance and self-help groups in India The most prominent SHG micro-finance project within rural India is part of the Indira Kranti Patham programme.8 Formerly called Velugu, this is a World Bank sponsored movement focusing specifically on the empowerment of women, initiated in 2000. Velugu, in turn, grew out of the Indian government programme Development for Women and Children in Rural Areas (DWCRA). DWCRA began in 1982-83 as a gendered offshoot of the National Integrated Rural Development Program of 1979 (Deshmukh-Ranadive, 2004). Under the Rural Development Program, the central bank, the Reserve Bank of India, initiated the creation of an ‘apex bank’ to facilitate the integration of rural investment and lending. This apex bank was called The National Apex Bank for Agriculture and Rural Development (NABARD). NABARD became a key institution for the orchestration of future diverse forms and origins of credit provision in rural India, and also a main source of data on lending levels. The 1979 programme was also the first attempt to use SHGs in India. The first SHGs in DWCRA stipulated that each should contain a minimum of 25 members from the same socioeconomic background who wanted to undertake a similar economic activity. Eligible SHGs received a grant of 15,000 rupees funded by UNICEF, the state and the national government. This formed the basis of smaller periodic loans to members. Repayments then created a ‘revolving’ lending facility. Initial DWCRA group sizes were large for rural village contexts, whilst total loan funds were small. The requirement for a similar socioeconomic background and for a common economic activity to be focused on also proved problematic (for the range of problems, see Tripathi and Tiwari, 1999: 25-30). As a result, the criteria for DWCRA SHGs were altered through 1993-95, and their current form began to emerge. The changes were also in accordance with a shift in focus in the eighth national Five-Year Plan (1992-1997) from more narrowly defined economic development towards empowerment as a means to create sustainable development (Sreelakshmamma, 2005: 284). Group sizes reduced, typically to 10-15 members; initial grant sizes increased to 25,000 rupees; socioeconomic backgrounds became more diverse (essentially meaning that a broader base of castes could be in the same SHG); and the stipulation of a common economic activity was dropped. Instead, the groups were organised on the basis of a common savings or thrift organisation focus that then became part of the basis for revolving lending. These changes were combined with a growing profile for DWCRA based on the role members played in the widely reported 1993 Total Literacy Campaign9 and the antiarrack (anti-alcohol abuse) movement (Ramalakshmi, 2001). In the eighth Five-Year Plan, NABARD identified SHG use of possible microfinance sources as being ‘underdeveloped’, and from 1992 it began to specifically promote more extensive links between SHGs, and a more diverse set of formal credit sources based on access to mainstream bank institutions. SHG accounts were now also


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placed in commercial banks. This became the SHG-Bank Linkage Program. An SHG demonstrates its credit worthiness through consistent saving and through its use of state-based revolving funds, and thereby becomes increasingly eligible for the extension of further credit from the bank. The total potential credit available to the SHG was thereby greatly increased. This potential, however, only began to be extensively utilised when the World Bank became involved through the Velugu/Indira Kranthi programme (Deshmukh-Ranadive, 2004: 9; Ghate, 2006). World Bank lending is provided through its International Development Association (IDA). The state of Andhra Pradesh became a particular focus for Velugu, and has resulted in the state’s containing more SHGs than any other. By the end of 2007, Andhra Pradesh had over 630,000 SHGs (Rao et al., 2007).10 In the same year, the total for the whole of India was 2.7 million (NABARD, 2008). Between 2000 and 2009, the IDA provided US$350 million in lending to SHGs in Andhra Pradesh. SHGs have leveraged this lending up to four times from commercial banks, creating over US$1 billion in additional credit availability. Not unexpectedly, therefore, the state has had the highest ratio of SHG loans to population in India (NABARD, 2008). Under the broad empowerment aims of Velugu, affiliated SHGs are integrated into a specific organisational model. The model has two aspects. First, there is an institutional structure that combines credit creation and oversight functions with the targeted social goals of empowerment. Each local SHG of 10-15 members is federated into a group of SHGs at village level – the village organisation (VO). The VOs are in turn federated into sub-district or ‘mandal’ organisations. These usually have an office in the local town with a small staff providing services that require accountancy and literacy skills – administration, book-keeping/auditing. They also provide some training and education services. Through Velugu, these latter services can be broad, including health awareness, immunisation services, access to safe cooking fuels, etc. The mandal organisations also provide a link between the VO, the SHG and the formal banking sector in keeping with the SHG-Bank Linkage Program. Typically, specific banks develop relations with particular VOs and SHGs through the mandal organisation, and may ‘adopt’ a village, creating a micro-finance conduit. This conduit allows the IDA-derived lending to be further leveraged by the SHG. The mandal organisations are also federated into large district organisations, formalising the institutional structure of the SHGs at a scale where project strategy can be assessed and discussed with higher-level government officials and World Bank representatives. Second, paralleling the institutional structure for credit creation and oversight is a supply-chain structure for poverty alleviation project investments undertaken by participating SHGs.11 Through the mandal organisations, VOs and SHGs are encouraged to assess local conditions and create appropriate income-generating projects, whilst also identifying local infrastructure and convention problems, ranging from irrigation and water access to local transport to markets and market practices. SHGs provide a focus for low-interest-rate lending to women and their households. The credit is used to buy assets such as livestock, to lease additional land to cultivate marketable produce, or to invest in tools or start-up materials for small local craft businesses. In the ideal model, members aggregate their product, and representatives of these village enterprises drawn from the SHGs or mandal level representatives negotiate prices with buyers at market (ranging from actual markets to the next stage in a supply chain, such as a dairy). In principle, Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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participants are able to demand higher prices and immediate cash payment, and are able to avoid the added costs of middlemen, and avoid being individually cheated on weights, measures and scales for their produce (Rao et al., 2007). They are then, again, in principle, better able to repay initial loans to the SHG and avoid a cycle of recurring indebtedness to local moneylenders when requiring initial capital for investment and when waiting for payment for goods. SHGs, then, have become a way by which greater access to credit has been extended into poor rural areas. They have been one way in which banks have extended their operations. They have been one way in which market forces and processes have been promulgated in rural India, based on the understanding that imperfect markets (distortions) are a prime way in which development is hampered. This has been done in accordance with the overall concept that there can be a convergence between market-based approaches to economy, sustainable development and broader socio-cultural goals of empowerment of the poor. This in turn has fitted both the vision of the Indian government set out in its periodic economic plans, and of global institutions such as the World Bank.12 Velugu and related development projects in Andhra Pradesh, for example, are specifically rooted in the Washington Consensus adjustment that sought to link different forms of capital (see Fine, 2001: Ch. 8). SHGs are understood to create social capital by constructing new networks and institutions that in turn enhance the human capital of participants, which in their turn can, through the expression of market relations, be translated into economic capital. The net effect is deemed to be a bottom-up transformation of socio-economic relations. The reality, however, is more complex. The actual practices, constraints and problems experienced by poor households, particularly focused around the key lever of debt, bring into question whether poverty alleviation initiatives as currently conceived are as good as they might be.

Survival and debt-dependence: Rising cow ownership The following insights and analysis derives from ongoing research findings in two villages in the Chittoor district of Andhra Pradesh. Related research has been conducted in the area since 1985 (Olsen, 1996) and has been focused on the two villages since 1994. The research has been qualitatively based, comprising questionnaires completed by a representative sample from each village followed by semi-structured interviews. Interviews were conducted in Telegu with local interpreters, and were then translated and transcribed into English. Each is accompanied by a set of field notes. Fully anonymised versions of the material are deposited with the ESRC QualiData Archive.13 The main periods of data collection were 1994-5 and 2006-7. There have also been additional follow-up visits by colleagues. DWCRA and then Velugu originated SHGs have operated in the two villages since 1995. However, each village also contains a range of SHGs linked to different microfinance initiatives supported by different NGOs. For example, one of the villages has an SHG supported by a Christian-based NGO that parallels Velugu’s aims and functions, but also has a faith aim. Both villages have also been adopted by banks. One has been adopted by the State Bank of India, and the other by a commercial bank. Each bank has


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a field officer who liaises with SHGs at the village level. Debt can therefore be accessed from multiple sources: different SHGs, direct from banks, and through local moneylenders. Interest rates vary from as low as 1 per cent per month in micro-finance initiatives to 5 per cent per month from local moneylenders.14 Our first finding has been that the levels of debt have risen and the characteristics of that debt have altered over the period of research. From 1994 to 2007, total average debt per household increased from 13,000 rupees to 20,000 rupees. Within the increase, there was a significant increase in the use of formal debt, i.e. deriving from SHGs and banks.15 Higher social classes were taking on higher levels of formal debt, and lower social classes were increasingly able to access formal debt. The higher social classes consist of landlords who do not work any portion of their land, Ryot farmers who work land they own or lease sufficiently successfully to not engage in any casual labour, and some local salaried state employees. These classes tend to be of forward castes. By 2007, landlords averaged 89,000 rupees of debt, and Ryot households 30,000. Lower social classes include ‘worker’ farming households, usually leasing smallholdings, who also engage in local casual labour and migrant labour to produce a living income, and landless casual/ migrant-labour households. These tend to be from scheduled castes (Dalits, etc.). By 2007, ‘worker’ farming households averaged 12,000 rupees in debt and workers 9,000. We find that the introduction of SHGs and micro-finance has ‘democratised’ debt access. Moreover, it has meant that local moneylenders are no longer a first port of call for the poor. However, bearing in mind that SHGs have been in operation since the 1990s and formal bank adoption has been in operation for a decade, it is notable that the populous is not being weaned off debt dependence. Rather, the process is turning out quite differently. All social classes report multiple loans from a range of sources, and there is also a trend to continually renew debt. Even though the poor have smaller average debts than higher social classes, persistent and increasing debt are serious issues because lower social classes experience greater income insecurity and thus more immediate debtservicing problems, despite now having access to lower-interest-rate sources. This has occurred despite development projects targeting the poor. The local context is one of changes in farming opportunities. There has been an intergenerational fragmentation of land holdings, causing individual household acreages to fall from an average of 3.2 to 1.65.16 At the same time, longstanding declines in ‘wetland’ (land sustained by rainfall) and a recent run of seasonal droughts have affected the reliability of many local crops, and created problems of sustainable irrigation. These two factors have meant that cow ownership for milk production has become a common local solution by creating a new source for, or diversifying existing sources of, household income (as well as providing a subsistence food source). Lower yields and crop failure reduce the income generation from owned or leased land (that is already smaller in extent for all but the large landlords). Lower yields and crop failure also create unemployment for casualised rural labour, and thus directly affect lower social classes. Thus, although the DWCRA/Velugu SHGs actually reversed their organisational focus on a common economic activity in the early 1990s, the reality of local conditions and the existence of mechanisms to aggregate local production for market purposes effectively reproduce this commonality of activity. Local experience orients on cow ownership as a survival strategy, and as an aspirational aspect of development – asset-owning small business activity. Different SHGs support this solution, and when inquiries were made with Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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mandal-level organisations of different umbrella organisations, including Velugu, it was found that they too oriented on cow ownership strategies for this area of Chittoor. In this context, women have been encouraged to take on more debt and that debt has been channelled. Cow ownership has increased across all households, but has notably increased among lower social classes. In visits between 1994 and 1996, only the most successful worker farming households could afford to own a cow. By 2007, ‘worker’ farming households, as a whole, averaged 2 cows and landless workers just under 1. A typical loan to purchase a single cow has been around 10,000 rupees (about £140), with the actual cow costing around 9,000 rupees. The debt and the form of investment have created a range of problems. Even if the milk product is later collectivised, the actual risk of cow ownership remains individualised.17 The woman within the household faces the opportunity cost of cow care, and the single household bears the financial burden. There is the possibility, realised in several cases we followed, that the cow(s) may not produce enough milk or may die. This possibility, as a variety of interviewees indicated, increases with the poverty of the family, since the capacity to provide grazing, additional fodder, adequate watering sites and any necessary medical care is reduced. The opportunity cost and time burden on the woman is central. When engaged in cow care, a woman’s time will tend to be split between that care and other obligations. The overall impact will be (even if an older child is given some of the care duties) greater calls on her time. A cow needs to be watered around three times a day, drinking around 50 litres of water in order to maximise its milk production. The cow needs to graze for most of the daylight hours, and is typically tethered, and periodically moved to avoid its straying into crops or other’s land, dwellings, etc. Land nearest the various hamlets of the villages is heavily grazed. The flat commons near natural water sources are thus the main prized sites, particularly for the landless and land restricted. These are 1-2km away. Cow husbandry can consume around 8-12 hours a day, and grazing involves permissions that require perpetual complex negotiations. Cow care means that casual paid labour is either reduced or foregone, depending on whether there are children old enough to take up some of the responsibility. The daily wage of poor Indian women is much lower than men’s, but has been an extremely important element in total household earnings in Andhra Pradesh (Olsen and Mehta, 2006). In 2007, the maximum sum an adult woman could earn per day from local casual agricultural labour was 40 rupees, compared to 80 rupees for a man. Taking into account typical unemployment periods and days taken up with other necessary activities, a woman might work up to 15 days per month and a man 20. She might earn 600 rupees per month, and he 2000. A twenty-month, 10,000 rupee loan even at a low microfinance interest rate of 1 per cent would require a repayment of 500 rupees per month or more. Given a local price for milk of 7 rupees per litre, a cow would have to consistently produce about 2.5 litres of milk a day during the period of repayment for the debt to be serviced. In actual fact, the period is more concentrated, since milk production only occurs during calving (though the calf is itself also an asset). The central point is that the risk is repeated for each cow, and is reliant on the safe term of pregnancy of the cow to facilitate milk production. For a worker farming household with two cows, if both were bought simultaneously then debt servicing for the cow loan alone amounts to over a third of the possible combined Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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monthly income from casual labour, and far in excess of that of the woman of the household. The risk here, however, has clearly seemed one worth taking, since the longer-term effect of success is a greater net income when the loan is repaid, and a reduced reliance on casual labour. However, borrowing in order to invest in cow ownership is just one among a series of debts a household might accrue. Large loans for housing improvements and smaller loans for farming tools are also common. Our findings suggest that ongoing debtdependence and the renewal of loans have become typical. Debt has become hybrid, and is used for multiple purposes from the short to the long term. This is being taken up from multiple sources. Debt accrued for cow ownership, therefore, is part of a matrix of debt servicing obligations – a fine balancing act for those in the lowest social classes. New loans can be for the purpose of paying off uncompleted loans, and as such the positive benefits of cow ownership that might be realised when the debt is paid off can in many respects be consistently deferred. Furthermore, the income effect of cow ownership even if repayment is completed is not as clearly a positive effect for a landless worker household with one cow. And neither in the case of a worker farming household nor a landless worker household does the potential for success of the survival strategy fully capture the reality of the situation. The time burden of care remains a constraint. This is important for lower social class households, because they report a far greater incidence of illness and injury. When the man of the household is incapacitated (a frequently reported situation for casual manual labourers and migrant construction workers), cow care becomes less of a net gain to the household and more of a source of vulnerability, because it restricts the ability of those on marginal incomes to respond. New debts are often produced at this point: households either use SHG micro-finance access in ways for which it was not initially designed (healthcare or simple income subsidy), or turn to local moneylenders. One problem is that household choices are restricted by the ownership of the cow. Milk production cannot be increased. Milk income is potentially more stable and lucrative under best possible conditions than casual labour, but these conditions are least likely for the poorest, since they cannot rely on their own water and land resources. The existence of the cow prevents additional casual labour. Moreover, the institutional basis of milk production remains extremely loose at the village level. This again raises the issue that risk remains individualised with the household, and that this is more burdensome for the poorest. Cow owners have a choice between two outlets for their milk. They can sell it locally to a series of wealthier families who will consume it, or they can transport it or arrange to have it transported to a central collection point. The central collection point is at the mandal headquarters several kilometres away. Local sales cut out transport costs, which would ultimately be borne by the household. Use of the central collection point ties the household into a guaranteed outlet for their product and the benefits of group representation via integration into a cooperative that acts on behalf of participants. This also has the benefit of guaranteed ‘procurement prices’. Yet the risk of purchasing the cow and maintaining a viable production of milk, in order to be able to benefit from the cooperative that then functions from the mandal level, remains individual. From the point of view of the risk of the individual household, milk production is aggregated rather than genuinely collectivised.


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A fallacy of composition: Market activity and environmental pressures It is important to also account for the longer-term effects of a fallacy of composition in terms of dominant market relations. Early criticisms of DWCRA-based SHGs noted that a common economic focus could be counterproductive. Yet the limitations of local experience in choosing survival strategies and the limitations of the focus on forms of collectivised market activity through VOs and mandal-level organisations have recreated this common economic focus. Having an organised focus creates potential market power further up supply chains, and this is a potential benefit. But it is only so if production is locally sustainable and if the effects of a net increase in supply further up the supply chain do not offset any increase in market power from the bottom. Representatives of local milk producers may well be able to demand immediate payments, fair measures and higher prices. The latter, however, is the least certain in a long-term sense, since the system is marketised. As milk production increases, the long-term effect of greater production may well be relative falling prices. Even if over-supply does not become an issue, market relations may always allow that private oligopoly captures the retail end of markets, enabling the growth of procurement prices to be suppressed over time even when end prices rise. Notably, state measures of procurement prices indicate that they rose by 15 per cent between 2004 and 2006 (Rao et al., 2007: 5). Thereafter, however, procurement prices have been relatively stable despite sharp rises in urban retail prices for all dairy products, as basic food commodity inflation has occurred across India since 2007. The fallacy of composition also has a more general sense in addition to its roots in marketised relations. One of the reasons for the turn to cow ownership has been the fragmentation of local landholdings and local environmental problems, particularly the increasing incidence of drought. These also affect cow husbandry. Furthermore, they do so in more intense ways as cow ownership increases because milk production is, in most instances, in addition to continued land use for arable farming. As such, the competition for resources for cow husbandry is increasing, and again this affects lower social classes (and castes) more. In a sub-study from 1994-2007, the research finds that households with less access to wetland and irrigated farmland have a far greater incidence of downward mobility in social class than those who begin in the higher social classes such as Ryot.18 Thus, the investment in cow ownership is not only an initial greater risk for lower social classes in terms of their own income generating potential related to ongoing debt servicing, but it is also one in which the risk is increasing precisely because this survival strategy has been spreading – not least because it falls under the remit of the development goals of microfinance projects. The net effect is that the debt vulnerability of the poor then also increases. Household 90 from our research, a poor landless worker Dalit caste household (precisely the group most targeted by development policy aims) illustrates the worse-case scenario: One time I received 4,000 rupees [from the SHG] and I used it for family expenditures. The second time I received 5,000 rupees, and in addition to that I borrowed 5,000 rupees from a private money lender. [I] bought one cow by expending a total of 10,000 rupees. We were repaying the amount by selling milk. We paid all the 5,000 rupees to the private money lender, but we are [still] repaying the DWCRA amount. [Because of illness] we sold our cow [but must still repay the loan].


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Aspiration problems and debt dependence Both the SHGs as collectives and the women as individuals are aware of the emerging problems. Two initial questions then arise. First, why do the women of the two villages continue to adopt a survival strategy and development strategy based on cow ownership? The simple answer is that in terms of the alternatives, the strategy seems rational. But that rationality is not a contextless optimisation procedure as understood in mainstream economic theory. The decision is circumscribed. It is a rationale rooted in the lived conditions of the area. The long-term trends of the area are towards land fragmentation and increased environmental vulnerability for farming. Cow ownership is the ‘least worst’ solution in the current circumstances and based on the local experience of SHG members. Moreover, as a solution it is not just a calculative form of pragmatics. Cow ownership can be viewed as both a survival strategy and a more seductive form of socio-cultural expression of aspiration. This socio-cultural expression of aspiration has several dynamics. First, as several interviewees noted, successful cow ownership was an alternative to insecure casual labour. This is not just a potential income effect, but also a status effect.19 It allows the woman to refuse socially inferior kuulie activity, and in so doing take on some of the attributes and status of a higher capital owning element of the farming class. This is so even though the actual effect of cow ownership during the period in which loans must be repaid can be a relative fall in available income. Ownership in itself is a form of cultural capital, which leads to a second point: cow ownership is a quite specific form of cultural capital. The cow is sacred to Hindus: its meat is never eaten, its milk is revered, and its calf worshipped. The serving of sweetened, boiled colostrum curds (the first milk produced for the calf ) to friends and family is a socially significant act. The capacity to engage in this practice is a source of prestige. This is particularly seductive for lower social classes and castes that have been mainly economically excluded from these practices in the past on the basis of ownership, and socially excluded on the basis of typical inter-class and caste relations. This issue of inter-class relations highlights a third dynamic of aspiration. DWCRA pioneered more socially extensive SHGs in which members of different social classes and castes could participate. For those of lower social classes and castes, therefore, SHGs are not just attractive on the basis of lower interest rates and more accommodating or flexible approaches to repayment. They are attractive as a means to gain status through association with higher social classes and castes. Higher social classes and castes, moreover, can find them attractive organisations on the basis that they do provide lower interest rate loans and accommodating terms and conditions (which in some SHGs has led to members representing themselves to mandal level representatives as less socially and economically successful than they actually are). For lower social class and caste members, participation in an SHG then creates status in various ways. It can be an opportunity to engage in interactions with forward castes, creating associations, for example, with individual Brahmin. 20 At the same time, the simple act of participation in an SHG for an economically and socially deprived woman creates a sense of empowerment and cultural capital through the act of participation. The point we wish to draw here is that the answer to the question of why women take on what can be seen as highly vulnerable debt is that it is a highly constrained form of risk taking, a forced choice that is also a form of socio-cultural seduction. Here the debt


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is both a means to an economic end and a means to a socio-cultural end. But the debt is also an end in itself, since the taking up of debt is a part of participation in the SHGs, which is also a desirable activity. This raises a second question: why do SHGs continue to extend loans to women and their households in ways that perpetuate debt dependence? This is more than an issue of the focus on cow ownership. It is a broader matter of the real mechanics of SHGs. Central to the micro-finance and SHG link is the idea of a group contract that ensures that debts are repaid – creating a revolving lending facility and also an incentive for the bank to continue and extend the arrangement with the SHG (and the state development project). The mechanics of the system do not directly promote the short-term use of debt to liberate the poor from debt. Rather, the system tacitly promotes debt dependence by allowing SHGs to renew credit to members. SHGs actually have a vested interest in extending debt to repay debt in order to reduce default rates.21 Thus the reported figures of SHGs, which typically claim repayment rates at over 95 per cent, may well be a signal of the astonishing success of micro-finance initiatives, but they can come at a cost.22 That cost is debt-dependence and, as the example of cow ownership indicates, a class- and caste-related debt vulnerability. This can be partly hidden since the hybridity of debt creation means that women and their households can access debt from a variety of SHGs and other sources, and do so in ways that deviate from the stated intention of any development goal defining the SHG. But this can only be hidden in so far as the total level of debt can be serviced. Since debt levels have risen, the question must surely be asked whether the broad commitment to ‘development’ and sustainable development that is at the core of the SHG ethos is being fully met here.

‘Development’ with contradictory progress Development and development economics are about more than micro-finance. But micro-finance does illustrate something about current dominant development thinking. As Chang (2010), for example, has consistently argued, it tends to create a constrained focus on bottom-up approaches. Those approaches are limited in their critique of the socioeconomic whole and tend to lead to a reasoning that sees transformations as the result of market-based micro changes rather than of broad plans to change the nature of an economy. Micro-finance lends itself to this approach. The assumption is that micro-finance lending is facilitating grassroots economic activity that would otherwise be prevented. As such, it is contributing to income growth that will eventually see the need for debt-dependence wither away. But this, of course, returns the focus to the form of local economic solutions: in this case, cow ownership. As we have set out, this is a highly constrained choice with a number of problems. One can think of those problems narrowly from the point of view of adjusting the overall nexus or range of institutions in which micro-finance is embedded. This approach recognises the relative successes of micro-finance and SHGs. It seeks to rationalise its gains. Velugu, for example, supports the Community Investment Fund, which promotes health insurance to the poor. Velugu has sought to specifically address the emergence of specific local problems by encouraging the formation of Livelihood Enhancement Action Plans (LEAPs), which identify those problems and provide local solutions. One might, therefore, make the argument that all that is needed is to ensure that LEAPs are adequate and that there is greater coordination between different SHGs, Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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NGOs, state initiatives etc. to ensure that problems are met.23 In terms of a focus on cow ownership, one might push for a variety of institutional improvements. One might argue for mandatory cow insurance as a condition of the micro-credit line to the SHG and from the SHG to the household. One might argue for full collectivisation of milk production: extending any cooperative down into the village and to the household level. The woman of the household might become a formal employee of a milk union, fodder could be provided at subsidised rates, collection could become more efficient, and so forth.24 LEAPS might result in some form of action plan that drew up a fair and equitable approach to access to grazing and watering land. These are modifications that would not in themselves reduce dept-dependence, but they would change risk and thus alter debt vulnerability based on forms of insecurity that affect the poor to a greater degree. Problems, however, would still remain, and these indicate something important about the current nature of the development focus that orients micro-finance and SHGs. Here, one can reasonably answer the question of the degree of success of micro-finance and SHGs within the context of debt and development by asking a different kind of question: what does the current focus defer or marginalise? The first point to make here is that many of the general initiatives are about ameliorating the effects of insecurity amongst the poor, not about removing the ultimate sources of insecurity. It is because of periodic unemployment in local casualised labour markets, which are in turn based on poor terms and conditions, that cow ownership (or any other small business operation by the household) becomes a form of alternative or additional subsidising income source. There is a limit to what the state can do about local environmental change, but it could do far more about promoting the organisation of effective union representation and fully implemented employment law in order to address the context that makes cow ownership the ‘least worst’ solution for the poor. Similarly, the state could do more to address land fragmentation and land concentrations that have left the poor either landless or trying to eke out a living on smaller plots (see Agarwal, 1994, 2003). Both these approaches, however, require the acknowledgement of the existence of a conflict of social class (and caste) interests, and a commitment to national policies that genuinely confront interest on a local level. Such an approach to development accepts that some aspects of development are zero sum power conflicts, in which representing the poor means challenging the privileged. It means having a class analysis of economic problems. It means having a collectivised approach to labour, and not just to alternative production by labour. It means taking a critical approach to property relations. This is anathema to the idea of consensus development through enhanced market relations that is at the heart of current approaches promoted by organisations such as the World Bank. One might, of course, make the counter-argument that the development of local economic activities will eventually transform local economic conditions. Social capital becomes human capital becomes economic capital. However, it is important to bear in mind, following Chang’s point (and work by Harris-White), that what is being collectivised locally is petty commodity production of one kind or another. The real situation of the poor household and of the woman in particular is as a labourer in an isolated activity at the bottom end of supply chains. Few of the participants are actually required to be active in the market as negotiators, etc. The very nature of the work restricts the degree to which individual participants can engage in and then use any training in business


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activity in market environments. The work retains most of the hallmarks of an informal economy, and perpetuates women and poor household exclusion from the formal economy and from fuller use of training and education with more opportunities in the emerging market capitalism of India 25 Without denigrating the real progress made on health awareness, immunisation, literacy of the young, etc., one might still question quite what kind of empowerment this economic dynamic is in practical terms. The social capital or networks may be real, but it is not clear that they translate into genuine expansions in human capital, even in the narrow terms by which that is understand by the World Bank approach (see Fine’s critique, 2001). The economic capital, meanwhile, remains currently uncertain based on local conditions in terms of debt hybridity and debt vulnerability, and seems likely to be questionable in the long term because it is part of a process that perpetuates economic inequality for women and the poor even where it is relatively successful. At its best, the current approach fosters a kind of development that can create more secure forms of income and provide alternatives and subsidies to other kinds of work. But even here it does so in ways that seem to produce people whose direct access to the rest of the changing Indian economy will remain limited. As such, it may well contribute to social division and restricted social and economic mobility. The aspirations of the poor may not be met.

The Indian development focus within neoliberal capitalist development and ‘financialisation’ A final point worth considering here, and one that cannot be ignored in the wake of the global financial and economic crisis, is that the development focus itself has a context and a history with a class dynamic. That context is the emergence of neoliberal capitalist development and its subsequent extension through financialisation. The form and limits of development policy have been oxygenated by neoliberalism and its associated financialisation. Indeed, development policy and micro-finance initiatives have become a narrow solution to problems produced and perpetuated by the broader economic system. According to Harvey, ‘neo-liberalization was from the very beginning a project to achieve the restoration of class power’ (Harvey, 2005: 16). It was in the first instance a political project to restore or create the conditions for profitable capital accumulation by domestic and foreign capital, and to restore or create the power of economic elites based on the construction of a state (and supra-state) apparatus that articulated particular concepts of freedom, human well-being, progress and growth: Neo-liberalism is in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets and free trade. The role of the state is to create and preserve an institutional framework appropriate to such practices… if markets do not exist (in areas such as land, water, education, health care, social security, or environmental pollution) then they must be created, by state action if necessary. But beyond these tasks the state should not venture… In so far as Neoliberalism values market exchange as ‘an ethic in itself, capable of acting as a guide to all human action, and substituting for all previously held ethical beliefs’, it emphasizes the significance of


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contractual relations in the marketplace. It holds that social good will be maximized by maximizing the reach and frequency of market transactions, and it seeks to bring all human action into the domain of the market. (Harvey, 2005: 2-3)

The general consequences of the spread of this political project from the 1970s onwards are well documented. In the 1970s, neoliberalism (in conjunction with the resurgence of neoclassical economics and its variants) entered, and then in the 1980s came to dominate, mainstream economics, providing a formalistic and scientistic expression of neoliberalism as ideology (Mirowski and Plehwe, 2009). This expression had found concrete form at the state level in the USA and UK and in other nodal geographies from which it spread. At the global level, it found concrete form in the emerging Washington Consensus and the shift to structural adjustment lending (SAL) through the World Bank (Harrigan et al., 1995).26 SALs was one way, in conjunction with IMF and GATT/WTO policy orientations, in which the consensus began to discipline states across the world into neoliberal practices and policies: fiscal discipline or reduced welfare spending and reduced progressive taxation, weakened collective labour, a focus on shareholder value and profit indicators, free movement of capital, and the extension of markets to all aspects of life. This in turn lent itself to the facilitation of mobile corporate entities utilising local labour and resources in global supply chains. Simultaneously, it lent itself to the growth of the financial sector, since the volumes and uses of capital flows were greatly increased in interconnected markets and across numerous floating exchange rates. The dominance of variants on efficient market theories within economics provided another point of facilitation here. Financialisation grew as a product of neoliberal ways of thinking, but also as a means to extend the profitability of its form of capitalism (see Epstein, [ed.] 2005). Narrowly understood, financialisation is: A process whereby financial markets, financial institutions and financial elites gain greater influence over economic policy and outcomes. Financialisation transforms the functioning economic systems at both the macro and micro levels. Its principal impacts are to 1) elevate the significance of the finance sector relative to the real sector, 2) transfer income from the real sector to the finance sector and 3) increase income inequality and contribute to wage stagnation. (Palley, 2007: 3)

In so far as there are social effects from these changes, financialisation has also been described more broadly as an extension of the commodification of the human and forms of life: the family unit and the individual have also become financial units locked into the logics and pressures of the extension of debt-dependence and debt vulnerability through credit and the significance of consumption for both identity and economy (e.g. Martin, 2002). As Sassen (e.g. 2006) has argued, the social, spatial and personal effects of finance are multiple and ongoing. As a ‘developing country’, India’s experience of neoliberalism and financialisation has itself been multi-faceted. More than 70 per cent of the population of India is still rural, and as such rural areas are still basic to India’s economy. However, the situation of the countryside has been transformed by neoliberalism and then by financialisation (Walker, 2008; Chadrasekhar, 2002). In the early 1990s, India experienced a balance of payments problem, and undertook ‘structural adjustment measures’ following IMF and World Bank conditionalities: devaluation, fiscal discipline, trade liberalisation, bank sector Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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deregulation, and privatisation (particularly in key utilities such as power). As such, it increasingly became subject to neoliberal disciplines, practices and policies. In 1995, India joined the WTO and began a period of rapid economic growth focused particularly on the service sector and notably business outsourcing services for large multinationals (call centres, legal services etc.). By 2006, services were generating more than 60 per cent of GDP. The consequences of this growth, however, have been the emergence of a small but highly influential group of high-net-worth individuals (India has more than 50 billionaires) and a relatively small urban middle class, both with a disproportionate claim on India’s policy orientation and resources. The working population of India is approximately 400 million. Less than 1.5 million work in business services, and only around 35 million work in the formal economy (including 21 million working for the state). A great deal of the capacity for growth has been underpinned by the growth of the informal economy and the mixed population of migrant and partially rural labour that service economic elites (Harris-White, 2003). One reason why this reserve labour exists is because of the impoverishment of the countryside. For example, the shift from state subsidies for fertilisers and the marketisation of fertiliser distribution in the early 1990s greatly increased the input costs of farming. In accordance with WTO tenets, trade protection measures were also then removed from a range of key agricultural products, causing the prices of many cash crops to fall and then fall precipitously in the late-1990s, particularly cotton and sugar.27 The net result was then not just an increase in income inequality as a small privileged proportion of the population working in the formal economy experienced rapidly improving conditions, but also an actual impoverishment of the rural population – itself disaggregated along class and caste lines, since wealthier peasant groups have greater potential to respond to adverse conditions (though this is not new in itself: see Chakravarti, 2001). The trend of growing access to credit but prolonged debt-dependence and debtvulnerability found in the countryside is imbricated in these broader tendencies. The deregulation of banking in the 1990s forms a backdrop to the extension of NABARD to promote more extensive links between SHGs, and a more diverse set of formal credit sources based on access to mainstream bank institutions in the SHG-Bank Linkage Program. Financialisation is also the broader logic of consumption and desire that define the status symbolism of the economic elite and the unachievable aspirations of the poor. One might argue that the acritical stance of development that fails to adequately confront the basic problems of property relations and fundamental labour relations resides in a neoliberal rationale that speaks of beneficial markets, but reduces to the credo: you are responsible for everything we do to you. In this sense, development policy and microfinance initiatives have become a narrow solution to problems produced and perpetuated by the broader system.28

Conclusion What we’ve argued here is that the growth of micro-finance and of SHGs in India has coincided with the growth in the levels of debt and the characteristics of debt in rural areas. More formal debt is available. Although interest rates are lower for that debt, debt does not tend to be a short-term commitment that is then paid off. Debt tends to be Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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renewed, and possibly expanded. This debt can be for multiple purposes and from multiple sources. One important use, promoted by SHGs, NGOs, and micro-finance development projects has been investment in small business and farming activities. In our research, that investment focused on cow ownership. The general purpose of such investment has been to create an alternative to insecure casualised labour. However, the choice to invest in this way through borrowing is not simply a rationally optimising decision. It is a more complex socioeconomic and cultural rationale. Investment via debt is channelled, creating a fallacy of composition. The real effect of that investment can be to create a class- and caste-related debt vulnerability. Analysing the nature of that vulnerability raises questions about the overall concept of development that structures the forms of investment undertaken. Whilst some aspects of the debt vulnerability can be addressed by better institutional arrangements at a local level and by fuller implementation of some aspects of current projects, the broader issue of what kind of development is being promoted remains. Here, one might conclude that issues of debt dependence and growing debt need to be analysed and addressed more thoroughly in the future to make fuller sense of the problems of hybrid debt for sustainable development. Acknowledgements This paper was originally presented at the International Conference on Microfinance as a Tool to Eradicate Poverty, University of Pondicherry, January 2008. The support of the Economic and Social Research Council (UK) is gratefully acknowledged. The work was part of the programme of the ESRC Global Poverty Research Group, grant number M571255001. Field research managed by Daniel Neff plays a central role in this paper. We gratefully acknowledge Daniel Neff ’s inputs of fieldwork time, data preparation, and expert commentary. We are also grateful to J. Rangaswamy, Vincent Ortet, D. Aktawala, K. Tejokiran and K. Sasikumar for their help in producing the original data set. Pseudonyms are used in the paper to protect the identities of the respondents.

Endnotes 1. In 1947, all caste discrimination was made illegal in India. However, caste remains – despite anti-discrimination legislation in 1955, 1976 and 1989 – a highly contentious term in Indian society, culture and politics. Here, we use the term to refer to research participants’ caste self-classification. The traditional caste classification involves the separation of lineages into endogamous social groups, each with a traditional occupation. These groups, according to traditional Hindu norms, were ranked into a (Varna) hierarchy based on ritual purity (an upper and lower grouping). The castes with less ‘clean’ occupations were assigned a lower status ranking. Priests (Brahmins) and vegetarian castes were at the top. A third group (Dalits or ‘broken people’) ranked below these two, and were historically barred from the Hindu castes. Thousands of specific castes and sub-castes are located within each of the three main groups. The three groups are now referred to as ‘forward castes’ (FC), ‘backward castes’ (BC) and ‘scheduled castes’/‘scheduled tribes’ (SC/ST), respectively. Dalits (SC) typically find themselves occupying a disadvantaged position in Indian society, and this is indicated by data provided by the Indian Government Planning Commission. The most recent data after 2000 indicates that Dalits are disadvantaged in every indicator. For example, more than 35% lived below the poverty line, compared to a general average of 21%. Note also that the use of the standard designations of caste in this paper is not intended to sanction the reification of the status hierarchy it connotes. SCs and ‘scheduled tribes’ constitute a combined 24% of the total Indian population.


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2. There is a now longstanding debate in development studies as to how this change should be understood. The core focus is on the development of new relations across a more complex form of capitalism. Brass refers to those new relations as ‘deproletarianisation’, whilst Breman refers to it as ‘neo-bondage’. 3. For an excellent summary of the issues created by new forms of gendered economic vulnerabilities in the context of measures of autonomy, see Watson 2009. 4. The villages are in Ramasamudram and Punganur mandals in the Chittoor district of Andhra Pradesh. Andhra Pradesh is the third largest state in India, and borders the Bay of Bengal. A mandal is an administrative section of a district (a sub-district). There are 22 districts in the state, and 1104 mandals in Andhra Pradesh. The total population of the state at the last census (2001) was 76 million (of India’s total population of 1086 million). Andhra Pradesh is by some measures a relatively wealthy state, ranking fouth in India by GDP per capita. It is, however, one of the poorest by other measures within the state-level surveys carried out for the national Indian Government Five-Year Plan. It is a state with a large rural poor, and has long been designated by the Indian government as being in need of targeted development assistance. The ninth Five-Year Plan (1997-2002) survey found that 30% of the population lived on less than US$1 per day, infant mortality was around 30%, and female literacy was around 30%. Around 10% of rural households are landless, and one third own less than one acre of land. Andhra Pradesh is strongly agriculturally-oriented and prone to cyclones, flooding and seasonal drought (Bosher et al., 2007). The Chittoor district is in the extreme south of the state. The total population at the last census was 3.7 million, of which 2.9 million, or 78%, were rural and mainly farming residents. Telugu is the predominant language. Hinduism is the dominant religion. The district headquarters are at Tirupati. Traditional crops include rice, groundnut, sugar and lentils. Cotton is grown further north. Other products of the region’s agriculture include tobacco, goat-meat, milk, tomato, mangos, chillies and turmeric. The predominance of farming activity makes water security an important factor in everyday life. Official normal rainfall for the Chittoor District is 28 inches per year. Average rainfall in 2001-2006 was 27.5 inches. However, there are strong seasonal and local variations and also, due to increasing demands, a growing groundwater problem. The study area lies in the upland of the Deccan peninsula and rainfall can be as low as 8 to 12 days per year. Access to watering grounds for livestock and for irrigation for crops and fodder are central concerns, and these are issues related to caste, class and land in the two villages within the study area. Some villages are dominated by a single caste, but the caste composition of both the study villages was mixed. However, the proportion of scheduled caste (SC) is high compared to the state as a whole: Malas (an SC) constituted 26% of the population of one village and 24% of the other village, compared to a total SC proportion of 16% for the state as a whole. 5. As such, this work forms part of a broader network of studies, some of it discussed through a series of invitation workshops in 2009-10, organised by Isabelle Guérin at the Institute of Research for Development, Paris-I Sorbonne. Guerin is the project leader of ‘Rural microfinance and employment: Do processes matter?’, online at <www.rume-rural-microfinance.org>. 6. This was following the Washington micro-credit summit of 1997, which set the target of improving the conditions for 100 million people by 2005. The micro-credit summits are annual affairs – see <www.microcreditsummit.org>. 7. As a Basix Bank report (2009) on Andhra Pradesh states, ‘The members of a savings and credit group (SCG) are usually neighbours, friends and fellow workers. Women in these groups may not be from the same caste/ community but they have the same socio-economic background. These groups also provide an opportunity for social interaction. The regular obligation to save may be no more than a ‘glue’ which brings the group together and holds


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8.

9. 10.

11.

12.

13.

14.

15.

16. 17. 18. 19. 20.


it together providing a base for other important activities. In some groups, their opportunities for profitable investment are limited due to lack of skills, markets and opportunities.’ Note that one can distinguish two main models for micro-finance and development based on the delivery network of the lending/investment. The first is the use of SHGs linked through formal national development projects (like Velegu), and the second is through micro-finance institutions (MFIs) only – see Ghate, 2006. Here, we do not maintain the formal separation between the two since in reality, delivery in rural contexts tends to be blurred between the two through the mix of local participants. Young, literate, village-based volunteers were identified and each assigned 10 illiterates to mentor. Note that although the increase in micro-finance and in SHGs is a significant trend, there is always the danger of over-exaggerating its overall impact over the last decade. 2005 data from the 2003 National Survey of Farmers indicates that of 55,700 farming households sampled, only 4.8% had a member in an SHG for India as a whole, though the figure for Andhra Pradesh was 18%, second only to the state of Kerala (NSSO, 2005: 11). The sample of course is restrictive since it looks at farming households only, rather than at a specific series of categorisations of the poor. Development projects in conjunction with Velegu have been rolled out under two organisational umbrellas: the Andhra Pradesh District Poverty Initiatives Project (APDPIP) and the Andhra Pradesh Rural Poverty Reduction Project (APRPRP). The former covers the six poorest districts (including Chittoor), and the latter the remaining 16 districts of the state. This also conformed to the Eight Millennium Development Goals, particularly goal 8: 1) Eradicate extreme poverty and hunger. 2) Achieve universal primary education. 3) Promote gender equality and empower women. 4) Reduce child mortality. 5) Improve maternal health. 6) Combat major diseases. 7) Ensure environmental sustainability. 8) Develop a global partnership for development. As Chang (2010) notes, the nature of the ‘fit’ is ambiguous at best. See the final section of this article. There are approximately 500 households in each village, each of which is then split into hamlets based on social class and caste. Sixty households per village were selected for the questionnaire, and 20 per village for the semi-structured interviews. The 2006 data is linked to the prior survey data by ID number (see ESRC Study Number 3927). Daniel Neff, a doctoral student working with Olsen has also conducted additional interviews with a focus on subjective well-being that form part of the findings. Just over 60% of households had an SHG member in 2007. Outlines of the ongoing research and a sense of the human geography of the area can be found at <www.ruralvisits.org>. Note that a 1952 usury law renders interest rates of 3-5% and higher per month illegal. For an earlier study of issues focused on seasonal debt using class-based estimates, see Olsen 1996. This is in line with general trends identified by studies available from the quasi NGO set up by the Andhra Pradesh state government to implement Velugu: the Society for the Elimination of Rural Poverty. See Sriram, 2005: 5. Again, this is in line with general long-term trends identified for the state by SERP. See Sriram, 2005: 6. For background on milk procurement initiatives in India, see Chandler & Kumar, 1998. Neff ’s sub-sample finds downward mobility in 4 out of 36 households on this basis. See Olsen, 2009. As, for example, highlighted in Neff ’s 2007 interviews, Household 8. As highlighted, for example, in interviews with Household 16 of the main 2007 sample.


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21. We also encountered instances where SHGs would actively recruit members and try to pressure them to take loans on the basis that they were credit worthy and would be assets to the SHG. For example, Neff ’s 2007 interviews, Household 6. 22. For example, the Swayam Krushi Sangam (SKS) micro-finance organisation, created in 1998 and with approximately 4 million participants borrowing a total of US$491 million in 2009, reports repayment rates of over 97 per cent. 23. There are a whole variety of relevant initiatives designed at the upper ends of institutions like Velugu, and more directly through the state or national government, which are intended to be implemented at local level. For example, there is a longstanding rice credit line designed to create food security: households in need are provided with up to 100 kilos in rice, the cost of which is to be repaid over a period of up to six months. Some of the problem of employment insecurity and local water access issues are met through the state’s Rural Employment Guarantee Scheme (REGS), which provides state paid work, often on local irrigation schemes that are timed to coincide with periods of low demand for casual labour. 24. Some of these modifications were suggested by SR Rajagopal, vice-chairman of the Tamil Nadu Milk Producers Federation, reported in The Hindu (2009). 25. Harris-White has made related points regarding the informal economy effects of Indian capitalism several times (e.g. Harris-White and Janakarajan, 2004). See also the forthcoming special edition on the informal economy and Indian capitalism of the International Review of Sociology, edited by Elisabetta Basile and Barbara Harris-White, to which we are contributing. 26. ‘At the global level’ does not, however, indicate that globalisation is a coherent form (‘the global’) or that globalisation is an explanatory concept per se. Both these confusions have been plausibly critiqued (Hirst and Thompson, 2009; Kiely, 2006). 27. This had brutal effects in the main cash crop states: the suicide rate amongst tenant farmers spiked sharply in 1998, and this received widespread media attention. 28. One might, for example, think of this as a particular example of Polanyi’s ‘double-movement’, defined as the constant tension between the institutional spheres of the economic and political based on the untenable distinction between a separate market liberalism and a reactive social protection that seeks to address the deformations created by the market (Polanyi, 1945: 135). Quite how far one can think of it this way is debatable, however, since both the problem and the solution stem from market liberalism.

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Martin R (2002) The Financialization of Daily Life (Labor in Crisis). Philadelphia: Temple University Press. Meenai Z (2005) Empowering Rural Women: An Approach to Empowering Rural Women Through Credit-Based Self Help Groups. Delhi: Aakar Books. Meenai Z (2006) Women’s empowerment through micro-credit. In Ghandi A, (ed.) Women’s Work, Health and Empowerment. Delhi: Aakar Books. Mirowski P, Plehwe D (2009) The Road From Mont Pelerin: The Making of the Neo-liberal Thought Collective. Cambridge: Harvard University Press. Morduch J (1999) The micro-finance promise. Journal of Economic Literature 37(4): 1569-1614. NABARD, The National Bank for Agricultural and Rural Development (2008). Annual Report 2006-7. Delhi: Government of India. NABARD (2007, April to June) Issue Number 1 NABSTATS – Quarterly Bulletin of Statistical Information. Online at <www.nabard.org>; accessed August 2008. NSSO (2005) Situation Assessment Survey of Farmers: Some Aspects of Farming (NSS 59th Round, January–December 2003). Delhi: National Sample Survey Organisation, Ministry of Statistics and Programme Implementation, Government of India. Olsen WK (1996) Rural Indian Social Relations. Delhi: Oxford University Press. Olsen WK, Mehta S (2006) The right to work and differentiation in Indian employment. Indian Journal of Labour Economics 49(3): 389-406. Olsen WK (2006) Pluralism, poverty and sharecropping: Cultivating open-mindedness in development studies. Journal of Development Studies, 42(7): 1130-1157. Olsen WK (2009) Beyond sociology: Structure, agency, and strategy among tenants in India. Journal of Asian Social Science, forthcoming. Palley T (2007) Financialisation, what it is and why it matters. The Levy Economics Institute, Working Paper No. 525. Polanyi K (1945) Origins of Our Time: The Great Transformation. London: Victor Gollancz. Ramalakshmi C (2001) DWCRA – A successful experiment to emancipate rural women in Andhra Pradesh. In Rao D, Kumar V, Development with the Human Touch. Delhi: Serial Publications. Rao KP, Kalavakonda V, Banerjee S, Shah P (2007) Making markets work for the poor. Livelihoods Learning B: 1-8. World Bank. Sassen S (2006) Cities in a World Economy, 3rd edition. New York: Pine Forge Press. Sassen S (2010) A savage sorting of winners and losers. Globalizations 7(1). Sreelakshmamma K (2005) Empowerment of women through the DWCRA programme in AP: A case study. In Rao M (ed.) (2005) Empowerment of Women in India. Delhi: Discovery. Srinivasan N (2009) Microfinance India: State of the Sector Report London: Sage. Sriram MS (2005) Financing Livelihoods: Providing Superior Access to Financial Services. PDF Society for the Elimination of Rural Poverty (SERP), Andhra Pradesh. PDF available online at <www.serp.ap.gov.in>. Tripathi R, Tiwari R (eds.) (1999) Perspectives on Indian Women. Delhi: APH Publishing. Walker K (2008) Neo-liberalism on the ground in rural India: Predatory growth, agrarian crisis, internal colonization, and the intensification of class struggle. Journal of Peasant Studies 35(4): 557-620. Watson S (2009) Formalising the informal economy: Women’s autonomous self-employment in rural South India. DSA paper, September, online at <www.devstud.org.uk/>.

Author biography Wendy Olsen works as a senior lecturer at the Institute for Development Policy and Management, University of Manchester. Her research focuses on the sociology of economic life. She has interests in methodology cutting across the whole range, from


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quantitatively based to qualitative research and discourse analysis. She specialises in the study of economic institutions from sociological and moral economy vantage points. Her research has included case studies of Indian and UK labour markets, the credit market involvement of the poor in India, and other topics in economic sociology. Jamie Morgan conducts research at the Cathie Marsh Centre for Social Statistics, University of Manchester, and at the Centre of Excellence for Global Governance Research, University of Helsinki. His work focuses on issues of economic vulnerabilities of systems in a global political economy context. He has recently published on private equity finance, central bank policy and reserve currencies, and also on issues of political stability, with a particular focus on China.


From transition crisis to the global crisis: Twenty years of capitalism and labour in the Central and Eastern EU new member states


Özlem Onaran Middlesex University, UK

Abstract This paper analyses the developments in wages, employment and income distribution in the Central and Eastern European new member states twenty years after transition to capitalism, divided into three periods: 1) the transition crisis; 2) post-transition growth; and 3) the crisis episode of 2008-9. Total employment has at best stagnated or slightly decreased. Modest wage increases have fallen behind productivity increases. Furthermore, the global crisis has led to employment losses in all countries, and real wages have already started to decrease in several countries. Keywords Central and Eastern Europe, wage, employment, wage share, crisis

Introduction It has been now twenty years since the transformation of the Central and Eastern European Countries (CEECs) from planned economies to capitalism. After the initial shock of transition, towards the end of 1990s, these countries were being praised as success stories. However, this evaluation did not incorporate the deviation between the Corresponding author: Özlem Onaran, Middlesex University, UK Email: [email protected]


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performances in terms of GDP growth vs. the outcomes for the working class. This paper analyses the consequences of this policy framework on wages, employment, unemployment and income distribution in the CEECs after twenty years of capitalism, divided into three periods: 1) the transition crisis; 2) post-transition growth; and 3) the crisis episode of 2008-09. The integration of the CEECs to the Western European market, and later Eastern enlargement of the EU, was expected to bring about the catching-up of these countries in terms of GDP per capita in the foreseeable future. This very optimism soon turned into an unquestionable dogma, particularly since any critique of the process was also perceived wrongly as constituting praise for the old, anti-democratic regimes of the region. The neoliberal economic policy framework maintained an uncontested hegemony under these historical conditions. The Eastern enlargement of the EU has also been designed as part of the neoliberal economic model, which perceives integration as being the extension of markets and the creation of new secure and profitable areas for capital mobility, with little concern for social cohesion. The official policy line of the EU was legitimised by the mainstream optimistic expectations from free trade and private capital flows, based on traditional trade theory. Different from the previous enlargement phases, during Eastern enlargement, the EU budget and the amount of structural funds have been very limited; and consistent with the neoliberal policy framework, the EU has abandoned the task of convergence to private capital flows and international trade. These are the objective conditions under which the Central and Eastern European new member states (CEENMSs) find themselves obliged to get involved in wage as well as tax competition in order to attract capital. The global crisis of 2009 and its consequences for the region have now laid bare the major shortcomings of this policy package, which has few instruments to counter the shock. The effects of the neoliberal policy framework on macroeconomic performance proved to be far from sustainable during the global crisis, which made it clear that the dependence of the region on private capital inflows is a major source of risk. After the initial transition shock and a decade of restructuring, all the NMSs are now facing the costs of integration to unregulated capital markets, despite differences in their development trajectory. The rest of this paper is organised as follows: the second section analyses the trends in labour market outcomes and institutions in the CEENMSs since the transition era. The third section discusses the expected consequences of the crisis both at a macro level and for labour; and the fourth derives the conclusions and policy implications.

Labour from transition to European enlargement Labour market outcomes The 1990s started with a severe transition crisis in the CEECs, with the cumulative loss in GDP ranging from 13.2 per cent in the Czech Republic to 22.1 per cent in Slovakia, and reaching up to 45 per cent in Latvia and Lithuania. Table 1 shows the period averages for annual growth rates in GDP, employment, productivity, and real wages. The transition crisis was replaced by a recovery in output starting in 1993-4 in the Visegard countries and Slovenia, in 1995-6 in the Baltic states, and in 1998-2000 in Bulgaria and Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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Romania; but as the market transition matured, dramatic changes in the sectoral employment structure and wages emerged in the CEECs (Havlik and Landesmann, 2005; Boeri and Terrell, 2002). In general, compared to the pre-transition era there has been a sharp contraction in employment, an increase in open unemployment, a massive exit from the labour market, and only moderate job creation. In particular, industrial employment has decreased in all the countries, not only in the first period of transition recession, but also in the post-recession period, at least until 2004-6. There have been some modest increases in Poland and Bulgaria after 2004, and in Czech Republic and Slovakia after 2006. In general, the jobs created in services have offset the negative effects of the major downsizing in the industry, but even during the uninterrupted growth years of the 2000s, new service jobs have just sufficed to generate stagnation in total employment (Hungary, Czech Republic, Romania), or modest increases in employment in the late-2000s (see Table 1). As a result of disappointing employment performance, employment rates (employment to population ratio) remained quite low – lower than 60 per cent in Hungary, Poland and Romania, as of 2008 (EUROSTAT, 2010). Only in Slovenia, Latvia and Estonia were employment rates slightly higher than the EU15 average of 67.4 per cent, and even when compared to the already low Western EU levels (let alone the higher rates of 74.3 per cent in Sweden), this is far from being a success story. However, a more striking comparison would be to the full employment performance of the pre-transition era. The fall in unemployment rates in Poland, Slovakia, Bulgaria and Romania in the 2000s seem far less spectacular, when the low employment rates are considered. There is also an important difference between the male vs. female unemployment rates, with the latter being higher in all countries other than in the Baltic countries and Romania (ILO, 2009). As of 2008, the difference is particularly high in Slovakia, the Czech Republic and Poland. The female unemployment rates are higher despite the lower female labour-force participation rates, which range between 54.8 per cent in Hungary and 63.4 per cent in Bulgaria, as of 2008, for the total working-age female population (ILO, 2010). Only the Baltic countries and Slovenia have female labourforce participation rates higher than 65 per cent. The massive withdrawal from the labour market at the early stage of transition was stronger among women. The participation rates for the prime-age population (in the age group 25-54) are higher for both men and women, and the difference between women and men is lower. This is an improvement, which indicates that once the wave of withdrawal from the labour markets after the transition crisis is over, the gender gap in participation has also narrowed for the new generation in the prime-age cohort. The youth unemployment rate (covering persons aged 15-24) is also strikingly higher than the total unemployment rate (ILO, 2009), reaching up to 19.9 per cent in Hungary, 19.0 per cent in Slovakia, and 18.6 per cent in Romania. The ratio of youth unemployment rate to adult unemployment rate is particularly high in Romania, followed by Hungary, Poland, and Slovenia. Boeri and Garibaldi (2006) show that in the aftermath of 1996, recession periods led to significant job destruction, whereas expansions in GDP did not lead to statistically significant job creation in the CEE-10. Indeed, high rates of output growth in the CEECs in the post-recession era generated fewer jobs than did stagnation in the other countries of the EU (Boeri and Garibaldi, 2006). Izyumov and Vahaly (2002) find a Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

-3,0

-1,9 -3,5 -6,0 -5,6 -17,3 8,2 -19,8 -13,4 -6,7

-

3,7 2,0 3,8 12,6 2,7 19,0 0,0 8,5 1,6

3,3 5,7 4,3 3,8 6,0 4,3 4,5 -0,2 0,1

2,2 0,5 -0,2 -0,3 -0,6 -2,7 -2,3 -1,2 0,0 -2,4

-0,8 2,1 5,0 4,7 4,8 8,9 2,7 8,3 0,0 5,0

3,2 -1,9 4,8 2,9 5,3 8,0 3,4 6,9 -4,4 6,5

3,2

Employment Productivty Real wage

1994-2000

Employment Productivty Real wage GDP

Czech -2,3 -2,0 Republic Hungary -3,2 -4,2 Poland -1,6 -3,6 Slovenia -2,3 -4,6 Slovakia -2,4 Estonia -1,6 -4,3 Latvia -11,2 -5,1 Lithuania -11,5 -2,0 Bulgaria -5,7 -5,8 Romania -4,6 -1,8

GDP

1989*-1994

3,7 4,1 4,4 6,2 8,1 9,0 8,1 5,6 6,1

4,5 1,1 0,6 0,9 1,0 1,7 2,4 1,3 2,0 -0,8

0,8

2,0 2,6 3,3 5,9 6,4 5,7 5,6 3,2 5,5

3,8

4,3 1,1 3,0 3,3 8,6 9,9 8,5 4,0 9,3

4,7

GDP Employment Productivity Real wage

2000-2007

Table 1. Average annual growth in GDP, employment, productivity and real wage, 1989-2009 and sub-periods, Eastern EU MS

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1,1

1,6 0,5 0,5 4,1 -5,1 -6,2 0,7 2,3 6,7

1,2

0,6 -1,3 5,0 3,8 3,5 2,8 6,2 2,8 -3,6 0,2 -4,6 0,9 2,8 -0,5 6,0 3,3 7,3 -0,2

2,5 0,9 3,8 1,5 1,3 0,6 -1,0 2,9 7,4 13,5

1,3 -1,2 -3,4 1,0 -5,4 -0,5 -4,2 -3,7 -8,1 -0,9 -6,1

-2,3 -4,5 1,0 4,0 3,6 -2,2 -14,6 -11,5 6,9 -0,1

-1,1 1,2 3,0 2,0 2,7 4,4 0,1 0,3 0,4 0,9

1,5 -0,2 0,3 0,3 0,3 -0,5 0,0 -0,2 0,6 -0,8

0,1 1,9 3,0 3,2 5,4 5,6 4,8 5,0 3,2 3,9

2,9

0,2 1,1 0,6 1,5 1,4 5,0 -1,1 -2,9 4,0

2,1

Employment Productivty Real wage GDP Employment Productivity Real wage

-6,3 -3,6 1,7 0,4 -7,8 -2,2 -4,7 -2,4 -14,1 -9,9 -18,0 -13,6 -15,0 -6,9 -5,0 -2,9 -7,1 -1,0

-4,2

Employment Productivty Real wage GDP

GDP

1989*-2009

Source: Own calculation based on AMECO (Economic and Financial affairs, Annual Macroeconomic Indicators online database). In the case of the missing values for 1989-1991, growth rates of the variables in WIIW (The Vienna Institute for International Economic Studies), Handbook of Statistics, online database is used.

Notes The starting date differs with respect to data availability. GDP data for Estonia only starts in 1993; the employment data for Slovakia starts in 1994, and for Hungary in 1992. The employee data for the Czech Republic starts in 1995; in 1992 for Hungary and Latvia; in 1993 for Slovakia, Estonia, and Lithuania; and in 1990 for Romania. The wage data for Latvia starts in 1993, and for Estonia in 1990. GDP is in 2000 prices in national currencies. Employment is total economy. Productivity is real GDP/employee. Real wage is labour compensation deflated by private consumption deflator, index 2000=100. Period averages are geometric averages. The data for 2009 is the AMECO forecast as of April 2010.

Czech Republic Hungary Poland Slovenia Slovakia Estonia Latvia Lithuania Bulgaria Romania

2009

2008

Table 1. (Continued)

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lower Okun’s coefficient of -0.526 (the effect of GDP growth on the change in unemployment) in the 10 CEECs in the post-recession era of 1995-2000, compared to the coefficient for EU15 (-0.799). Another important concern is that of the quality of the jobs created in the service sector. One major problem of the neoliberal pattern of European integration continues to be that jobless growth and deindustrialisation go hand in hand. Although the shift in employment from industry towards services is a pattern, which goes along with improvements in productivity and can be observed in developed countries as well, Reinert and Kattel (2004) point out that the type of deindustrialisation in the CEECs is qualitatively very different from the slow ‘de-industrialisation’ of high-income countries, which upgrade into a knowledge-intensive service sector. In contrast, the service jobs created in the CEECs are mostly low–skilled and low-paid jobs. An indicator about the quality of employment is the share of vulnerable employment, calculated as the sum of contributing family workers and own-account workers as a percentage of total employment (ILO, 2009). As of 2008, this share is quite high in Romania (31.2 per cent), which is particularly due to the high share of agricultural sector, which has a higher share of self-employment and unpaid family workers. Poland follows with an 18.9 per cent share of vulnerable employment. In the Czech Republic, Slovenia and Slovakia, the share is slightly higher than 10 per cent; however in Slovakia, further data about informal employment reveals a very high and increasing share of informal employment in total employment in the non-agricultural economy (23 per cent as of 2008: ILO, 2009). This disappointing employment performance took place despite massive wage cuts in the early stage of transition, which was then followed by moderate wage growth compared to productivity. The transition shock came with a sharp real wage cut in the first two to three years: of 39 per cent in Slovenia; 30 per cent in Czech Republic and Slovakia; 15 per cent in Hungary during 1989-1991/92; more than 60 per cent in the Baltic countries during 1990-1992/93; and a prolonged decline of 70 per cent during the period 1990-97 in Bulgaria. Table 1 shows the period average for annual growth in real wage and productivity (GDP/employee). Although wages started to recover in the second half of the 1990s, real wages significantly lagged behind productivity in seven out of ten countries during 1994-2000, despite strong growth in GDP and the opening up to Western Europe through trade and FDI. Slovakia, Latvia and Romania are the exceptions in this period. During the period 2000-7, wage growth was still lower than productivity growth in Poland, Slovakia, and Slovenia. In manufacturing, this gap is more pronounced (Onaran, 2008). Thus the CEECs have also followed the wage moderation policy of Western European countries, and wage convergence between Eastern and Western Europe remained weak despite the phenomenal improvements in productivity in the periphery of Europe. Indeed, with the onset of the global crisis, real wage growth slowed in 2008 in the Czech Republic, Slovenia, Hungary, Estonia and Latvia. Even before the crisis, despite the strong wage growth in the 2000s, in Bulgaria and Lithuania real wages were as of 2008 lower than in 1989, and in Hungary and Slovenia, there has been negligible improvement. In 2009, the figures point at already declining real wages in the Baltic states, Hungary, Romania and the Czech Republic, as will be discussed in more detail below.


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As a consequence of this moderate wage growth, which lags behind productivity, and low employment, the labour share has been declining in Slovenia, Poland, Bulgaria and Romania, and stagnant in Hungary and Slovakia (Figure 1). The only exception to this are the last years in the Baltic countries and Czech Republic, when the labour share is back to the former peaks at the start of the transition; however data does not allow us to compare their current situation with the pre-transition phase. Moreover, as the forecasts indicate, this recovery will be reversed during the current crisis, as will be discussed in more detail below. In the meantime, the GINI coefficients have increased in all 10 CEECs (AMECO database). The low GINI coefficients of the early 1990s, ranging from 19.4 in the Czech Republic to 25.2 in Poland, increased to a range of 25.4 in the Czech Republic and 34.9 in Poland. The Baltic countries have the highest GINI coefficients of the region, reaching 36. In Poland, Slovenia, Slovakia and Romania, the increase in inequality was continuous, while in Hungary and Lithuania, the improvement in equality in the late-1990s was reversed again later. The mode of accumulation in the CEENMSs has been very dependent on foreign capital inflows from Western Europe in key sectors, with the exception of Slovenia. Nölke and Vliegenthart (2009) define this regime as dependent market economies, and emphasise the role of multinational enterprises (MNEs). However, within this common framework of dependent development, further differences emerged. Becker and Jaeger (2010) distinguish between a regime of accumulation based on dependent industrialisation in Visegrad countries (Hungary, Czech Republic, Slovakia, Poland) and Slovenia, as opposed to a regime based on dependent financialisation in the Baltic countries and the South Eastern member states (Bulgaria and Romania).1 In the countries with dependent industrialisation, the industrial export sector has been the driving force of accumulation; however the dependency on imports as well as repatriation of profits have been high, leading to current-account deficits beyond 5 per cent of GDP, with the exception of the Czech Republic. The countries with dependent financialisation are marked by highly appreciated domestic currencies, which hindered international competitiveness and industrial development, and capital inflows, which have mostly financed real estate bubbles (Becker and Jaeger, 2010). In these countries, with the exception of Romania, the appreciation of the domestic currency was determined by fixed exchange-rate regimes, which aimed at establishing stable domestic currencies. The end result was dramatic current account deficits exceeding 10 per cent of GDP, or even 20 per cent of GDP in the case of Latvia and Bulgaria. The decline in industrial employment was particularly strong in the countries with dependent financialisation; nevertheless the decline in total employment has been among the highest also in Poland and Slovenia, along with the countries with dependent financialisation. However, the actual divergence in the employment and growth performance of these two regimes and the fragilities associated with dependent financialisation became more evident after the global crisis, as will be discussed below. A controversial fact about this dependent development, for the mainstream economists, is that rapid improvements in exports and FDI have not generated a stronger boost to employment. It is true that transition economies of Central Asia, which have attracted significantly lower FDI inflows, performed much more poorly than did the Eastern European countries in terms of employment and growth. However, the shooting stars of the East, which have been the most attractive destinations of the Western European


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Figure 1. Adjusted wage share, Eastern EU MS*

*Compensation per employee as percentage of GDP at factor cost per person employed. Source: AMECO (Economic and Financial affairs, Annual Macroeconomic Indicators online database), April 2010.

MNEs, have not been star performers in terms of labour-market outcomes. Onaran (2008) finds that exports (to EU15), imports (from EU15) and FDI have had no significant positive effect on employment in manufacturing in the post-transition period in most CEECs. Onaran and Stockhammer (2008) estimate the effects of FDI and trade Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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on wages in the manufacturing industries during the period 2000-4 in five CEE countries, and find that only in the capital-intensive and skilled sectors has FDI had a positive effect on wages, and that international trade has had no significant effect. Interestingly, in the long run, the effect of FDI becomes negative, exports also have a negative effect on wages, and imports have a positive one. Thus in the long run, neither FDI nor international trade has the expected effect according to the traditional trade theory. Although MNEs tend to pay higher wages than local firms in most developing countries as well as in the CEECs, there are also many anecdotal stories for other countries concerning threats by companies to move to sites with even lower wages, if workers try to unionise or raise their wages (Burke and Epstein, 2001). These results could come as a surprise to neoclassical economists, who would expect an increase in employment and wages thanks to trade liberalisation and FDI inflows in countries that are relatively capital scarce compared to Western Europe. A close look at the nature of FDI flows can account for this adverse development. About half of the FDI in the new member states between 1990 and 1998 was in the form of privatisationrelated acquisitions, and the restructuring of the former state-owned enterprises led to massive labour shedding (Hunya and Geishecker, 2005). In later years, especially in manufacturing, most of the new FDI has been investment in new assets; however even then, although new capacities usually increased employment, technological progress also led to lay-offs simultaneously. Moreover, most of the greenfield jobs have been created in the service sector such as banking, retail and real estate. Irrespective of the initial method of entry, FDI is now increasingly taking the form of reinvestment of profits, the results of which are yet to be seen. Apart from the direct effects, indirect negative effects of FDI are also observed (Hunya and Geishecker, 2005): jobs were destroyed through negative spillovers as foreign investors replaced traditional domestic suppliers by imports, or domestic firms disappeared or downsized due to intensified competition from larger and technologically more advanced foreign subsidiaries of multinational enterprises. Thus productivity spillovers of FDI to domestic firms have been very limited, and in turn, employment effects have been weak or negative. Mencinger (2003) points at several reasons that may explain the absence of positive productivity spillovers in the CEECs: 1) the extent of imitation is limited because of the small size of the countries (except Poland), where often a single company represents the whole industrial sector; 2) the restructuring of a privatised firm acquired by a MNE most certainly may be associated with specialisation within production or the business chain of the MNE, which implies purchasing raw materials and spare parts within MNEs, rather than local suppliers. Thus, while the microeconomic efficiency of the MNE increases, its forward and backward linkages might shrink, and this might increase current account deficits. Then 3) due to the concentration of FDI in trade and finance, multinational companies contributed more to imports than to exports of host countries; and 4) large MNEs often force small domestic firms out of business, and thus reduce potential competition and create monopolistic or oligopolistic structures. Furthermore, profit repatriation by the MNEs creates long-term current-account problems, as discussed above. Finally, capital flows, even if in the form of FDI, create macroeconomic instability due to the appreciation of the local currency and fragility with respect to sudden capital flow reversals. This last point was demonstrated after the deepening of the global crisis in autumn 2008. These findings do not mean that FDI is Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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to blame for the jobless growth pattern of the CEE NMS, but they indicate that in the absence of a systematic industrial policy for structural change and public investments, which could have been financed by domestic states as well as the EU, transition based on private FDI inflows do not generate strong domestic spillovers, and fail to compensate for the job losses of the early transition period.

Labour market institutions and industrial relations At the beginning of transition, not even the actors for wage negotiations were present. With the exception of Poland, none of these countries had independent unions, nor were employers organised in associations. Privatisation, foreign direct investment and EU accession have shaped the transition of industrial relations (Aquilera and Dabu, 2005). EU accession processes affected in particular the states’ role in establishing industrial relations through the adoption of modern labour laws, the right of workers to form unions, and collective bargaining. Boeri and Garibaldi (2006) report that wage floors in the new member states (NMS) are often not binding, and are rarely enforced in the private sector: the ratio of minimum wage to the average wage is around 30-40 per cent compared to a ratio of 50 per cent on average in EU15. Schroeder (2002) reports that the minimum wage to average income ratio as of 2001 is ranging from 33 per cent in the Czech Republic to 42 per cent in Lithuania – Slovenia is an exception, with a ratio of 52 per cent. Kohl and Platzer (2007) argue that minimum wage increases serve as benchmark for wage contracts. States often encouraged tripartite meetings, which among other things, are involved in setting minimum wages. Former official trade unions had strong membership, although they had little practical influence. After transition, the numbers declined dramatically. Kohl and Platzer (2007) argue that the private sector is characterised by large ‘union-free’ spheres; and Aguilera and Dabur (2005) argue that this is also the case for the multinational enterprises. Galgoczi (2003) reports that the multinational enterprises match their wage and welfare policies solely to the local conditions; even some big firms are ‘union free’; and cases of trade union presidents’ being threatened have been observed. Regarding the power of unions, collective bargaining coverage rates are very low compared to EU-15, although union density rates are more comparable (Boeri and Garibaldi, 2006). Viser (2009) provides data on union density, collective bargaining and dominant levels of bargaining. With the exception of Slovenia, only a minority of the workers is covered by collective bargaining. The adjusted rate of collective bargaining coverage is 44 per cent in the Czech Republic, and 35 per cent in Hungary, Slovakia and Poland. Bulgaria, Latvia and Estonia have even lower rates, at around 20-25 per cent, and Lithuania has the lowest collective bargaining coverage at 12 per cent. Union density varies substantially, being highest in Slovenia (at 41.3 per cent) and Romania (33.7 per cent), followed by Slovakia (23.6 per cent), with the other countries ranging between 16 and 21 per cent. The early transition period also witnessed the foundation of independent unions and conflict between old and new unions (Schroeder, 2004). Strong rivalry persists in Poland and Hungary, while other countries typically have one dominant union federation and several smaller ones. The targets of the trade unions were rather far from a productivity-oriented wage policy: Stasek (2005:588) reports that a Czech union president writes, ‘the collective Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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bargaining process … was successful and worked well … and generally respected the principle of maintaining the real wage’. According to Viser’s (2009) index of wage coordination, most countries have firmlevel wage negotiations; only in Slovenia and Slovakia is there economy-wide coordination, with central elements or pattern bargaining similar to Austria or the Scandinavian countries. Slovenia is a clear outlier, whereas Slovakia has more sectoral elements in bargaining. Romania fits into the category of industry bargaining, with no or irregular pattern setting. Hungary, the Czech Republic and Bulgaria represent intermediate cases of mixed industry- and firm-level bargaining. All the Baltic countries as well as Poland have the most market-oriented industrial relations, with fragmented bargaining, mostly at company level. Many indicators show that the newly formed labour markets in the CEECs are rather flexible. Based on panel data estimation of wage bargaining equations for the sub-sectors of manufacturing in the CEECs, Onaran and Stockhammer (2008) find that wages are highly flexible with respect to unemployment. Regarding employment flexibility, Hungary, the Czech Republic and Slovakia are ranked in the more flexible half of the OECD countries, according to the Index of Rigidity of Employment Protection Legislation of OECD (2004). The Employment Rigidity Index in the World Bank’s Doing Business Report (2006) ranks the four OECD members in CEE (Czech Republic, Poland, Hungary, and Slovakia, the first being the most flexible) at a level between fifth to ninth among 20 countries, where Ireland is ranked the sixth. Thus wage or employment rigidity does not seem to be the reason behind the disappointing employment performance.

Crisis and the consequences for labour CEENMS are being severely affected by the credit crash and capital outflows, and possible currency crises accompanying the banking crisis, although the recent problems in the old periphery countries of Europe removed the focus on these countries as Europe’s ‘sub-prime’. After the initial transition shock and a decade of restructuring, these countries will once again face the costs of integration to unregulated global markets. The early optimism about the decoupling of the East from the West proved to be wrong. The hopes for a soft landing were replaced by fears of a hard landing in 2008 autumn; the conventional wisdom of the markets shifted from optimism to pessimism; and the EU anchor seems to be helping only to a limited extent. The fundamental problem of the region was an excessive dependency on foreign capital flows, and as a typical consequence of this, a bust period following the boom was an unavoidable outcome of capital flow reversals. Many authors, including myself, were pointing at these risks, and a bust did happen again (Onaran, 2007; Becker, 2007; Goldstein, 2005). If it had not been due to the global crisis, it could have been triggered through traditional channels of expectations regarding the sustainability of the overvalued exchange rate and high currentaccount deficits. Ignoring the possibility of capital outflow was a gamble in policy making. This behaviour is like ignoring a gas leak in your house, and choosing a ‘wait and see’ strategy rather than trying to fix the leak. Markets in the last instance could not prevent the systemic risk, but only postponed it and made it bigger. The difference of this crisis compared to the former boom-and-bust cycles in the periphery is that it is a global and not a regional crisis. It has originated from the core, Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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but the consequences for the periphery of Europe are heavier. The credit crunch has a global dimension, which makes the usual capital inflows after the bust phase unlikely. Again, due to the global character of the crisis, the export markets have severely contracted, and depreciation, which is a usual outcome of boom-bust cycles, now only has the negative balance-sheet effects, and no positive demand effect. The austerity packages in Western Europe further threaten recovery. The extent of debt-led growth and household and private-sector debt, most of all in foreign currency, is also increasing the risks more than did the former crises, with wider social implications of depreciation. The slowdown in global demand, the decline in FDI inflows, portfolio investment outflows, the contraction in remittances, and the credit crash are affecting all the Eastern European countries; but the degree of accumulated imbalances including current-account deficits, exchange-rate appreciation, the housing-market boom and foreign-currencydenominated private debt determine the differences in the depth of the effects among these countries. The Baltic countries, Hungary, Romania and Bulgaria are more exposed than Poland, Czech Republic, Slovenia and Slovakia. The sudden reversal of capital flows had disastrous effects in the countries with dependent financialisation. Latvia and Estonia entered a recession already in 2008. Hungary has some features similar to those of the countries with dependent financialisation, which made the effects of the crisis heavier, compared to the other Visegrad countries. In Hungary, the public sector, households and firms are in debt, and the current-account deficit has been high for a long time. In particular, government bond auctions made the country a target of speculations and capital outflows early on, and it became one of the first countries to depend on the IMF programme, along with Latvia. Hungary is now affected by the sovereign debt crisis in Greece and other peripheral countries in the Eurozone; but even Poland, Czech Republic, Slovenia and Slovakia are suffering from those effects, and from the slowdown in global demand and the decline in FDI inflows. Excessive dependence on export markets and a dangerous specialisation in the automobile industry, as in the case of Slovakia in particular, but also in the Czech Republic and Slovenia, turn out to be major risks. Poland is experiencing only stagnation rather than a recession, thanks to its more diversified market and large domestic economy, with a lower trade volume as a ratio to GDP. However, growth rates in Poland only accelerated in 2006; and thus the boom had not yet created all the associated fragilities. Both Slovakia and Slovenia have escaped turbulence in the currency markets by adopting the Euro; but their problem will be a permanent loss of international competitiveness relative to their Eastern European competitors, whose currencies depreciate. To avoid speculation, Estonia is also willing to opt for the lesser evil, i.e. to adopt the Euro. The myth that these countries would not experience bottlenecks regarding the currentaccount deficits, thanks to FDI’s being a major source of finance of the deficit, also proved to be wrong. It is true that FDI is still more robust than the other capital flows, but FDI inflows have also fallen significantly, reaching the level, of 2001-2 (Hunya, 2009). Although the current-account deficits are also falling because of lower imports, FDI is now financing a declining part of the deficits. Furthermore, FDI not only finances but also creates current-account deficits; average repatriation rates of profits have been 70 per cent in the region; and FDI inflows are either only as large as or even less than the repatriated profits in Hungary, Slovakia and Czech Republic (Hunya, 2009). Nine Eastern European economies in the EU have had a recession in 2009, Poland being the only exception (see Table 1). Employment has declined and unemployment Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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increased significantly in all countries, with the sharpest increases taking place in the Baltic countries. Real wages have fallen in the Czech Republic, Hungary, the Baltic countries and Romania. The austerity programmes in Hungary, Romania and Latvia will further reinforce the pressures of the crisis. The wage share has already fallen in Latvia, Hungary, Poland and the Czech Republic (see Figure 1). Moreover, a long-lasting recession cannot be ruled out, which would certainly have negative effects on the real wage and labour share. In the last part of Table 1, we calculate the long-term average annual growth in GDP, employment and real wages in the last twenty years of transition to a market economy: with first a transition recession and then a global crisis, the gains in terms of growth and wages are far from spectacular. Employment has at best stagnated, and it has decreased in Romania, Estonia, Lithuania and Hungary, compared to 1989. Real wages have stagnated in Hungary and Slovenia, and have even fallen in Lithuania and Bulgaria. Real wage growth has, overall, lagged behind productivity growth. The only significant real wage growth has taken place in Romania, but even then only equal to improvements in productivity. This does not look like a politically and socially viable balance sheet of integration. The current global crisis has created no change in the policy stance regarding European enlargement. The concerns of the EU for the NMS are shaped by the interests of the MNEs, in particular Western banks, and are limited to maintaining the stability of the currency rather than employment and income. The EU did not have the political will to create the institutions and tools for a unified counter-cyclical stimulus plan, but rather delegated the issue of the NMS to the IMF, albeit with some financial support to prevent a big meltdown of the Western European MNEs in the region. The IMF’s injured credibility after the Asian crisis was restored at the G20 via an increase in the available funds to the IMF, but not much has changed in the policy framework, despite the seemingly different discourse. Faced with the pressure of capital outflows, Hungary, Latvia and Romania have resorted to the IMF. The EU connection, thanks to the interests of the MNEs, and in particular West European banks in the region, has determined the size of the packages rather than the genuine content. As it was in the case of the crises in the developing countries in the 1990s and 2000s, the IMF’s policies are again far more restrictive than those the IMF deems appropriate for the Western European countries. The credit line to Poland without conditionality is the only new tool the IMF has used. Otherwise, Hungary, Romania and Latvia have strongly pro-cyclical fiscal policies; fiscal discipline is still the norm; and cuts in public-sector wages and pensions are part of the recipes. In the fixed-exchange-rate countries, the prevention of devaluation was the major aim to protect the foreign banks, which had extended the majority of the loans in foreign currency. The governments of these countries were also not willing to push domestic firms and households indebted in foreign currency into bankruptcy through devaluation. Thus nominal devaluation was replaced by a brutal internal real devaluation via wage suppression. In Latvia as of the fourth quarter of 2009, average salaries fell by 12.1 per cent. Public-sector wages were down by 23.7 per cent compared to a year ago; and pensions have been cut by 10 per cent. Together with increases in the VAT rate from 18 per cent to 21 per cent, these were the conditions to which the Latvian government had to agree in order to get the second tranche of the IMF package (Gligorov et al., 2009). The government has forced through spending cuts and tax rises worth a tenth of Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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GDP (Ward, 2010). The cost of this internal devaluation has been a 25 per cent loss of GDP in two years, and 22.9 per cent unemployment in 2009. It also translated eventually into a political crisis, as the biggest party, the People’s Party, broke from the ruling coalition because of its support for the tax cuts. In Estonia and Lithuania too, cuts of at least 20 per cent in public wages and a reduction in social benefits have been decided (Gligorov et al., 2009). Thus the current-account imbalances are being corrected not through nominal but real devaluation, and deep recession. One difference during this crisis is that the IMF is now trying to bail in the banks in order to maintain the level of credits in the countries that have an IMF financial programme. The major difference compared to East Asia and Latin America was the reliance on parent banks in the mature markets with a longer-term strategy of expansion in the region, rather than market finance via foreign capital flows. The parent banks’ loyalty to the region did not happen automatically, though. For example, initially the Austrian government has said that it would only support its troubled Erste Bank, which was overexposed to risky loans in foreign currency in Eastern Europe, if the money went to loans inside Austria, rather than to the further expansion of loans in the East (The Economist, March 2010c). This approach would have led to each individual bank’s reducing its exposure by calling in loans and dumping assets, and a major currency crisis, which would have hurt the banks themselves as well. The small number of large international players with a long-term strategic investment in the unsaturated new banking markets of the region facilitated coordination, and the European Bank for Reconstruction and Development led the ‘Vienna Initiative’. The ECB’s liquidity provision to foreign banks in Eastern Europe encouraged them to keep financing the subsidiaries outside the Euro area. The IMF support helped the central banks of Eastern Europe to provide liquidity to foreign-owned banks as well as to the minority domestic-owned banks. However, given the global crisis and the crunch in the wholesale credit markets, the ability of parent banks to maintain the credit booms in the region is exhausted, and even without further capital outflows, the region suffers from a deeper recession than in the West in the absence of former capital inflows. The speculation about the Greek sovereign debt is creating particular liquidity restraints for the Greek banks and their affiliates in Bulgaria and Romania; and the funding problems of other European parent banks are also rising. The currency depreciation or the recession will lead to increases in non-performing loans and further affect the parent banks’ approach to the Eastern affiliates. In Latvia, even without devaluation one fifth of debt is non-performing due to the recession (The Economist, 2010). Although the non-performing loans will not lead to a collapse of the Western banks, they will erode their capital buffers, and contribute to stagnation in credit and economic activity in the region. Another difference in this crisis in the Eastern MS compared to the former crises in the developing countries was the moderate scale and pace of depreciation. In the countries with the floating exchange-rate regime, there has been some contagion even in countries like Poland, but not a total breakdown until now: the exchange rate only depreciated by 20-30 per cent in Hungary, Poland and Romania, with some recovery afterwards, and the fixed pegs are still holding in the Baltic states and Bulgaria. The maintenance of the problematic pegs required rather large international rescue packages in comparison to the size of the economy. The Western European banks operating in the region (such as the


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Swedish in the Baltic states and the Austrian in Bulgaria) and their home country governments have applied pressure to avoid devaluation for fear of high non-performing loan rates, which would erode their profitability. The local governments also stand behind the pegs. However, preserving this overvalued fixed exchange rate under the current policy framework came at the cost of a very deep recession and deflation to create a real devaluation, and the mechanism for that was massive wage cuts, as can be seen in Latvia. On the other hand, the consequences of an unmanaged devaluation following a marketmade currency crisis would also lead to very severe distributional effects, as was the case during the Asian or Latin American crises. The reason for that are the inflationary effects of high devaluation rates following a currency crisis. In import-dependent developing countries, devaluation has a high pass-through effect to domestic prices due to the rise in the imported input costs, and during a severe recession and high unemployment, it is impossible for workers to index their wages to past inflation rates (Onaran, 2009). So far during the recent global crisis, not only has the depreciation rate been moderate, but also the pass-through effect to inflation has been restrained by the global deflationary environment and the falling commodity prices. However, any problem in the periphery in Eastern or Western Europe or other developing countries regarding speculative attacks on sovereign debt and capital outflows can easily trigger contagion effects and pressures on currencies in Eastern Europe again. Capital controls on outflows or a managed devaluation are not even mentioned in the IMF or EU debates. The only recent revision has been a recent ’IMF Staff Position Note’ about capital controls on inflows to moderate the effects on the exchange rate (Ostry et al, 2010); however, this does not help at this moment, when the boom has already been followed by a bust.

Conclusions and policy implications FDI inflows to the CEECs have been the channels around which most of the optimistic expectations about catching-up have been built. However, FDI without a systematic industrial policy does not seem to deliver what mainstream economic policy expects from it. As opposed to the common wisdom, FDI and trade have not necessarily brought positive aspects for labour in the Eastern European countries. Total employment has stagnated or even slightly decreased, along with significant job losses in industry. Modest wage increases have fallen way behind phenomenal productivity increases. Simple reliance on private capital flows has proved unable to lead to an egalitarian income distribution. Similarly shocking to many economists will be the finding that international trade does not deliver an increase in wage shares in the more labour-abundant economies of the CEECs. Furthermore, the global crisis has led to employment losses in all countries, and real wages have already started to decrease in Hungary, the Baltic countries, Romania and the Czech Republic. In spite of these adverse developments, the lack of a serious policy about EU-wide social cohesion is still dominating the enlargement process. As the wage growth in the CEENMSs lag behind productivity, the convergence of wages to Western levels proceeds at a rather slow pace. The depth of the crisis in some CEENMSs will not only slow down convergence, but also create a further divergence in wages. The current global crisis has


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also created no change in the policy stance. The concerns of the EU for the CEECs are shaped by the interests of the MNEs, and are limited to maintaining the stability of the currency, rather than employment and income. How or whether the West supports the East in weathering the current global crisis will be critical in the political credibility of the EU. In the European context, labour in the old and new member states has more common ground than it is currently exploiting. The coordination of collective bargaining activities is vital in order to avoid beggar-thy–neighbour policies and the relocation threats of the employers to suppress union demands. Coordinating the institutional setting of wage bargaining, a fundamental correction of the wages in both the periphery and the core to reflect the productivity gains of the past three decades fully, and designing a European framework for minimum wages and shorter working hours is the only alternative to readjust the playground back to conditions that are fairer to labour. Understandably, labour in the East can only be convinced to stop seeing lower wages as an advantage and the only way to attract private FDI from the West, if there is a systematic EU policy on regional convergence and social cohesion. Regional convergence should be supported by fiscal transfers and public investments to boost productivity in poorer regions. Industrial and technology policy should set investment priorities and recognise the significance of public investment to achieve these ends. The regional and cross-country distribution of these investment programmes should be based on dynamic long-term targets, instead of static competitive advantages. Furthermore, a European unemployment benefit system should be developed to redistribute from low to high unemployment regions. This requires a significant EU budget financed by EU-level progressive taxes. The most important obstacle today to initiate any progressive economic policy in Europe is the speculation on public debt and the governments’ commitment to satisfy the financiers. Public finance has to be unchained via debt default in both the periphery and the core. This has to be coordinated at the EU level as part of a broader public finance policy to make the responsible pay for the costs of crisis and to reverse the origin of the crisis, i.e. pro-capital redistribution. This involves a highly progressive system of taxes, coordinated at the EU level, not only on income but also on wealth, higher corporate tax rates, inheritance tax, and tax on financial transactions. Another important fact that became clearer after the global crisis is that capital account openness creates turbulences and structural imbalances, and that capital controls and financial regulations are vital. They are not, however, enough. The crisis has shown us that large private banks are exploiting their advantage of being ‘too big to fail’. Yet the challenge is the finance of socially desirable large new investments, e.g. in the energy sector. What needs to be done is to build a public banking sector with the participation of the workers and other stakeholders in decision making, and transparency of the accounts. A similar managed approach is required with regards to the exchange-rate policy. In Eastern Europe, a direct transition from the pegged exchange rate to the Euro as is planned in Estonia, or insistence on preserving the overvalued pegged exchange rate as in the case of Latvia, Lithuania and Bulgaria, ignores the need for a major adjustment in the exchange rate. Devaluation pushed by market forces would be devastating, but this can be overcome with capital controls, debt restructuring and a managed devaluation


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with price controls. To avoid the negative effects of devaluation on indebted households and firms, the foreign-currency denominated debt must be converted to local currency at the current exchange rate, and the burden of devaluation must be shifted to the private banks of the core countries. Similarly, to avoid the inflationary effect of devaluation on the purchasing power of people, price controls could be introduced. Last but not least, after twenty years of capitalism in the Eastern European countries and amidst the global crisis of the neoliberal model, it is time to discuss efficient as well as socially desirable alternatives for the mechanisms of economic decision-making, and to derive positive lessons from the negative experiences of anti-democratic plans as well as unstable market mechanisms. This crisis calls for a major shift in decision-making to facilitate the economy-wide coordination of important decisions. This in turn requires public ownership and the participation and control of the stakeholders (the workers in the firms, consumers, regional representatives, etc.) in critical sectors for society, such as banking, housing, energy, infrastructure, pension system, education and health. Bringing democracy, participation and planning together to avoid short-termism, instability and inequality will require the mobilisation of our collective creativity to bridge the current urgent problems with a democratic socialist alternative for the 21st century. Acknowledgements The author is grateful to Jane Hardy and the participants of the workshop, The Transformation of Post-Soviet Economies Twenty Years On, organised by the European Association of Evolutionary Economics and held in Hertfordshire 9-10 October 2009, for their comments and suggestions. The usual disclaimers apply.

Endnote 1. In a more detailed divide, Drahokoupil and Myant (2010) distinguish between different modes of integration through MNCs, exports in complex sectors, exports in simple manufacturing, commodity exports and financialised growth. Looking from the perspective of welfare regimes, Bohle and Greskovits (2007) distinguish between a neoliberal type in the Baltic states, an embedded neoliberal type in the Visegrad states, and a neo-corporatist type in Slovenia.

References Aguilera R, Dabu A (2005) Transformation employment relations systems in Central and Eastern Europe. Journal of Industrial Relations 47(1): 16-42. Becker J (2007) Dollarisation in Latin America and Euroisation in Eastern Europe: Parallels and differences. In Becker J, Weissenbacher R (eds.) Dollarization, Euroization and Financial Instability. Marburg: Metropolis-Verlag. Becker J, Jaeger J (2010) Development trajectories in the crisis in Europe. Debatte: Journal of Contemporary Central and Eastern Europe 18(1): 5-27. Boeri T, Garibaldi P (2006) Are labour markets in the new member states sufficiently flexible for EMU? Journal of Banking and Finance 30(5): 1393-1407. Boeri T, Terrell K (2002) Institutional determinants of labor reallocation in transition. Journal of Economic Perspectives 16(1): 51-76. Bohle D, Greskovits B (2007) Neoliberalism, embedded neoliberalism and neocorporatism: Towards transnational capitalism in Central-Eastern Europe. West European Politics 30: 443-366.


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Burke J, Epstein G (2001) Threat effects and the internationalization of production. Political Economy Research Institute Working Papers 15. Drahokoupil J, Myant M (2010) Varieties of capitalism, varieties of vulnerabilities: Financial crisis and its impact on welfare states in Eastern Europe and the Commonwealth of Independent States. Historical Social Research 35: 266-95. Galgoczi B (2003) The impact of multinational enterprises on the corporate culture and on industrial relations in Hungary. South-East Europe Review 2003 1-2: 27-44. Gligorov V, Pöschl J, Richter S, et al. (2009) Where have all the shooting stars gone? Current Analyses and Forecasts 4. Vienna: The Vienna Institute for International Economic Studies. Goldstein M (2005) What might the next emerging-market financial crisis look like? Working Paper Series 5-7. Institute for International Economics. Havlik P, Landesmann M (2005) Structural change, productivity and employment in the new EU member states. In Economic Restructuring and Labour Markets in the Accession Countries. Vienna: The Vienna Institute for International Economic Studies Research Project, commissioned by EU DG Employment, Social Affairs and Equal Opportunities. Hunya G, Geishecker I (2005) Employment effects of foreign direct investment in Central and Eastern Europe. Vienna: The Vienna Institute for International Economic Studies Research Reports 321. Hunya G (2009) FDI in the CEECs Under the Impact of the Global Crisis: Sharp Declines. Vienna: The Vienna Institute for International Economic Studies Database on Foreign Direct Investment in Central, East and Southeast Europe, 2009. Kohl H, Platzer H (2007) The role of the state in Central and Eastern European industrial relations: The case of minimum wages. Industrial Relations Journal 38(6): 614-635. ILO (2010) Key Indicators of the Labor Market, 6th edition; online at <www.ilo.org>. Izyumov A, Vahaly J (2002) The unemployment-output tradeoff in transition economies: Does Okun’s law apply? Economics of Planning 35(4): 317-31. Mencinger J (2003) Does foreign direct investment always enhance economic growth? Kyklos 56(4): 491-508. Nölke A, Vliegenthart A (2009) Enlarging the varieties of capitalism: The emergence of dependent market economies in East Central Europe. World Politics 61: 600-702. OECD (2004) Employment Outlook. Paris: OECD. Onaran Ö (2007) International financial markets and fragility in the Eastern Europe: ‘Can it happen’ here? In Becker J, Weissenbacher R (eds.) Dollarization, Euroization and Financial Instability. Marburg: Metropolis-Verlag, pp. 129-148. Onaran Ö (2008) Jobless growth in the Central and Eastern European countries: A country specific panel data analysis for the manufacturing industry. Eastern European Economics 46(4): 97-122. Onaran Ö (2009) From the crisis of distribution to the distribution of the costs of the crisis: What can we learn from the previous crises about the effects of the financial crisis on labor? Political Economy Research Institute, University of Massachusetts Working Paper 195. Onaran Ö, Stockhammer E (2008) The effect of FDI and foreign trade on wage bargaining in the Central and Eastern European countries in the post-transition era: A sectoral analysis. Structural Change and Economic Dynamics 19: 66-80. Reinert ES, Kattel R (2004) The qualitative shift in European integration: Towards permanent wage pressures and a ‘Latin-Americanization’ of Europe? PRAXIS Center for Policy Studies, Working Paper 17. Schroeder W (2004) Arbeitsbeziehungen in Mittel- und Osteuropa: Weder wilder Osten noch europäisches Sozialmodel. Politikinformation Osteuropa 119. Stasek F (2005) Employee relations in the Czech Republic: Past, present and future. Employee Relations 27(6): 581-91.


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The Economist (2010) A glow from the East. The Economist 62, 28 August. Visser J (2009) ICTWSS: Database on Institutional Characteristics of Trade Unions, Wage Setting, State Intervention and Social Pacts in 34 Countries between 1960 and 2007. Online at <www.uva-aias.net>. World Bank (2006) Doing Business report. Washington DC: World Bank.

Author biography Ozlem Onaran is a senior lecturer at Middlesex University, UK. She is a member of the coordinating committee of the research network Macroeconomics and Macroeconomic Policies, a research associate at the Political Economy Research Institute of the University of Massachusetts, Amherst, a fellow of the Global Labour University, and a member of Research Group on Money and Finance. She has published articles in journals and books on globalisation, crisis, distribution, employment, investment, development and gender.


The backward march of labour halted? Or, what is to be done with ‘union organising’? The cases of Britain and the USA


Gregor Gall

University of Hertfordshire, UK

Jack Fiorito

Florida State University, USA, and University of Hertfordshire, UK

Abstract This article evaluates the phenomenon and dynamics of union organising. It neither presents a critique of variants of union organising nor a preferred version of union organising as the solution. Rather, it provides some of the intellectual resources needed to create theoretically informed practice. It examines critiques of union organising to foreground discussion of the two key hallmarks of union organising to date; namely, officer domination and externally-led organising. This opens out the argument to consider a number of under-explored areas for the more expansive and ambitious version of union organising. Thereafter, it examines cross-cutting issues between the two countries and the absence of class consideration from union organising. Keywords unions, union organising, industrial relations, labour relations Corresponding author: Gregor Gall, University of Hertfordshire, UK Email: [email protected]


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Introduction ‘Union organising’1 as a quasi-distinct form of praxis of worker representation and mobilisation has become dominant among most unions in both Britain and the USA. But the results of ‘union organising’ have, to date, been disappointing to say the least. There has been no return to the former days – some thirty to forty years ago – of far greater influence, strength and vitality of unions and union movements. In both countries – if a direct, causal link can be made between the two – union organising has merely managed the decline. At best, it has helped slow down and bottom it out in terms of both density and absolute membership (when used as a cipher for overall union strength). In Britain, union density continued its downward trend, reaching 28 per cent in 2007 and 27.4 per cent in both 2008 and 2009, having previously been at 31.4 per cent in 1996 (Achur, 2010; Barratt, 2009) and 55 per cent in 1979. In the USA, after decades of continual decline from a high of roughly 35 per cent in the mid-1950s, density increased from 12.0 per cent in 2006 to 12.1 per cent in 2007, and again to 12.4 per cent in 2008 before slipping back to 12.3 per cent in 2009 (US Department of Labor 2008, 2009, 2010). In both countries, the situation for union density in the private sector is even graver. In Britain, this fell from 16.1 per cent in 2007 to 15.5 per cent in 2008 and to 15.1 per cent in 2009 (Barratt, 2009) and rose from just 7.5 per cent to 7.6 per cent in the USA from 2007 to 2008, but then fell to 7.2 per cent in 2009 (US Department of Labor 2008, 2009, 2010). No matter its limitations and contradictions, union organising represents the most serious and sustained move by unions and union movements to become masters of their own destinies, since the late-1970s in the UK and perhaps as far back as the 1950s in the USA, with regard to reversing the decline in their fortunes. Even if much less onerous measures and timescales for making judgements are used to assess union organising, there is still some dismay at the paucity of progress to date. One more lenient measure, for example, would be to return to the levels of membership, power and influence of the late-1990s over a five- or ten-year period. This would mean, for example, in the case of the tangible measure of union membership, a return in Britain to 8m members (as opposed to the actual 7.5m in 2009) and in the USA to 16.5m (as opposed to the actual 15.4m in 2009). Whilst membership is a simple method of measurement, here it conveys the sense of what would need to be achieved in and by the institutions, and the processes and outcomes of labour unionism on a range of measures of vitality. Of course, it necessarily remains unknown just how ‘bad’ or how much ‘worse’ the situation would have been for both national union movements without union organising. But the same is not true of whether union organising may have become an impediment to the emergence and implementation of other, possibly more effective, strategies of renewal and revitalisation. This is because it is evident that a mass resurgence of grassroots activism or a ‘challenge from below’ – as occurred in both countries in the late-1960s and early 1970s – was not even a dim prospect. Nonetheless, union organising is highly likely to continue as the major strategy of most unions because it is more or less the only meaningful, conscious strategy they have to hand. At one level, this is incontestable, because union organising is for many, when set against business unionism and union servicing, a refraction of the soul and raison d’etre of labour unionism (see Fiorito and Jarley, 2008). At another level, the simultaneous strength and weakness of union organising is that it is both conceptually and politically


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ambiguous and broad. The effect of this is that it can be used for both – for want of better terminology – militant and moderate ends, and for participative and bureaucratic means (see Fiorito et al., 1991). Similarly, it can be used for explicit political ends and ends of ‘no politics’ (if such a phenomenon could exist), and as just a technique for workplace organising or a strategy of mass collective mobilisation for an entire union. As a result, there are the proverbial ‘Heinz 57 varieties’ of union organising, and this trait of heterogeneity has become more evident the longer union organising has operated across space and time. So, although union organising began as a fairly specific set of ideas (see, for example, Blyton and Turnbull, 1998: 136-138; and Heery et al., 2000), it has been developed and adapted over time, particularly to suit the particular union and sectoral environment to which it has been applied. Indeed, the malleability of union organising is one of the major reasons why discussion of union organising permeates and informs discussion of other strategies for labour unions such as building transnational labour unionism, business unionism, and social partnership. They are neither incompatible with it nor holistic strategies on their own, with union organising providing a potential foundation for all, particularly when construed as a mere workplace activity. For reasons of this pervasiveness as well as of persuasiveness, it does appear that union organising remains, to a certain extent, the ‘only game in town’. This article seeks to evaluate the primary themes and issues that comprise and underlay the phenomenon and dynamics of union organising. Consequently, the article does not present a critique as such of the many variants of union organising. Nor does it present a new or preferred version of union organising as the solution. What it does hope to do is to provide some of the intellectual resources needed in order to create robust and grounded, theoretically informed practice amongst labour unionisms. It begins by examining the critiques of union organising to foreground the key discussion of what are believed to be the two key hallmarks of union organising to date; namely, officer domination and externally led organising. This opens out the argument to consider a number of fatally under-explored areas for the more expansive and ambitious version of union organising. Thereafter, the article examines a number of cross-cutting issues between Britain and the USA, and the absence of class consideration from union organising. Before this, it is worth attempting to lay out what are regarded as the core ideal components of any notion of ‘union organising’ (albeit this does not necessarily presume they are internally coherent or compatible). This serves the purpose of providing a basis for identifying a) how certain variants have interpreted the components, and in doing so have emphasised some more or instead of others; and b) how the components have been mediated and transmogrified by the interplay of agency and environment in the translation of ‘theory’ to ‘practice’. Thus, in a general and generic sense, ‘union organising’ is characterised by the principles that employed union officers (EUOs) should never do for workers what they should do for themselves; that the members are ‘the union’ and they must set its agenda by themselves and for themselves (see, for example, Blyton and Turnbull, 2004: 166-168). So the question is not what the union can do for workers, but what workers can do for themselves through their unions. EUOs should only provide a supporting role, and where they provide leadership, this should be as a result of an active and conscious mandate given to them by members (and for which they are accountable and recallable). Central to ‘union organising’ is the Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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notion that the organising should be issue-based – that is, focused on identifying and resolving grievances with the employer and by means of oppositional and adversarial collective activity. That is why the language of ‘fairness’, ‘respect’ and ‘justice’ is so embedded within ‘union organising’. These beliefs are then operationalised for the tasks of organising (not just recruiting) previously non-union workers, and activating existing members in furtherance of union objectives, where organising has both internal (member) and external (supporters) aspects. Consequently, the hallmarks of ‘union organising’ for members are self-organisation, self-reliance, self-initiative, empowerment, mobilisation, participation and activism.2 Underlying all of these is a sense of trying to return unions to their social movement origins. Apart from the general sense of union decline, there are several specific stimuli to ‘union organising’. One is that no matter how many EUOs unions can afford, they will never have enough to substitute for activists. Another is that achieving the expansive ambition of ‘union organising’ is dependent upon developing more activists. And, further, this is all the more necessary with the continued decentralisation and fragmentation of bargaining units so that each union is now dealing with more de jure employers than ever before. When measuring the efficacy of union organising, we suggest there are certain necessary qualitative and quantitative criteria. These encompass not only the standard ‘numbers game’ of new members, stewards and activists recruited and generated, but also the less measurable quantitative aspects of increased membership participation in unions which shades into the qualitative aspects, particularly at the workplace level. Examples are increased membership commitment to themselves as the union and control over union policy formulation. The dovetailing of the qualitative and quantitative aspects is that membership and union density are not just greater, but that members form a coherent collective capable of effective collective action. This then would give a reified meaning to the union dictums of ‘strength in numbers’ and ‘unity is strength’.

Thematic overview In the mounting academic and practitioner evaluation of union organising, seven quasidistinct approaches have emerged. Before examining them, it is worth noting that no version of union organising nor any analyses or critiques of it have set out in a clear way what the qualitative and quantitative goals are in terms of capacity, consciousness and so on. This means that it is difficult to then evaluate the outcomes of union organising against its own objectives. Neither have any versions or critiques established what historical benchmarks union organising is seeking to progress towards (or get back to). For heuristic purposes, the seven approaches can be approximated as follows: • • • •

servicing is not unimportant as a means of delivering union representation, and should not be downplayed or dismissed; union organising strategy is essentially correct and sound, but not yet widespread enough to realise its potential or ‘make the difference’; union organising as conceptualised, and thus practiced, is misconceived and needs correcting within the gamut of union organising; union organising is appropriately conceptualised, but as practiced has been flawed and needs to be corrected in order to realise its potential;


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union organising is too narrow in its focus on the workplace, and requires a wider ‘political’ focus and purpose to reinforce and supplement its tasks; the mission of union organising needs to be operationalised in terms of a wider understanding of socialisation and interest representation in which social identity formation and collective interest mobilisation are keystones; and because unions will only renew and revitalise themselves to the extent that they contest capitalist employment relations in the workplace and in a period of rising overall industrial struggle, union organising is an anachronism.

Many, if not all, of these approaches are, of course, not mutually exclusive of each other. This is also true of the writings of the analysts and commentators cited below, so that some could be placed in more than one approach. That said, the first approach emphasises that there is a legitimate place for union servicing given that a level of membership passivity is endemic and inevitable, and that task specialisation under a (union) division of labour is necessary and desirable. This most easily pertains to legal representation of members, technical or specialist knowledge regarding pensions or health and safety, union education, or media relations. For example, both farm and chemical production workers require specialists to address the technical aspects of hazardous substances. As Clark and Gray (2008) have reported, trends toward greater reliance on professional staff to provide specialised services have continued in large US national unions. In some national unions, these staff now number in the hundreds, and college degrees are at least a ‘somewhat important’ consideration in hiring the vast majority of both headquarters and field staff (Clark and Gray, 2008: 46) although much more so for the former. An example of this approach can be found in aspects of de Turberville’s (2004, 2007 2009) work. The second approach focuses on the quantitative issues of resources, whereby insufficient numbers of unions have invested sufficient vigour and resources in union organising (without there being much questioning of the form of union organising). ‘More’ and ‘for longer’ are the cries in the internal battles to convince policy-making bodies within unions that the diagnosis and prognosis are correct and can work. The conclusions of the work of Heery and colleagues (see, for example, Heery et al., 2003; Heery and Simms, 2008; Simms and Holgate, 2010b); of Waddington and Kerr (2009) on Britain; and of Bronfenbrenner and Hickey (2004) on the USA could be placed within this approach. The third approach stresses that the corruption and watering down of the potency of the model of union organising in implementation – through its use alongside, for example, partnership approaches or a ‘pick and mix’ selective rather than holistic approach – has led to the shortfall in the realisation of its potential. Thus, a quasi-ideological conviction akin to a religious fervour is required to keep union organising on the road of the ‘one true path’. A ‘representative’ of this approach can be taken to be the work of Bronfenbrenner and Juravich (1998). The fourth approach argues that the particular version of union organising adopted is off the mark through, for example, a lack of focus on creating self-sustaining workplaces unionism, domination by EUOs, lack of integration with bargaining agendas, or lack of integration with sectoral organising strategies. The work of Carter (2000, 2006) may be taken as illustrative of this type of approach. A variant of this is the work of Fairbrother


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(2000a), with his emphasis on the importance of union ‘form’ and the implications of the particular nature of public-sector employment relations in relation to state activity. The fifth approach suggests that union organising lacks a wider political Weltanschauung, and is not part of a political vision that marries together the workplace and extra-workplace concerns of workers in the form of unions as conscious and deliberate political actors. Thus, the question of ‘what are we organising for?’3 looms large because of the recognition of the limitations of labour unionism as economistic and parochial. As such, union organising is just not up to the quantitative and qualitative scale of the task at hand of regenerating unions and union movements. Thus, union organising should be subsumed within a more general orientation of mobilising to promote and advance workers’ collective interests through union movements acting in the economic, ideological and political arenas. An example of this approach can be found in Moody (2007). The sixth approach suggests that union organising should be subsumed within a more general orientation of mobilising to promote and advance workers’ collective interests. One version of this would see union movements acting in the social arenas, and is most obvious in terms of the espousal of community and social-movement unionisms. The logic is not just that unions should work with and adopt the methods of social movements, but that they should renew themselves by becoming social movements in order to move away from the economistic orientations of the past. An example of this approach can be found in the work of Wills (2001, 2002, 2004; Wills and Simms, 2004). Another version of this approach would emphasise collective workplace mobilisation through industrial action (see, for example, Darlington, 2009; McCarthy, 2009). The last approach is a combination of workerist, rank-and-filist and syndicalist approaches based on the premise of the necessity of returning to a period of a workers’ offensive as per the period 1968-1974 in Britain, and perhaps as far back as the 1930s in the USA. A good exponent of this perspective is Cohen (2006). Based upon these evaluations, various proposals and strategies are then forthcoming. Some argue for sticking with union organising but amending it in qualitative and quantitative ways, while others for argue for a ‘revolution’ from without. Strategies of social and community unionisms offer, in different hands, examples of proposals of both internal ‘reform’ and external ‘revolution’. But, as alluded to before, hampering such evaluations is the absence of specifications of what the objectives of union organising are in terms of membership gains and union density, membership participation and the number of activists, much less stipulations of regaining the power and influence of particular former years, and over what timespans these are to be attained. Without these specifications of intent and expectation, it is difficult to work out and measure whether the different union organising projects, both extant and proposed, are credible and effective. For the practitioners themselves, this is a glaring omission. For example, is union organising – when all is said and done – merely a holding exercise as unions wait for favourable exogenous developments, or is it a means of the internal and external political management of decline? That said, some initial contextualisation is warranted on the manifestations of the seven approaches. As the initial zeal of union organising has dissipated because of the emergence of various obstacles – and as subsequent reassessment has been made – recognition has been made of the value of the previously denigrated ‘servicing’ by both practitioners (e.g. Wilson, 2007) and academics (e.g. Banks and Metzgar, 2005). Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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Nonetheless, the calls and plans for further and greater resources to be afforded to union organising have been made. In the USA, the breakaway of a number of unions from the AFL-CIO in 2005 to form the Change to Win coalition is symptomatic of the working out of these tensions; and in Britain, the cases of the TGWU/Unite (TGWU section), GMB, USDAW and Unison represent the most obvious cases of unions putting their ‘money where their mouths’ are. The differences in approaches between the two peak federations in the USA and between the four unions in Britain to union organising testify to the belief now that there is no single ‘one true way’ on how to construct, resource and implement union organising. Again in Britain, the TUC has tried to move union organising on by promoting its integration with bargaining, environmental and workplace learning agendas, only to find that these attempts have been viewed as not strengthening, but rather diluting measures by some union activists and EUOs. Arguably, the most popular approach is the re-envisaging of unions as social movements, and this will be considered in greater detail below. Lastly, here, the path dependency of unions (see, for example, Carter, 1997) has been emphasised, with the consequent conclusion that an alliance of robust left leadership at national and local levels (of lay and EUOs) is necessary and desirable (see, for example, Carter, 2006).

Managerialism and union organising A central and problematical meta-aspect of union organising that remains heavily underdeveloped in both academic and practitioner assessments is whether union organising is appropriate as a ‘managerial’ means by which to regenerate a ‘social movement’. Indeed, there are certain strains of this argument within the fourth, fifth, sixth and seventh approaches outlined above, but none of them make this a key starting point which is then fully interrogated. To examine union organising in this way requires making a number of initial assumptions; namely, that union organising is a managerial means and that the union movement is a social movement, and that the two are, thus, largely or wholly incompatible. One can suggest that the dominant conceptual and practiced versions of union organising have constituted – indeed, have been deliberately constituted – as managerial, administrative, centralised and top-down responses. One could even go as far to say that the form of the relationship (and attendant power imbalance) between member and EUO under the servicing approach has – despite intentions – been transferred into the (union) organising approach. The rationale has been that the union leaderships as organisational leaders can use their unions’ limited resources in a targeted manner to achieve certain objectives in efficient and effective ways through the application of employed staff, techniques and specific knowledge. These leaders have recognised that their own extant activist base is too weak or insufficiently strong in qualitative and quantitative terms to bring about the desired change without additional help and resources. Consequently, they have chosen to target these resources and attempt to gain the most efficient and effective expenditure of them. The hope is that these extra resources in terms of EUOs can be a small cog that helps turn, or even create, a bigger, more powerful cog. Such a perspective would scoff at the notion that leaders can easily or quickly (re)create a vibrant grassroots through being less managerial and less technocratic as well as that a vibrant grassroots can be easily or quickly (re)created per se. With this leadership approach have come bureaucratic and centralised control Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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methods and means of operating to ensure their desired outcomes are achieved, and to demonstrate responsibility and accountability in doing so. In essence, faced with the organisational decline which is synonymous with a decline, inter alia, in activists and activism, union leaderships have used specialist EUOs to lead, direct and implement union organising. Issues of efficiency, effectiveness and managed activism within set parameters have been paramount instead of those of democracy, participation, control and agenda setting with regard to grassroots members and activists. The underlying point of critique here revolves around the power structures and ideology in union organising and has several suppositions: activists cannot be culturally reproduced in this hierarchical and managerially generated way; activism should not be managed by superordinates in this way; activists cannot be substituted for by EUOs; and, that coordination of voluntary labour (of activists) should not be equated with the management of employees. In this form of union organising representing a managerialised practice, the goals of national unions do not necessarily align with those of workplace unionisms over targets and timescales for creating workplace structures. Neither do they necessarily accord over the ways and means of doing. This is because the actions of the national union are driven by its organisational concerns rather than workplace concerns. At root, there is a technocratic view of the way that activism and labour unionism can be created and managed. By contrast, and developing the overall point of the critique, unions and countrybased union movements are often held to be part of, in the former, and, in the latter, to comprise social movements, whose virtue is that their members’ and activists’ voluntary labour is driven by ideologies of social justice, collective endeavour and democratic participation. Underlying or running alongside these views of what union organising and unions should be about is the view that any sort of union organising should be based on a more decentralised, self-determined and self-activated practice (albeit coordinated at the extra-workplace or local level) than has hitherto existed since the late 1970s. ‘Participative’ rather than ‘managerial’ or ‘professional’ labour unionism (Heery and Kelly, 1994) is the frame of reference for this analysis and action, and on that basis, union organising is largely inappropriate, particularly where it does not have or is not part of a wider (progressive) social justice vision. But to take a few steps back, if unions and union movements are not regarded in actual current terms as being social movements (in part or in whole, respectively), then the above critique of, and objection, to union organising begins to steadily come undone. Unions may not be viewed as constituent parts of a union social movement because of sectionalist values, because they as organisations are inevitably bureaucratised, or because they have become hollowed out in a process of atrophy since the 1970s. Indeed, one could venture that unions are not now social movements by dint not only of the rise of union organising but also because of the existence of the problems that it – union organising – tries to address and resolve. Also, to speak of a union ‘movement’ in the singular implies a coherence and commonality of purpose and values as well as dynamism in action in pursuit of those common goals by voluntary labour (and the direction of employed labour where it is used by unions). In other words, the properties of being a movement imply a significant and tangible sense for the overwhelming body of members of a foremost identity of being part of same social entity that moves in a singular direction in order to achieve its goals.4 Union movements may no longer be, and may Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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never have been, ‘movements’ as per this understanding. Indeed, many of these key properties can be regarded as being presently absent to a significant degree. Moreover, unions and union movements are not synonymous. A union movement is more than just the aggregation of extant unions put together, for in addition to the proffered definition of movement, the term ‘movement’ for unions implies a number of horizontal links at different levels between unions and a loyalty to a higher force. If the contemporary aspiration, existence and activity of unions and union movements are viewed as defective in any substantial way in the terms laid out above – possibly because of continuing dislocation, dissolution and disorganisation allied to membership passivity and so on – then the calculation of what is desirable or feasible in terms of social movement unionism must be substantially reconfigured. The almost inevitable result is that the union organising per se or of the kind critiqued above again become serious options where no sign of an upturn in grassroots industrial struggles is present to provide the basis for regeneration. So managed activism and bureaucracy may yet, for some, have their places and purposes as, reluctantly, the best of what is currently possible. This brief discussion of the relationship between a notion of social movement unionism and union organising as ‘managed activism’ serves to highlight the enforced circularity of the straightjacket of the contemporary period for labour unionism, whereby the goal of achieving what is deemed necessary is stifled by the absence of the requisite social forces to do so, which then, in turn, compels a return to – if not reliance upon – the very practice that is found to be wanting in the first place. The practical implications of this for the future are that a) with a shrunken membership base, there are never likely going to be sufficient number of dedicated EUOs to be able to bring about in both countries a sustained lift off or breakthrough in the fortunes of labour unionism as laid out at the outset, and b) the dependence being created through reliance upon EUOs risks limiting the potential of grassroots members and activists to develop the social capital and skills that are needed to create a potential lift off or breakthrough when the environment they operate in becomes more favourable at some future date. This latter point is worth developing. Grassroots lay leadership not only needs to be expanded but developed, either organically or inorganically, so that it acquires greater capacity and capability to act effectively and independently from (but not necessarily in opposition to) national labour unionism. This requires itself the development of collective confidence to act and advanced collective consciousness. Developing workplace ‘leaders’ who are not necessarily workplace stewards but subscribe to their national union’s heavily top-down concept of union organising, as Unite/TGWU seems to be doing (Cohen 2009), does not appear to be able to meet these criteria involved in creating self reliant capacity. So here is the sense that union organising becomes selflimiting if the aspirations are to rebuild the presence and power of the shop stewards’ movement, as the head of organising at Unite/TGWU claims (see Graham 2007).

Meso- and meta-union organising It is not contentious to suggest that union organising is not and should not be merely about workplace organising in and at the workplace. As such challenges and opportunities are then opened up for union organising (see Moody 1997). This is another of the aspects of union organising that remains relatively under-explored in much academic and practitioner literature. The tendency to treat union organising as a type of workplace Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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activity arises from the influence of the dominant the decentralised nature of industrial relations systems in Britain and the United States and the dominant features of labour unionism there, namely, a) the belief that their focus should primarily be on where their power most obviously resides (that is, the points of production, distribution and exchange), b) economism, and c) the separation of economic representation from political representation via labour-type parties. The most obvious counter-responses are those of the approaches of social movement unionism and community unionism for labour unions or, more radically, attempting to recast union movements as social liberation movements. What is common to these proffered proposals is to not just to upscale the spatial dimensions and connectivity of union organising but to require that union organising undertakes a form of political organising. The under-explored aspects of these proposals are then several-fold and all point to difficulties as much as if not more than opportunities in operationalising such upscaled versions of union organising: •

•

•

The first concerns the impact of the decomposition of social democracy and decline of the politically organised far left since the late 1970s for this reduces the availability of ideologically motivated activists to unions and union movements. Leftwing political ideologies (as opposed to leftwing religious or moral ideologies) are probably one of the key motivating a priori factors for activists and activism, particularly because these ideologies charge organised workers with a critical role of agency in transformative social projects. The successful neo-liberal offensive, the inculcation of social liberalism into social democracy, the defeats for working class organisation, the fall of the Berlin Wall and the collapse of the Soviet Union, inter alia, have all played a role in sapping the confidence and purchase of leftwing oppositional ideas for an entire generation. The absence of such a wellspring as before cannot be ignored or wished away in regard of union capacity. Whether a renewal and growth in the prevalence of such leftwing ideologies can or will happen will be crucial to the immediate and wider possibilities for union organising. The second concerns the nature of the recent social movements with regard to their rise and fall as well as their openness to the union movement and viceversa and the degree of overlap in common purpose. Here the concern is whether such social movements can be of use or help to attempts, nascent or existing, to broaden out and embed union organising. Recent social movements have been characterised by only minimal involvement from mainstream labour unionism reflecting unease from the union side about the former’s methods and cultures (rather than their aims as such). Similarly, social movements have had only limited formal cooperation with unions, again for similar types of reasons. This raises the issue of whether there can be an enjoining or co-joining in practice with mutually beneficial outcomes. Moreover, many social movements are now shadows of their former selves, raising the issue of whether such greater relations and integration are worthwhile or even possible in current times. The third relates to the features of social capital, particularly in oppositional, campaigning and social milieus vis-à-vis understanding how it is created and functions for the purpose of replication inside unions. Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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There appears to be a distinct lack of understanding within unions of how social capital is (subconsciously) created and developed within unions, work groups or workplaces, how social capital that predates union membership can be deployed thereafter and what the relationships between social capital and union education and membership socialisation are. If unions were able to develop an understanding of how social capital can be deliberately and consciously created, then this would go some way to developing the necessary cadre of effective activists. The fourth focuses on the conservative nature of Anglo-American labour unionism by comparison to those found at different times in countries like Brazil, South Africa and South Korea, or southern European countries like Greece, Spain, France and Italy. In referring to these countries it is necessary to try to separate out the contextual from the generic in order to appreciate both the existence and dynamism of other models or configurations of labour unionism (see, for example, Hyman 2001). The traditions in these other countries indicate a greater fusing together of political and economic demands and campaigning, a greater political role for unions and greater reliance on street and community mobilisation. They then contrast markedly with a more servicing- orientated labour unionism focused primarily on current members’ immediate work-related needs. The differences may at base concern a mobilising and/or social movement type-orientation which is prepared to use membership mobilisation as a primary tool to conduct political exchange over all issues. In making this distinction, it is worth recalling that it is not the case that the labour movements in those countries which engage in mass mobilisation are without recourse to affiliation to social democratic parties which have traditionally played a major role in the political representation of workers’ interests.

Running through all of these issues must necessarily be an evaluation of what in the current temporal and spatial dimensions are possible and probable, off limits or not, for union revitalisation projects. To take some examples, labour unionism is predicated on intervening in labour markets to modify their outcomes. But in attempting to do this and necessarily also intervene in product markets and the larger, and more general, ‘market’ to achieve this in order to more fully defend and advance members’ interests, labour unionism needs to operate in other arenas outside the workplace, through other means and in alliance with other social forces. This may concern changing legal regulation, public policy, public values or the centre of political gravity. (For example, recasting labour unionism as a social liberation movement would involve campaigning against the reduction in popular political democracy and the privatisation of society.) In so doing, labour unionism may be said to move from economic to political labour unionism. But, however, this is attempted or achieved requires utilising and mobilising oppositional ideas and forces. Most obviously, this concerns working with social democrats, socialists, social progressives and so on of the ‘old’ or the ‘new’ (in the case of recent social movements and groups) types. Discussion of the key practical tasks, thus, revolves around on what basis (and how) unions could work in concert with these other milieus. The issues are not just whether agreement could be gained on these tasks but which Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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alliance (and with whom) is best suited to achieve the particular stated aims in terms of the human resources that could be brought together and whether a synergy of the whole being more than the sum of the parts is possible. And given the depleted nature of labour unionisms in the two countries as well as that of many of the old and new social movements, a balance between caution and ambition would need to be steered. For example, in trying to replicate the Justice for Janitors and the London Citizens (formerly TELCO) campaigning organisations, a hard-headed assessment would try to identity the specific salient social relations in Los Angeles and London in order to find which were peculiar and which were universal (or at least general) so that the prospects of reproduction could be deduced (cf. Milkman 2006, Wills 2004). Put more bluntly: if both Justice for Janitors and the London Citizens are such exemplars, where are all the follow up examples of such success in their respective countries? Moreover, why is social movement unionism, relative speaking, far weaker in Britain than in the US: is this a factor of greater union strength in Britain than the United States? Put more bluntly, have US unions being forced by greater weakness to reach out to others? Without such follow up successes in this arena, we cannot talk of the proverbial ‘two swallows making a summer’ on this particular strategic front. The same point about transferability and applicability arises concerning the relative growth and bargaining success of the PCS and RMT unions in Britain under leftwing national leaderships (see McCarthy 2009 and Darlington 2009 respectively). In the case of the RMT, it organises in the rail sector where, for a number of reasons, there is little labour substitutability and a heavily used monopoly service exists so that the strike weapon is more potent and visible than in many other sectors. The task of assessment is to neither unnecessarily build up a wall of exceptionalism against transferability, nor glibly ignore such idiosyncrasies. Turning to another pertinent issue of this discussion, to what extent does labour unionism in Britain need a new form of political organisational representation given the transition of Labour into neoliberal or social liberal versions, and the unions’ inability to influence Labour successfully to the required extent from within or without on their agenda of substantial reform? In the case of the USA, the situation is, of course, different, with all previous attempts to create a labour or social democratic party coming to nothing. Indeed, the return of unions to the now Obama-led Democrats has been stark. In turn, this has made the possibility of forming such a party that much harder in both countries. But the case for doing so remains the same in as much as the former socialdemocratic parties now approximate to the Democratic Party and vice versa, in their hostility and ambivalence to labour unionism (Moody, 2007). With only a few exemplars like Germany, Greece and Portugal, labour unions in the two countries have been unwilling to create new left parties or join with existing left groups to build new alliances. So, overall, the parameters are still confined to being between ‘a rock and a hard place’ for unions’ organs of political representation. The growing (but still minority) desire of many labour union activists inside the FBU, PCS, RMT and Unison unions in Britain for a new working-class leftist party still does not command sufficient requisite social forces for the desire to become a reality. And here, as with much elsewhere in regard of union revitalisation, there is a sense of Catch 22 wherein the ‘answers’ and ‘solutions’ are in one sense obvious and exist in the abstract – unions need to mobilise members collectively for a more ambitious agenda. But these Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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very same answers and solutions are not so obvious, because they do not exist in a manifest way, remaining out of reach in the concrete sense due to the disconnection between available means and desired ends. Approaching the subject matter from another angle further elucidates the issues at hand. If on paper and in practice, labour unionism does not itself possess, and cannot generate, sufficient human resources and critical social weight (on its own or with others) for the creation of any of these types of wider social and political projects at the present time or in the immediate future, is it then left waiting for the exogenous upswing in industrial and social struggle of the kind experienced in the 1840s, 1880s, 1910s-1920s, mid-to-late-1930s and late-1960s-to-late-1970s periods as the best and most viable ‘option’? Such a perspective serves to emphasise the definite limits to which the return to agency – which union organising represents – has, either per se or under late capitalism.5 Nonetheless, the aforementioned perspective is suggestive of Kondratieff ’s or long-wave theory when applied to labour relations (see Dunlop, 1948: 189-192; Kelly, 1998). The problem here is that the present period represents either the soon-to-come end of an exceptionally long long-wave of downswing, or that the cycle is broken and no upswing is coming. Both scenarios could constitute hope and hopelessness, depending on the veracity or otherwise of long-wave theory. But for some observers, either the extension of the current long-wave or the non-appearance of the expected upswing will chime with theses of the decline, fragmentation and end of the working class as social force or political actor. Hobsbawm (1981) called this ‘The Forward March of Labour Halted’. For some others like Metcalf (2005), it will merely confirm that labour unionism has increasingly become an anachronism as a form of interest representation, and that worker dissatisfaction is wildly overstated because HRM is an enlightened management practice. But others, like Darlington (2002) for example, would no doubt respond that simply waiting for the return of, or the next, upswing is defeatist and abstentionist. Whatever the strengths and weaknesses of the contending arguments here, a pervading sense exists of our lack of depth of understanding not so much of ‘why’ in terms of how social relations upswings occur – although that arguably remains true – but of what influence conscious and organised political participants had in creating, furthering and directing the previous upswings. Therein lays the conundrum of understanding the dialectic between voluntarism and determinism, particularly for those who wish to change or create the future.

Public/private and national differences One aspect of the initial zeal of the practitioner proponents of union organising was that union organising was a ‘one size fits all’ solution. The approach was one of ‘year zero’, where more or less all labour unionism, regardless of its sectoral location, was predicated upon and corrupted by the servicing approach. Notwithstanding the increasing convergence of the public sector to the private sector in terms of marketisation and managerialism, this ignored the significant differences between the public and private sectors for labour unionism. Most importantly, these concern variations in levels of employer support for union membership, union recognition and collective bargaining, and the use of political (rather than economic) pressure in the bargaining process in the public sector. Equally noticeable has been the ignoring of the importance of these differences in assessments of union organising (even acknowledging the proportionately Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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smaller role and size of the public sector in the USA, and where employers per se are more hostile to labour unionism). In most overviews regarding labour unionism’s fate and fortune over the last couple of decades, full account has been given to the important and manifest differences (see, for example, Fairbrother, 1994, 2000b; cf. Masters, 1997). Yet these insights have seldom pervaded analysis of union organising. To that extent, both the proposition of union organising and assessment thereof are partial. But it is no great surprise to find that increasingly, in practice, more union resources now appear to be being invested in union organising in the public sector as part of a bigger overall trend for union organising to concentrate on those areas where union recognition already exists. So-called ‘infill’ recruitment (and thus ‘infill’ organising also) seeks to take advantage of extant employer support for (or neutrality towards) unions, and existing workplace union organisation. The corollary is that less and declining attention is being given to union organising in the far more hostile private sector (especially the private services sector) where employers are prepared to engage in widespread opposition and resistance, and those that were willing to concede union recognition have already done so. These trends are truer of Britain than the USA, but they are, nevertheless, still evident in the USA. The difference here testifies to the considerable disparity in environment for union organising between the two countries. For example, a union member is fired, on average, every 23 minutes of every day of every year for union activities in the USA (American Rights at Work, 2005) and with near total impunity for employers (see, for example, Bronfenbrenner and Juravich, 1998; Kleiner, 1984, 2001). This is a world away from the situation in Britain and highlights how a) employer power is far greater in the USA than in Britain; b) the regulatory regime for worker protection in the employment relationship is far weaker in the USA; c) governments are openly and unashamedly far more pro-business in the USA; and d) hegemonic public values in the USA have been little influenced by social democracy. The salience for the analysis of union organising is that it seems to perform poorly in both very hostile (USA) and quite hostile (Britain) environments. In tune with the tenor of the preceding discussion, this may again suggest that it is not entirely ‘fit for purpose’.

Class and union organising Class – understood as a small and finite number of social groups whose role and relations emanate from concentration of the ownership and control of the means of production, distribution and exchange – is a more or less missing dimension to conceptualisation of, discussion about and studies on union organising. This is as true of the preceding discussion here as it is of other accounts. The collective ‘amnesia’ exists for a number of reasons. One is that, for some proponents, it is self-evident that union organising is (or should be) about building worker or union power, and so there is no need for elaboration. This view is found primarily amongst the radical and far left, where workers – however conceptualised or configured – are regarded as the key transformative progressive social agency in generating socialism (however defined).6 Yet this overlooks – deliberately or otherwise – the disjunctures between worker representation (in the workplace and in employment) and the representation of the totality of working-class interests. These exist, inter alia, in regard of (trade union) sectionalism, the representation of women, and black and minority ethnic workers, and levels of class consciousness. For others, union organising is not about Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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a (working-)class project but rather it is about gaining social justice within and under capitalism, and ameliorating the worst outcomes of the market and neoliberalism. This marks it out – implicitly, at any rate, in these soft- and centre-left minds – as a reformist project and just one of many means and attempts to secure these outcomes. In addition to these basic poles of attraction, there is a heterogeneity of understanding amongst those who practice and study union organising of what class is and what it means (for example, Marxist or Weberian), as well as whether it still exists and what the implications of this are. Put together with the fact that the focus of those who study unions is away from the metaunits of analysis like class and the occurrence of a manifest decline in class consciousness of workers as a ‘class for themselves’, we have a fertile ground for the non-consideration of class and its dynamics in appreciations of union organising. This has produced itself in two obvious ways. First, the implications of union organising for class are seldom deliberated. And second, the relevance of class for union organised is seldom contemplated. Despite the aforementioned problems and the not inconsiderable difficulties in inserting ‘class’ into union organising, it remains essential that moves are made by analysts and commentators to think through and conceptualise the relationship between union organising and class, and for the benefit of both. For example, if those who are in command of union organising are committed to reformist social projects, then the question of whether this represents an obstacle or a possible transformational or transitional basis for those with more ambitious aims becomes an important issue. As does the matter of whether, if union organising is dominated by EUOs, it reflects their interests more than those of the workers whom union organising seeks to organise? A radical or Marxist understanding of class as a framework and tool of analysis would allow, at the very least, substantial and purposeful light to be shed on these types of issues.

Conclusion Labour unions in Britain and the USA remain tightly wedged between the proverbial ‘rock and a hard place’, despite some of their most sustained and well-resourced organisational efforts of late to change this predicament. Agency has come up against the restrictive limits of environment because the former is – at the moment – more contingent upon the latter than vice versa. Of course, environment is merely the aggregation of past agency, but it also represents the historical and contemporary power imbalance between capital and organised labour. And being between ‘a rock and a hard place’ has become an even more uncomfortable position with the onset of economic contraction. Despite having existed for more than a decade in each country, and in more fertile periods of growing employment before the global recession of 2008 onwards, there appears little prospect of an alternative and more efficacious strategy for building union influence and power appearing. Yet even if ‘the’ ‘correct’ union organising strategy were devised, it would still be hard to implement, because the social forces it seeks to create are those that are needed to implement the strategy in the first place. This seems to suggest that the square cannot be circled, and has a ring of Catch 22 to it. As a consequence, what has happened in practice is that EUOs have assumed a position of power and influence in and through union organising and over union members and activists that was not hitherto the case in this arena. Whether this is regarded as necessary and virtuous in the circumstances is a judgment likely to be heavily influenced by the approach one takes in deciding what union Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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organising should be (see above). For those of a radical and/or Marxist persuasion and whose views would permeate across a number of the seven approaches, the predominance of EUOs is a cause for concern. Although alliances can be made between the different horizontal levels within unions, it is their purposes, and the power relations contained therein, that are the key issues. (Only an ultra-left approach would argue that the predominance of EUOs is a problem per se.) It is here that there may be mileage in examining these aforementioned issues inherent in union organising from a radical historical perspective, where priority is attached to understanding the contingent processes and contexts by which collective mobilisation and advanced worker consciousness are created (see, for example, Hyman, 1971, 1975, 1979). One obvious avenue to which to return would be studies of unions as organisations, whether as bureaucracies, oligarchies or polygarchies (see Kelly and Heery, 1994). Such a radical historical approach would necessarily envisage a wider, more political and more social purpose for unions where they exist as more politically and socially radical organisations. But it would do so in a grounded, contextualised manner so that there was an appropriate meeting of means and ends which would be neither conservative nor ultra-left, and neither optimistic nor pessimistic. Endnotes 1. The term ‘union organising’ is used in quotation marks to denote that it is a precise term of a specific historical period, and as such, has a particular meaning. It comprises a set of ideas and can be contrasted with the same term as used without punctuation. From this point on, however, we will primarily use the unpunctuated form, for stylistic reasons. 2. In these regards, ‘union organising’ is sometimes also referred to as ‘organising model’ unionism, ‘organising unionism’, and the ‘organising model’. 3. In this connection, Simms and Holgate (2010a) ask where and what are the politics of organising. But surprisingly despite its professed intention, their article is not about the politics of union organising but about competing versions of practice, so that the issue of macro-level politics remains left out of the equation. The competing versions of practice they discuss do deal with micro-level politics of the unions as organizations, and the lower-level politics of industrial relations and collective bargaining. But this does not tell us much about the grand purpose and mission of the politics of union organising, because the model(s) of union organising is inherently flexible so that it can be used for quite different ends (contrast the RMT and PCS with USDAW and Community, for example). This is despite the ‘fact’ that almost all versions of union organising recognise that the aim is to increase workers’ collective leverage. But again, this begs the question, which their article does not address, of ‘leverage for what purpose’: to serve whose interests, and in which way should it be exercised (in selfemancipatory ways or not)? Indeed, despite a model(s) of union organising’s existing, unions have adapted it to suit their own existing politics. Out of this can be read a variety of lowerlevel purposes varying from militant mobilisation to partnership overtures (organising to gain partnership from reluctant employers) within the arena of the employment relationship. Yet this trajectory of analysis is insufficient in itself, for a further step has to be taken in terms of examining the social and political purposes of the different unions that have adopted union organising vis-a-vis neoliberalism/social liberalism, social democracy and socialism. 4. The dissemination process of ‘union organising’ in US and British union movements, heavily characterised by peak organisations from the ‘centre’ trying to instil into affiliates the new creed, but without huge success, is redolent of the absence of there being a singular and coherent union movement in each country. In each case, the peak organisations have little control over those that affiliate to their organisation because affiliates choose not to cede control for political and sectional reasons. Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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5. Clawson (2003) provides one interpretation of the contemporary favourable proximity of challenge and opportunity in the case of the USA (as does Milkman, 2006, in a different way). 6. Even proponents of social movement unionism – who advocate the quintessential extraworkplace strategy and one of mobilisation of grassroots power resources - seldom analyse the class basis of what they propose or how this relates to workers’ interests as a class in itself.

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US Department of Labor (2008) Union members in 2007. Online at <www.bls.gov.cps>. US Department of Labor (2009) Union members in 2008. Online at <www.bls.gov.cps>. US Department of Labor (2010) Union members in 2009. Online at <www.bls.gov.cps>. Waddington J, Kerr A (2009) Transforming a trade union? An assessment of the introduction of an organising initiative. British Journal of Industrial Relations 47/1: 27-54. Wills J (2001) Community unionism and trade union renewal in the UK: Moving beyond the fragments at last? Transactions of the Institute of British Geographers 26(4): 465-483. Wills J (2002) Union Futures: Building Networked Trade Unionism in the UK. Fabian Ideas pamphlet 602. London: Fabian Society. Wills J (2004) Campaigning for low paid workers: The East London Communities Organisation (TELCO) Living Wage Campaign. In Healy G, Heery E, Taylor P, Brown W (eds.) The Future of Worker Representation. Basingstoke: Palgrave, pp. 264-282. Wills J, Simms M (2004) Building reciprocal community unionism in the UK. Capital & Class 82: 59-84. Wilson T (2007) The Future for Unions. London: Unions 21, online at <www.unions21.org.uk>.

Author biography Gregor Gall is a research professor of industrial relations and the director of the Work and Employment Research Unit (WERU) at the University of Hertfordshire. He is author of the forthcoming Tommy Sheridan: From Hero to Zero? A political biography (Welsh Academic Press) and a number of others books, and is a fortnightly columnist for the Morning Star. Jack Fiorito is the J. Frank Dame Professor of Management at the Florida State University College of Business, a principal research fellow at the University of Hertfordshire, and a longstanding researcher on unions, union commitment and union organising. He has been widely published in the Journal of Labor Research and Labor Studies Journal, amongst others. He has been the chapter president of the United Faculty of Florida FSU for a decade, and helped increase union membership there by a significant amount.


Reformism on a global scale? A critical examination of David Held’s advocacy of cosmopolitan social democracy


Brian Roper

University of Otago, New Zealand

Abstract Held argues that globalisation is undermining democracy at the level of the nation state. Responding to this and to the escalation of military conflict, the mounting scale of environmental problems and increasing global inequality, he argues for the establishment of cosmopolitan democracy to enable the global implementation of social-democratic policies. This article provides an exposition and critical evaluation of cosmopolitan social democracy (CSD), identifying its main strengths and weaknesses, and argues that Held advocates CSD to remedy the world’s major problems by reforming the global capitalist order, but that this is unlikely to work because these problems will persist until capitalism is replaced by socialism. Keywords cosmopolitan social democracy, cosmopolitanism, Marxism, liberalism, liberal democracy, liberal socialism, socialist democracy, alternatives, globalisation

Introduction David Held argues that ‘the focus of modern democratic theory has been on the conditions which foster or hinder the democratic life of a nation’, the problem being that ‘in a world of regional and global interconnectedness, there are major questions about the Corresponding author: Brian Roper, University of Otago, New Zealand Email: [email protected]


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coherence, viability and accountability of national decision-making entities themselves’ (Held, 2006: 290-91). This is particularly problematic for social democracy because it has traditionally relied upon nation-states to implement domestic policies ostensibly aimed at improving the lives of working- and middle-class people living in advanced capitalist societies. In order to overcome this problem, Held argues that cosmopolitan democracy needs to be established through the reform of existing, and the creation of new, governance institutions at the regional and global levels. The implementation of a comprehensive programme of social-democratic reform remains possible, but only if the global geopolitical order becomes a cosmopolitan democracy. Accordingly, he advocates a cosmopolitan social democracy (CSD) whose main aims are: ‘promoting the rule of law at the international level; greater transparency, accountability and democracy in global governance; a deeper commitment to social justice in the pursuit of a more equitable distribution of life chances; and the regulation of the global economy through the public management of global trade and financial flows’ (Held, 2004: 16). Held’s advocacy of CSD has developed in response to neoliberalism, Third Way social democracy, and ‘radical anti-globalism’. It has been given added impetus by the responses to the global financial crisis and ensuing recession by the world’s most powerful capitalist states and economic agencies. For example, the IMF’s managing director stated, ‘We were very close in September [2008] to a total collapse of the world economy’; and ‘The IMF has proposed that governments in a position to do so should act together to inject a global fiscal stimulus equivalent to about 2 percent of world GDP – $1.2 trillion’ (Strauss-Kahn, 2009: 1-2). The secretary-general of the OECD similarly observes that ‘sound, counter-cyclical, fiscal policies’ are required to counter the ‘severest financial and economic crisis in decades’ (Gurria, 2009: 3). Furthermore, ‘the crisis has led to some major new thinking, about regulation and markets, about accountability and ethics, and about the kind of economy we need to build’ (Gurria, 2009: 3). This ‘major new thinking’ is unlikely to involve more than a selective and limited revival of some elements Keynesianism based on a critique of the more obvious failures of neoliberalism, particularly with respect to the regulation of the global financial and monetary system. By 2011, unsustainable levels of private- and public-sector debt forced (or was used as a pretext by) many governments to abandon fiscal stimulus and implement sweeping programmes of fiscal austerity and associated neoliberal policy change, leading to an upsurge of popular resistance. Nonetheless, in this highly volatile global context, policy-making elites may partially implement some of the measures proposed by Held, such as tighter regulation of financial institutions and capital flows; modification of international organisations such as the G20, IMF, OECD, World Bank and United Nations to enhance their contributions to global economic management; and ‘the creation of new global governance structures with responsibility for addressing poverty, welfare and related issues’ (Held, 2006: 306-7; 2008). The 2008-9 economic and financial crisis, and the ensuing rejection of some elements of the neoliberal Washington Consensus amongst the world’s policy-making elites, ended a decade in which the global justice and anti-war movements vigorously challenged both neoliberalism and the imperialist adventures of the Bush administration. Although the scale of global justice and anti-war protests has declined in recent years, these movements have succeeded in undermining the ideological hegemony of neoliberal policy regimes, and have raised the consciousness of broad masses of people Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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across the globe about issues such as inequality within and between nations; poverty and debt in less developed countries; the undemocratic nature of bodies such as the WTO, IMF, and World Bank; and global warming, imperialism and war. Furthermore, this crisis is impacting most severely on the workers, peasants and their dependents, who constitute the majority of the world’s population, through rising unemployment, declining incomes, the inability to service mortgage repayments, mounting pressure on welfare systems, and so forth. Increasingly those suffering the effects of the crisis will be looking for solutions and alternatives. Therefore CSD is both interesting and important because it addresses issues of central concern to ruling classes and political elites, as well as to the participants in progressive social movements pushing for change from below. This article provides an exposition and critical evaluation of Held’s advocacy of CSD, underlining CSD’s important strengths and highlighting its main weaknesses (there is insufficient space here to consider the work of other authors who also advocate CSD1). Essentially, the article argues that CSD aims to remedy the world’s major problems by reforming the global capitalist order, but that this is unlikely to work because these problems will persist until there is a fundamental transformation of the social, economic and political dimensions of global capitalism. In particular, the fundamental transformation of capitalism through the collective creation of socialism is necessary in order for cosmopolitan democracy to operate effectively on a global scale, with entrenched civil liberties, regular elections, and the extensive involvement of the workers and peasants who constitute a substantial majority of the world’s population.

1. Globalisation and representative democracy Both liberal and radical thinkers assume symmetry and congruence between ‘citizen voters and the decision-makers whom they are, in principle, able to hold to account’ and ‘the “output” (decisions, policies, etc) of decision-makers and their constituents – ultimately, “the people” in a delimited territory’ (Held, 2006: 290; 1995: 16). This assumption is problematic because the decision made by a particular government, such as the Bush administration’s decision to invade Iraq in 2003, can have major effects on people living elsewhere in the world. More generally, ‘the idea of the democratic state as in principle capable of determining its own future’ is being undermined by developments in ‘the world economy, international organisations, regional and global institutions, international law and military alliances which operate to shape and constrain the options of individual nation-states’ (Held, 2006: 295; 1995: 99-140). The upshot is that the geographical territorialisation of democracy is becoming increasingly complex, and is being reconstituted at regional and global levels. This is highly significant, because: territorial boundaries specify the basis on which individuals are included and excluded from participation in decisions affecting their lives (however limited the participation might be), but the outcomes of these decisions, and of the decisions of those in other political communities and agencies, often stretch beyond national frontiers. The implications of this are troubling, not only for the categories of consent and legitimacy but for all the key ideas of democracy: the nature of a constituency, the meaning of representation, the proper form and scope of political participation, the extent of deliberation, and the relevance of the democratic nation-state as the guarantor of the rights, duties and welfare of subjects. (Held, 2006: 292) Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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Since the mid-1970s, the world economy has been transformed by the growing internationalisation of production networks, increasing concentration and centralisation of capital ownership embodied in the growth of huge multinational corporations, massive expansion of global financial flows due to the extensive deregulation and international integration of capital markets, and the growth of international trade (Held et al., 1999: 149-282; Held, 2004: 21-33; see also Gowan, 1999: Part I; Harvey, 2005). These and other developments in the world economy have significantly reduced the capacity of nation states to govern their domestic economies and, in particular, to do so through Keynesian demand management (Held, 2004: 14-16, 30). International political decision-making has been conducted by a growing array of organisations, reflecting ‘the rapid expansion of transnational links, the growing interpenetration of foreign and domestic policy and the corresponding desire by most states for some form of international governance and regulation to deal with collective policy problems’ (Held, 2006: 298). This development is exemplified by the growth of international governmental organisations (IGOs) such as the IMF, World Bank, WTO, European Union, United Nations, G8 and the G20, and international non-governmental organisations (INGOs): in 1909 there were 37 IGOs and 176 INGOs; and in 1996 4,667 IGOs and 25,260 INGOs (Held, 2006: 298). During the post-war era, ‘the development of international law has subjected individuals, governments and non-governmental organisations to new systems of legal regulation’ (Held, 2006: 300). In particular, international policies and conventions on human rights, such as the European Convention for Human Rights (1950) and the UN’s Declaration on Human Rights (1948) and International Bill of Human Rights, have created sets of international rules that transcend, and to varying degrees constrain, the traditional national sovereignty of states (Held, 2006: 300-301). Global interconnectedness has accelerated dramatically in the areas of transportation, telecommunications, printed and electronic media, and popular culture. Finally, major environmental problems such as non-renewable resource depletion, global warming due to deforestation and the growing emissions of greenhouse gases, ozone depletion, and the pollution of oceans, lakes and rivers, are clearly transcending the borders of nation states (Held, 2004: 132-136; Held and McGrew, 2007: 64-72). These developments combine to restrict the freedom of action of national governments and obscure ‘the lines of responsibility and accountability’ of these governments by ‘blurring the boundaries of domestic politics, transforming the conditions of political decision-making, changing the institutional and organisational context of national polities, [and] altering the legal framework and administrative practices of governments’ (Held, 2006: 303). Consent and legitimacy through elections becomes problematical once the autonomy of national governments becomes limited and the definition of their constituency becomes blurred. Furthermore, in recent decades the global order has been characterised by ‘the progressive concentration of power in the hands of multinational capital (productive and financial), and the weakening role of states faced with global market processes and forces. In this context, the risk is that democratic politics will increasingly be reduced to adapting to global markets – second-guessing their tendencies and accommodating to them’ (Held, 2006: 304). The only effective way to counter this is to establish cosmopolitan democracy and implement social-democratic policies on a global scale. Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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2. Held’s cosmopolitan social democracy In a nutshell, the major problem facing democracy in the 21st century is the fact that, with the important exception of the EU, it is largely confined to nation states at a time in which the autonomy of nation states is being increasingly undermined by globalisation and, in particular, by the growing power of international economic forces including business elites (Held, 2004: 30). Held’s solution to this problem is to deepen and extend democracy ‘across nations, regions and global networks’ in order to entrench ‘democratic autonomy on a cosmopolitan basis’ (Held, 2006: 305). In this vein, he argues, ‘a cosmopolitan democracy would not call for a diminution per se of state capacity across the globe. Rather, it [seeks] to entrench and develop democratic institutions at regional and global levels as a necessary complement to those at the level of the nation-state’ (Held, 2006: 305). In addition, ‘the territorial boundaries of systems of accountability’, he convincingly argues, need to be restructured ‘so that those issues which escape the control of a nation-state – aspects of monetary management, the rules of the global trading system, environmental questions, elements of security, new forms of communication – can be brought under better democratic control’ (Held, 2006: 305). As this implies, a cosmopolitan polity ‘would need to establish an overarching network of democratic public fora, covering cities, nation-states, regions and the wider transnational order’ and ‘create an effective and accountable political, administrative and regulative capacity at global and regional levels to complement those at national and local levels’ (Held, 2006: 305). With respect to its basic institutional framework, cosmopolitan democracy would require, among other things: ‘the formation of an authoritative assembly of all states and agencies – a reformed General Assembly of the United Nations, or a complement to it’; ‘the creation where feasible of regional parliaments and governance structures’; ‘the opening up of functional international governmental organizations (such as the WTO, IMF and World Bank) to public examination and agenda setting’; ‘the creation of new global governance structures with responsibility for addressing poverty, welfare and related issues… to offset the power and influence of market-oriented agencies such as the WTO and IMF’; ‘the use of general referenda cutting across nations and nation-states’; and ‘the development of law enforcement and coercive capability, including peace-keeping and peace-making, to help deal with serious regional and global security threats’ (Held, 2006: 306-7). Crucially, international law would entrench ‘a cluster of rights and obligations, including civil, political, economic and social rights and obligations, in order to provide shape and limits to democratic decision-making’ and also provide individuals with an avenue via international courts if national or regional governments should infringe upon their basic rights (Held, 2006: 307). The development of these governmental institutions would make possible the implementation of CSD policies. These include greater regulation of global markets including tighter controls over financial markets and capital flows, voluntary codes of conduct for MNCs, and ultimately the creation of a ‘World Financial Authority’, a global tax mechanism, mandatory global labour and environmental standards, foreign investment codes and standards, and redistributive and compensatory measures (Held and McGrew, 2007: 218-9). World poverty would be addressed with the abolition of debt for highly indebted poor countries, increasing global pressure on national governments to meet UN aid targets of 0.7 per cent of GNP, the introduction of fair


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trade rules, the removal of EU and US subsidies of agriculture and textiles, the implementation of existing global poverty reduction commitments and policies, and ultimately the establishment of a global social charter (Held, 2004: 164-165; Held and McGrew, 2007: 218-9). As Smith observes, at the core of Held’s vision of a CSD is the reform of the global capitalist economic order via a ‘Charter of Rights and Obligations’ that includes constitutional guarantees of two fundamental economic rights and commitments to two forms of economic policy. These are: ‘i) the right to a basic income; ii) the right to “access avenues to the decision-making apparatus of productive and financial property; that is, to the creation of participative opportunities in firms and in other types of economic organization”; iii) increased social control of global investment through “management of interest rates to induce capital to invest in certain areas” and through the pooling and allocation of democratically-controlled social investment funds; and iv) controls on short-term capital flows’ (Smith, 2003: 6-7). In sum, these policies are directed towards ‘strengthening multilateralism, building new institutions for providing global public goods, regulating global markets, deepening accountability, protecting the environment and urgently ameliorating social injustices that kill thousands of men, women and children daily’ (Held and McGrew, 2007: 236).

3. Reform, revolution or double-democratisation? Although the debate between revolutionaries and reformists is well worn, it is still highly relevant politically because at its core is the question of whether or not a better world is possible. In his earlier writing, Held avoids taking a strong position on either side of the debate and instead argues for a ‘strategy of transforming civil society – of creating a socialist civil society – and reforming the state’ (Held and Keane, 1984: 180; see also, Held, 1982: 195). From this perspective, ‘the real question facing socialists… is not the old alternative between reformism or revolution to abolish the state. It is the question of how to enact the “two-pronged” strategy of creative reform protected by state action, and innovation from below through radical social initiatives’ (Held and Keane, 1984: 180). The full implementation of CSD involves more than reform because it requires and entails fundamental social, economic and political change; but it involves less than revolutionary change because it preserves key features of liberal democracy, and is based upon the firm rejection of the classical Marxist vision of socialism and a radically democratic workers’ state brought into being through a largely spontaneous mass class struggle culminating in an insurrection to overthrow the liberal democratic state.2 The principle of democratic autonomy is at the conceptual core of the doubledemocratisation or ‘liberal socialism’ that Held advocates. In order for democratic autonomy to exist, persons should enjoy equal rights and, accordingly, equal obligations in the specification of the political framework which generates and limits the opportunities available to them; that is, they should be free and equal in the processes of deliberation about the conditions of their own lives and in the determination of these conditions, so long as they do not deploy this framework to negate the rights of others. (2006: 264)


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More specifically, the central elements of this principle include: a concept of equal autonomy, ‘that is, a common structure of political action – in that [citizens] may be able to pursue their projects, both individual and collective, as free and equal agents’ (2006: 264; 1995: 153-4); a system of rights which ‘enable, that is, create spaces for action – and constrain – that is, specify limits on independent action so that the latter does not curtail and infringe the liberty of others’ (2006: 264; 1995: 154); ‘a process of debate and deliberation, open to all on a free and equal basis, about matters of pressing public concern’ (2006: 264); ‘procedures and mechanisms of majority rule’ (2006: 265); constitutional rules and safeguards of the rights of individuals and minorities so that majorities can not ‘impose themselves arbitrarily upon others’ (1995: 156); and the prioritisation of individual rights over those of collective entities (2006: 265). Recognising that ‘the full meaning of a principle cannot be specified independently of the conditions of its enactment’ (2006: 266), Held outlines the conditions that would have to be created in civil society and the polity in order for democratic autonomy to be enjoyed by citizens in a ‘liberal socialist’ and cosmopolitan democracy. Drawing upon Dahl (1989: Chs.6-9), Held (2006: 264-5) argues that in order for cosmopolitan democracy to be considered fully democratic it would have to meet a criteria that includes: effective participation, enlightened understanding, voting equality, citizen control of the decision-making agenda of governing bodies, and inclusiveness. Accepting the fundamental liberal tenet that ‘the separation of the state from civil society must be a central feature of any democratic political order’, Held also contends that ‘representative electoral institutions, including a parliament and the competitive party system’, are an inescapable element for coordinating activities such as ‘enacting legislation, enforcing rights and obligations, promulgating new policies and containing inevitable conflicts between particular interests’ (2006: 274). However, Held moves beyond the liberal tradition in recognising that the ‘structures of the liberal democratic state (including large, frequently unaccountable bureaucratic apparatuses, institutional dependence on the imperatives of private capital accumulation, political representatives preoccupied with their own re-election) do not create a force which can adequately regulate “civil” power centres’ and establish the social and economic conditions necessary for effective political participation, enlightened understanding, a fair and equal electoral system, and equal control of the political agenda. Thus the principle of democratic autonomy ‘can only be enacted by recognising the indispensability of a process of double democratisation: the inter-dependant transformation of both state and civil society’ (2006: 276). The remoulding of liberal democratic institutions that Held advocates is relatively uncontroversial and includes: ensuring that electoral processes are as democratic as possible (through, for example, the use of proportional representation); public funding of political parties to counter the influence of business; greater public ‘access to, and more equitable distribution of, media time’; ‘freedom of information’; ‘decentralization of the civil service to the regions’; ‘defence and enhancement of local government powers’; and ‘experiments to make government institutions more accountable and amenable to their “consumers”’ (2006: 276). Much more controversially, Held also advocates a constitution and bill of rights specifying ‘equal rights with respect to the processes that determine state outcomes’ (2006: 277).


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This would involve not only equal rights to cast a vote, but also equal rights to enjoy the conditions for effective participation, enlightened understanding, and the specification of the political agenda. Such broad ‘political’ rights would, in turn, entail a broad bundle of social rights linked to reproduction, childcare, health and education, as well as economic rights to ensure adequate economic and financial resources for democratic autonomy. Without tough social and economic rights, rights with respect to the state could not be fully enjoyed; and without state rights, new forms of inequality of power, wealth and status could systematically disrupt the implementation of social and economic liberties. (2006: 277-8)

In keeping with the traditional social-democratic emphasis on the capacity of the state to shape civil society, Held clearly considers that a state reformed along these lines will be capable of creating the social and economic conditions necessary for democratic autonomy to flourish. It can do so, among other things, by entrenching reproductive rights and ensuring the adequate provision of childcare; implementing a range of policies to establish and maintain a more equal distribution of income and wealth and introduce a universal basic income; creating an ‘empowering legal system’ that would be centrally concerned with ‘distributional questions and matters of social justice’; building new ‘deliberative public fora and procedures’; curtailing ‘the power of corporations to constrain and influence the political agenda’; and eroding ‘systematic privileges enjoyed by some social groups … at the expense of others’ (2006: 278-280). Within civil society, ‘strategies would have to be adopted to break up old patterns of power in civil society and, in addition, to create new circumstances which allowed citizens to enjoy greater control over their own projects’ (2006: 280). For example, direct participatory forms of democratic decision-making could be introduced within ‘socially regulated enterprises’ and ‘independent communications and health centres’. From this perspective, ‘the state and civil society must, then, become the condition for each other’s development’ (2006: 280).

4. A Marxist critique of Held’s cosmopolitan social democracy Does the double-democratisation that Held advocates really constitute a desirable and feasible alternative to the strategic orientations of reformism and revolutionary socialism, or does it actually constitute a particular variant of reformism? This section of the article3 explores the extent to which it is likely to be possible to fully implement double-democratisation and thereby realise the principle of democratic autonomy while retaining a modified variant of capitalism as the underlying mode of production; argues that double-democratisation would necessarily involve social, economic and political change on a scale that has, at least so far in history, only taken place in the wake of revolutionary upheavals in which the previous state was overthrown and a new form of state created; considers the coalescence of social and political forces that would be necessary to bring about double-democratisation and the implementation of CSD on a global scale; and investigates the major barriers to the implementation of CSD on both national and global levels.

Democratic autonomy and alienation The principle of democratic autonomy is interesting and important for those who are committed to the creation of a qualitatively more democratic world. With the central


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emphasis on people being ‘free and equal in the processes of deliberation about the conditions of their own lives and in the determination of these conditions’, it is kindred in significant respects with the classical Marxist critique of alienation and the principle that in a democratic socialist society, ‘the free development of each is the condition for the free development of all’ (Marx and Engels, 1998: 62). At the absolute heart of Marx’s general critique of capitalism is the notion that alienation is an inevitable effect of capitalist social relations because these relations systematically deprive the majority of access to the means of production (and hence subsistence) and subject them to domination from above, not just within the workplace but throughout society. Hence the struggle for working-class self-emancipation, socialism and democracy is simultaneously a struggle to transcend alienation by qualitatively enhancing the capacities of individuals to exert control over ‘the conditions of their own lives’ through the collective creation of a selfgoverning community in which each individual has ‘the means of cultivating his [or her] gifts in all directions’, and therefore has ‘the positive power to assert his [or her] true individuality’ (Marx, cited in Ollman, 1976: 115-16). Clearly, Marx considered that socialism and communism would greatly enhance individual freedom. Held would object to this interpretation on the grounds that ‘a conception of the principle of autonomy is an unavoidable presupposition of radical democratic models, but it is not addressed and developed by them’, because neither Marxists nor New Left theorists have developed a ‘theory of the “frontiers of freedom”’ nor the institutional arrangements necessary in order to protect individual freedom against ‘the arbitrary use of political authority and coercive power’ (Held, 2006: 264-266; 1995: 149). There is a strong element of truth in Held’s argument on this point, to which I will return later, but it is undeniable that the classical Marxists thought that in a communist society people would be ‘free and equal in the processes of deliberation about the conditions of their own lives and in the determination of these conditions’. I am drawing this comparison here because although it can be argued that Marxists are committed to a normative goal approximating Held’s conception of democratic autonomy, they categorically deny that a state of affairs approximating democratic autonomy can be achieved as long as capitalism exists. To his credit, Held places a great deal of emphasis, via his conceptualisation and advocacy of double-democratisation, upon the need to transform civil society so that capitalism does not undermine democratic autonomy and governance through, for example, the fiscal dependence of the state on private capital accumulation and the disproportionate influence that business interest groups can exert over government decision-making. But although he attempts to incorporate key elements of the Marxist critique of liberal representative democracy within his model, the overall result is a conceptualisation of the democratisation of civil society needed in order to overcome capitalist social and economic constraints on democracy that is best described as ‘neo-pluralist’ rather than Marxist (see, for example, Held, 1995: 182-3, 246-47). Of course, this is not in and of itself problematic, since neo-pluralism provides a sophisticated theoretical framework for analysing societal influences on liberal democratic states; but it is fatal for Held’s defence of the idea that anything remotely approximately democratic autonomy can be created as long as capitalism exists. This is because Held, in conjunction with neo-pluralism, does not place sufficient emphasis on the extent to which capitalist relations of production, distribution and exchange necessarily involve exploitation and are inherently anti-democratic.


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Although Held appears to accept key elements of the Marxist critique of the socio-economic constraints that capitalism places on democracy – ‘to the extent that modern capitalist relations produce systematic inequalities in economic and social resources, the structure of autonomy is profoundly affected’ (1995: 182-3) – he rejects Marx’s theory of surplus value and does not fully appreciate the central role that this theory plays in Marx’s (and Marxist) critique of liberal representative democracy. Yet it can be argued that the strongest, and most neglected, empirical support for Marx’s theoretical analysis of specifically capitalist exploitation is its general historical realism. For one of the unique historical features of capitalism is the fact that it has a historically unprecedented capacity to generate a surplus product over and above the subsistence needs of the immediate producers, but that it creates the appearance that the production of this surplus product does not involve a process of exploitation. To a greater extent than any prior mode of production, capitalism is highly successful at simultaneously producing and obscuring the production of a massive surplus product (Eagleton, 1991: 84-89; Geras, 1986: 59-84; Wood, 2006: 11-12). Furthermore, Held doesn’t seem to appreciate the extent to which the production and appropriation of a surplus is not just central to the functioning of capitalism but is also a condition of its survival as a system. For if the political institutions and social relations governing and organising economic production were altered so profoundly that the surplus product was equally distributed and consequently a reasonably egalitarian distribution of income and wealth prevailed, then capitalism as such would cease to exist. This is not merely playing around with definitions of the term, for the point is that capitalist exploitation is organised and sustained by the entire nexus of social relations and political institutions that Held, quite rightly, argues need to be reformed to reduce socioeconomic inequality and thereby create conditions more conducive to democratic autonomy. Yet if double-democratisation is fully implemented, then key features of capitalism will be removed. For example, the socioeconomic compulsion experienced by the majority of the population to sell the capacity to work for a wage or salary would be effectively removed or else very substantially reduced through the introduction of a basic income available to all. The top-down authority relationships within workplaces that are necessary in order to ensure that the potential capacity to work (labour-power) is realised through the expenditure of actual labour would replaced by democratically organised relationships within the workplace in which elected managers would have greatly reduced power over workers. The profit-to-wage ratio is likely to be reduced substantially due to the democratisation of economic production, thereby undermining the conditions necessary for private capital accumulation. Following ‘double-democratisation’, production is to be focused on achieving goals decided upon democratically by the associated producers rather than being driven purely by the exigencies of profit maximisation. The severe external pressures on individual economic units generated by competition with other units in capital and product markets would thereby be substantially altered and reduced by greatly increased state regulation and governance of economic activity. In short, this kind of socioeconomic change is necessary if Held’s principle of democratic autonomy is to be enacted in practice, but it is hard to see how this would leave very much of a distinctively capitalist mode of production, distribution and exchange. Therefore, although Held recognises and endorses much of the Marxist analysis of alienation and critique of capitalism, it is far from clear that exploitation and alienation can Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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be overcome and replaced by democratic autonomy as the governing principle of the lives of the majority of the inhabitants of advanced industrial societies without the fundamental transformation of capitalism. Interestingly, it was another ‘liberal socialist’ – C. B. MacPherson - who recognised more clearly than Held the extent to which in capitalist societies the prevailing power relations in civil society mean that some people ‘are able to get more out of others than others get out of them, or get a net transfer of some of the powers of others to themselves’ (1966: 42). The liberal-democratic state constitutes a ‘double system of power’ because not only is it a ‘system of power’ in which ‘the governors have power to compel the governed’, but it also ‘exists to maintain a set of relations between individuals and groups within the society which are power relations’ (1966: 39). The upshot is that the process of capitalist exploitation simultaneously involves a net transfer of product and power from workers to capitalists. To transform the power dimension of capitalist production in a manner and to an extent that substantially undermined the production and appropriation of a surplus product would, in effect, involve transforming the entire system of production into another kind of system (1966: 44-45).

Democracy and revolution It seems clear that double-democratisation would, if fully implemented, actually involve a fundamental transformation of both the society and the polity in order to create the conditions necessary for the realisation of the principle of democratic autonomy. But this transformation would of necessity reduce the wealth, power and privileges of the members of capitalist classes and state elites, something that they are unlikely to let happen without fierce resistance. This resistance to the full implementation of CSD also seems likely because the three main forms of democracy that have emerged thus far in history were all created in a process of revolutionary struggle between those social and political forces that supported and opposed democratisation. For example, Athenian democracy was created around 508BC through the reforms of Cleisthenes, a politically astute member of the aristocratic Alkmeonid family, against the violent resistance of other aristocratic families. Under the leadership of Isagoras, they enlisted the support of the Spartans to oust Cleisthenes: ‘This [provoked] a riot in Athens, and Isagoras and his Spartan supporters found themselves besieged on the Acropolis by the angry populace’ (Thorley, 1996: 21; Ober, 2007: 86; de Ste Croix, 1983: 279-282). In essence, democracy arose in Athens in the context of a revolutionary uprising by peasants, artisans and free labourers. As Ober (2007: 86) observes, ‘The events of the year 508-7 constitute a genuine rupture in Athenian political history, because they mark the moment at which the demos stepped onto the historical stage as a collective agent, a historical actor in its own right and under its own name’. The English (1640-88), French (1789-95) and American (1776-1791) revolutions played central roles in the emergence and global spread of capitalism and historical revival of democracy. Although the English revolution is particularly complex because ‘the “commercial classes”, far from being uniformly capitalist or ideologically unified, were divided from, and indeed in crucial ways set against, one another in consequence of their diverse relationships to production, property, and the state’ (Brenner, 1993: 649),


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nonetheless it is clear that a substantial section of the landed aristocracy rallied in support of King Charles I, preferring monarchy to the perceived dangers of the London mob and the potential threats to their power and privileges posed by parliamentary democracy and ‘the poorer classes’ and the ‘middling sort of people’ who supported it during the civil wars (Manning, 1996: 1; Manning, 1991: 319-325; Hill, 2002: 117-142). During the French Revolution, the bulk of the landed aristocracy and upper echelons of the church defended their feudal privileges and the absolutist monarchy, and intransigently opposed the revolution and the democratic aspirations of the classes, especially the emergent bourgeoisie and urban petty bourgeoisie, that made up the Third Estate (McGarr, 1989: 28-34; Rude, 1988: 71; Soboul, 1977: 72-79). The democratic ideology and rhetoric of the wealthy elites that dominated political life in the American colonies enabled them to enlist the support of farmers, wage labourers and the self-employed and small employers, in order to defeat the British and win the War of Independence; but subsequently they were careful, when framing the US Constitution, to develop a unique form of democracy that ostensibly embodied but actually curtailed the rule of the majority of the people (Raphael, 2001: 47-106; Wood, 1995: 204-237, 2006: 17-19; Zinn, 1999: 77-102). In short, the historical emergence of liberal representative democracy involved a series of dramatic and interconnected ruptures, involving revolutions, wars, and civil wars, in which the major advances and retreats in the collective creation of this particular form of democracy were the outcome of struggles for democracy against the often violent resistance of ruling classes, state elites, and foreign powers. The key elements of socialist participatory democracy also only emerged in the context of revolutionary upheavals and war, such as the Paris Commune of 1871 and the Russian revolutions of 1905 and 1917. The bloody suppression of the Paris Commune by counter-revolutionary forces with the tacit support of the Prussian army, and the Stalinist degeneration of Russian Revolution due in part to civil war, foreign invasion and economic blockade, should not blind us to the positive achievements of workers, peasants, and sections of the middle classes, in building institutions that facilitated, albeit for tragically brief periods, a qualitatively higher degree of political participation in governance by the broad masses of the population than that which characterises more indirect forms of democracy (Callinicos, 1991: 110-118; Gluckstein, 2006: 11-55; Haynes, 2002: 15-41; Rees, 1991). Although Held would readily acknowledge some of these points, serious discussion of revolution, and of revolutionary ruptures in history, is largely absent from his writing. In view of the fact that Athenian, representative and socialist forms of democracy have only been created in the wake of revolutionary upheavals, Held needs to mount a systematic defence of his central contention that cosmopolitan democracy can be created through a largely gradual and peaceful process of reform. Indeed, in this respect the strategy of double-democratisation begs key questions about both agency and the revolutionary nature of societal transformation. How is such fundamental change to be brought about in the absence of a revolutionary upheaval in which the majority of the world’s people, desiring a qualitatively more democratic, egalitarian and environmentally sustainable world, engage in mass collective action to obtain a fairer share of the world’s resources and political power against the resistance of the world’s ruling classes and states? What evidence is there that it can be brought about by reformist means? What social and political forces are going to push through ‘double-democratisation’ against the probably Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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violent resistance of the powers at be? Although Held can undoubtedly generate some convincing answers to these questions, it is worth noting that this certainly is not an area of weakness for classical Marxism since this tradition has, more than any other intellectual tradition, explored the sources, inner dynamics, ideological and political processes, and outcomes of revolutionary change (see, for example, Geras, 1986: 133-215; Marx, 1973, 1974; Luxemburg, 1970: 153-218, 365-395; Lenin, 1964, 1974; Trotsky, 1980).

The question of agency Whereas Marxist advocates of revolutionary change have paid a great deal of attention to the question of agency, investigating changes in the class structures of advanced capitalist societies, associated shifts in class consciousness and class struggle, ideological hegemony, and so forth, Held suggests that an extremely heterogeneous combination of social and political forces will be able successfully to push for the implementation of social-democratic policies on a global scale: A coalition of political groupings could develop to push the agenda of global social democracy further. It could comprise European countries with strong liberal and social democratic traditions; liberal groups in the US which support multilateralism and the rule of law in international affairs; developing countries struggling for freer and fairer trade rules in the world economic system; non-governmental organizations, from Amnesty International to Oxfam, campaigning for a more just, democratic and equitable world order; transnational social movements contesting the nature and form of contemporary globalization; and those economic forces that desire a more stable and managed global economy. (Held, 2004: 166)

This raises some important questions. Why is this particular set of political groupings likely ‘to push the agenda of global social democracy further’? What interests, capacities, collective psychologies, and socially determined ideological orientations are likely to unite and/or divide these social, economic and political forces in this regard? Surprisingly, especially in view of the great length of Held’s writing on other issues, he has very little to say about this (see, for example, Held and McGrew, 2007: 234-236). If Held is to provide a persuasive alternative to Marxist conceptions of the progressive and potentially revolutionary capacity of the working class to transform society, then he needs to address the question of agency much more systematically than he has done in his writings up to this point.

Critique of CSD as a reformist strategy In order to support his advocacy of CSD, Held draws on positive examples of socialdemocratic governments implementing progressive policies (Held and McGrew, 2007: 233-236) – ‘countries with strong social democratic traditions, above all the Scandinavian, show that it is possible to be both business-friendly and welfare-oriented’ (Held, 2007: 250). However, even if one accepts that significant changes to the social, economic and political arrangements that currently prevail in the global capitalist order can be introduced through a process of gradual peaceful reform, and that the disparate socio-political forces that Held identifies do coalesce to promote the implementation of CSD, the historical record of social-democratic governments suggests that although the implementation


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of a moderate version of CSD might be achievable on a global scale, this is unlikely to bring about the kind of fundamental change necessary in order to solve the world’s most pressing problems. Although in the context of favourable economic circumstances and/ or when subject to sufficient pressure from working-class movements, social-democratic governments have introduced reforms that have significantly improved working-class life chances in the advanced capitalist societies (as took place during the golden era of Keynesianism from 1945 to 1973), no such government has eliminated the fundamental problems generated by capitalism such as class inequality, persistent gender and ethnic inequalities, unemployment, alienation within the workplace, the destruction of the natural environment, and industrialised military conflict between nations. Furthermore, as Lavelle (2008) and many others have shown, since the collapse of the post-war boom in the mid-1970s, social-democratic governments across the globe have implemented neoliberal policies, attacking their own working-class supporters in the process. Examples of this include the Hawke-Keating government (1983-1996) in Australia, New Labour in Britain (1997-2010), centre-left governments dominated by the Socialist Party in France (1981-86, 1988-93, 1997-2002), the SPD and Green coalition in Germany (1998-2005), the fourth Labour government in New Zealand (1984-1990), PSOE governments in Spain (1982-1996, 2004-), and SAP governments in Sweden (1982-91, 1994-2006). At the very least, Held needs to engage critically and systematically with the historical record of social-democratic parties and governments, many of which started out with radical aspirations and publicly stated intentions to implement progressive policies, and which once in office were forced to water down their policies and, since the late-1970s, accommodate themselves to the central pillars of the neoliberal policy regime. More specifically, he needs to explain the historical failures of social-democratic governments to implement progressive policies in a manner that is consistent with his defence of the feasibility of the global implementation of CSD policies. Although Held undoubtedly could do this, as his interesting analysis of power and legitimation in post-war Britain attests (Held, 1984), up to this point he hasn’t. What he does provide is a series of slippery arguments that freely cite positive examples of the successful implementation of social-democratic policies by centre-left governments while avoiding any serious discussion of the arguably far greater number of examples of social-democratic governments rolling back the Keynesian Welfare State and implementing neoliberal policies. Furthermore, despite Held’s (1993: 299) claim that capitalism itself is not the problem, since there are ‘different capitalisms with different capacities for reform and adaptation’, some of which have provided the economic underpinnings for comparatively generous welfare states, the reality is that social-democratic governments have consistently failed to bring about fundamental change because capitalism is an inherently and unalterably undemocratic form of economic organisation. There is not a single historical or contemporary example of any government extensively democratising economic life in a capitalist society. This is because real power in capitalist society does not, for the most part, lie in elected governmental assemblies; it is heavily concentrated in the network of economic and political organisations of the capitalist class. Within the state apparatus itself, power is heavily concentrated in the cabinet and its key advisory bodies – central banks, treasuries and other similar financial ministries. Furthermore, capitalism generates massive inequalities in the distribution of income and wealth, which means that Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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capitalists can exert far more influence over the formation of policy by governments than can trade unions or progressive social movements (Roper, 2005: 88-90). The state in capitalist society is constrained by its financial dependence on revenue from the taxation of incomes generated in the process of capital accumulation. Because state power is dependent on capital accumulation, every government in a capitalist society must promote conditions conducive to the continuation of capital accumulation. These domestic constraints have been compounded by the growing internationalisation of the economic system, as Held correctly emphasises. These points are well worn, but this in no way undermines their contemporary relevance and importance. If CSD is to present itself as constituting a feasible and desirable alternative to a world dominated by neoliberalism, corporate power and the G8, it first has to confront the evident failures of social-democratic reformism at the level of nation states and convincingly demonstrate that the social and economic forces that have consistently operated to prevent social-democratic governments from introducing fundamental change within nation states could be overcome so that social-democratic policies can be successfully implemented on a global scale.

Global capitalism and cosmopolitan democracy Smith (2003) provides a convincing critique of Held’s specific proposals for reforming the capitalist world economy. The basic income proposal assumes that the kind of income support provided via welfare entitlements in the advanced capitalist societies feasibly can be provided in poor countries with widespread poverty and malnourishment. However, unless there is a generalised and effective socioeconomic compulsion to sell the capacity to work for a specified period of time on a labour market for a wage or salary, no capitalist economy can function. This means that basic income must be provided at a lower level than the wages earned by a large majority of wage earners, and this means that ‘the lower the wages and the worse the work conditions in a particular region of the global economy, the lower the basic income must be if the reproduction of the capital/wage labour relation is not to be undermined’ (Smith, 2003: 9-10). Therefore, even if one assumes that provision of a basic minimum income is possible in poor and middle-ranking countries, the provision of a basic income within a capitalist market framework is unlikely to substantially reduce the wide disparities in incomes within and between different countries. As discussed above, Held recognises that capitalist economic relationships and processes need to be democratised. He proposes the creation of ‘“access avenues” to the decision-making apparatus of productive and financial property; that is, to the creation of participative opportunities in firms and in other types of economic organization’ (Held, 1995: 253). This would enable workers, local communities, consumers and investment fund holders to have some ‘involvement in the determination of the regulative rules of work organizations, the broad allocation of resources within them, and the relations of economic enterprises to other sites of power’ (1995: 253). This proposal is problematic for a number of reasons. Among other things, as long as capitalist property relations and market competition continue to prevail, enterprises, even if they are managed with substantial input into decision-making processes by their employees, will be driven by an imperative to maintain profitability by controlling costs and retaining or


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increasing market share, thus limiting any possible economic benefits to workers (Smith, 2003: 13). In view of the generally bureaucratised and frequently undemocratic nature of trade unions, ‘access avenues’, if they are to establish genuine democratic control over production, will require more than trade union officials sitting on the boards of directors; they will require the creation of direct participatory mechanisms, such as the rankand-file election of recallable delegates to workplace councils with extensive powers. Held also proposes the development of a new coordinating agency at a global level – an ‘Economic and Social Security Council [of the UN] to coordinate poverty reduction and global development policies’ (Held, 2004: 164). Among other things, it would work at both global and regional levels and be ‘capable of deliberation about the broad balance of public investment priorities, expenditure patterns and emergency economic situations’ (Held, 1995: 260). It would oversee the formation of a social investment fund through the introduction of new taxes on corporate profits and dividends, combined with greater democratic control over pension funds. It would also use interest rate differentials to encourage investment in poor countries. Because big business is likely to actively oppose such measures, ‘it is essential, therefore, that strategies of economic democratization, if they are to be feasible strategies, work, wherever possible, “with the grain of private property rather than against it”’ (Held, 1995: 261). In addition to the obvious objection that it is almost impossible to imagine an Economic and Social Security Council of the UN not being dominated by the world’s most powerful governments and largest corporations, Smith convincingly argues that ‘the drive to appropriate surplus profits through technological innovation – an inherent feature of capitalist property relations – systematically tends to reproduce uneven development in the world market over time’, and this means ‘The most that might be reasonably expected [from Held’s proposed reforms] is that the mechanisms underlying the reverse flow of wealth from the poorest regions of the world to the centres of capital accumulation might operate with somewhat less force than they do at the moment’ (Smith, 2003: 21). Furthermore, the amount of credit required to provide poor developing countries with lower interest rates would be unfeasibly massive. At present, the global financial and monetary system is dominated by what Gowan (1999) aptly refers to as the ‘Dollar Wall Street Regime’ (DWSR) that accords numerous economic advantages to the USA. In order to introduce the economic measures that Held proposes, this regime would have to be comprehensively dismantled, something that no US government is likely to allow unless it is forced to do so (Gowan, 1999: Part I; Harvey, 2005: 19-31, 161-163; Smith, 2003: 23). Finally and more generally, the limitations and constraints that have prevented socialdemocratic governments from introducing fundamental change on a national scale are likely to operate with even greater force with respect to cosmopolitan governance, among other things because capital is much better placed than labour to organise politically on a global scale. Thus, although it is not inconceivable that political institutions may be reformed or created at an international level to facilitate a significant shift towards the kind of cosmopolitan democracy that Held advocates, if this occurs it is likely to be driven by fractions or subfractional groupings of the world’s dominant capitalist classes that see this as necessary in order to ensure the survival and further development of global capitalism.


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Conclusion In ‘Reframing global governance: Apocalypse soon or reform!’ Held (2007) highlights pressing global issues: climate change, pollution, biodiversity and ecosystem losses, inequality within and between nations, poverty and deaths from poverty-related causes, global infectious diseases, nuclear proliferation, war, and the negative impacts of the Washington economic consensus and security agenda. In a similar vein, McNally (2006: 400) observes, ‘As the war planes thunder overhead, as death squads murder peasants and indigenous peoples, as factory fires take the lives of young women workers, as people struggle to make it through one day after another in a lifetime of alienated labour, the world’s leaders prattle on about “freedom”, “progress” and “civilisation”’. While many intellectuals busy themselves with work that ultimately legitimates the status quo, Held shares with Marxists a healthy indignation at the state of the world and a strong desire to change it for the better. The importance of doing so can hardly be over-stated in view of the scale of the problems confronting humankind in the 21st century, and the high probability that capitalist civilisation will collapse with catastrophic consequences unless the causes of these problems are addressed and eliminated – either through the fundamental reform of the prevailing global order that Held proposes, or else through the fundamental transformation of this order and the creation of a new global socialist order as proposed by McNally and others in the Marxist tradition. As the planet warms and millions of people needlessly die, the inter-related questions of whether or not the current global capitalist order can be fundamentally reformed and, if not, whether or not it can be transformed in a revolutionary manner, are more important and pressing now than when Luxemburg’s (1973) classic Reform or Revolution was first published in 1900. Yet the debate between social democrats and revolutionary socialists is so well-worn and the positions on either side of the debate so entrenched, that readers of this article may evaluate Held’s advocacy of CSD purely from the perspective of their previous positions in this debate rather than reading his work with an open mind. This would be a pity, because there is much of value in Held’s conceptualisation of CSD for both social democrats and Marxists. For example, many of the policy proposals that Held advocates can be viewed from a Marxist perspective as constituting transitional demands emerging ‘from the realities of existing struggles but whose implementation in the current context would challenge capitalist economic relations’, both offering ‘immediate remedies and begin to introduce a different social logic’ (Callinicos, 2003: 140,132). For social democrats, Held’s advocacy of CSD provides an important challenge to defenders of the incorporation of key elements of neoliberalism within the policy frameworks of social democratic governments, and outlines a systematic alternative policy agenda for those seeking policy solutions to the world’s major problems. In this respect, the CSD proposed by Held and others is much more critical of the evident failures of the global capitalist order than the right-wing social democracy of the Third Way (Giddens, 1998, 2000, 2001; cf. Callinicos, 2001). From a Marxist perspective, the central problem with Held’s approach is the idea that capitalism can be reformed in fundamental ways in order to solve the world’s major problems. This objection probably doesn’t worry Held too much. There is a sense in which all of Held’s work is driven by a fundamentally Keynesian orientation towards capitalism. As Joan Robinson observes,


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These three names [Marx, Marshall and Keynes] are associated with three attitudes towards the capitalist system. Marx represents revolutionary socialism, Marshall the complacent defence of capitalism and Keynes the disillusioned defence of capitalism. Marx seeks to understand the system in order to hasten its overthrow. Marshall seeks to make it acceptable by showing it in an agreeable light. Keynes seeks to find out what has gone wrong with it in order to devise means to save it from destroying itself. (Robinson, 1960: 1)

Held’s overall intellectual and political outlook is classically Keynesian in this respect. He considers that it is neither desirable nor feasible to attempt to create an egalitarian, democratic and environmentally sustainable socialist world beyond capitalism. Instead of imagining a democratic socialism collectively constructed by the working class and its allies through the revolutionary overthrow of capitalism, the task for responsible left scholars is to ‘find out what has gone wrong with capitalism in order to devise means to save it from destroying itself’ since, as neoliberals such as Hayek have shown, there is no ‘fully convincing alternative political economy to capitalism’ and ‘capitalism, in the context of democratic constitutional societies, has strengths, as well as weaknesses – strengths that need to be recognized and defended as well as extended and developed’ (Held, 1993: 299, 1995: 249). As I’ve argued at length, this position is problematic because it is far from clear that problems such as class inequality, gender and ethnic inequalities, unemployment, poverty, alienation within the workplace, global warming, and industrialised military conflict between nations can be eliminated while retaining a modified variant of the capitalist mode of production. For this reason, although a form of ‘cosmopolitan democracy’ embodying a number of the features that Held describes needs to be created, it needs to be fundamentally anti-capitalist and socialist in nature. So, for example, a cosmopolitan socialist democracy would, as Held suggests, constitutionally entrench an international cluster of rights, including the civil liberties that many people falsely assume are exclusive to liberal democracy; but unlike cosmopolitan social democracy, it would remove the major social and economic forces emanating from capitalism that currently systematically undermine the establishment and effective exercise of these rights. Acknowledgements Thanks to the referees and other people who provided constructively critical feedback on earlier drafts, especially David Bedggood, Lars Lih, David McNally, David Neilson, Bryce Edwards, Chris Rudd, and Rebecca Stringer.

Endnotes 1. There is a a reasonably substantial body of literature advocating CSD, and it includes Archibugi (2008), Archibugi et al. (2008), Held and McGrew (2002), Held and KoenigArchibugi (2003), Held and Mepham (2007), Pooge (2002), Tannsjo (2008). 2. The critical rejection of neoliberalism and the attempt to steer a middle course between the timid reformism of the political parties and governments on the right of the social-democratic tradition and the revolutionary socialism of those groups and parties still based in the classical Marxist tradition configures Held’s overall intellectual and political orientation. In this respect, Held’s work shares much in common with that of C. B. MacPherson (1966, 1977) and Norberto Bobbio (1987), who share Held’s commitment to ‘liberal socialism’. Unfortunately, a consideration of the similarities and differences between Held, Bobbio and MacPherson is beyond the scope of this article.


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3. This section is a highly condensed version of a substantially longer section in the research paper upon which this article is based. A fifth section focusing on Held’s critique of Marxism and socialist democracy has been cut altogether. The longer research paper can be obtained from the author upon request.

References Archibugi D, Held D, Kohler M (eds.) (1998) Re-imagining Political Community: Studies in Cosmopolitan Democracy. Stanford, CA: Stanford University Press. Archibugi D (2008) The Global Commonwealth of Citizens: Towards Cosmopolitan Democracy. Princeton, NJ: Princeton University Press. Bobbio N (1987) Which Socialism? Minneapolis, MN: University of Minnesota Press. Brenner R (1993) Merchants and Revolution: Commercial Change, Political Conflict, and London’s Overseas Traders, 1550-1653. Princeton, NJ: Princeton University Press. Callinicos A (1991) The Revenge of History: Marxism and the East European Revolutions. Cambridge: Polity. Callinicos A (2001) The Third Way: An Anti-Capitalist Critique. Cambridge: Polity. Callinicos A (2003) An Anti-Capitalist Manifesto. Cambridge: Polity. Dahl R (1989) Democracy and its Critics. New Haven, CT: Yale University Press. De Ste Croix GEM (1983) The Class Struggle in the Ancient Greek World. London: Duckworth. Eagleton T (1991) Ideology: An Introduction. London: Verso. Geras N (1986) Literature of Revolution. London: Verso. Giddens A (1998) The Third Way: The Renewal of Social Democracy. Cambridge: Polity. Giddens A (2000) The Third Way and its Critics. Cambridge: Polity. Giddens A (ed.) (2001) The Global Third Way Debate. Cambridge: Polity. Gluckstein D (2006) The Paris Commune: A Revolution in Democracy. London: Bookmarks. Gowan P (1999) The Global Gamble: Washington’s Faustian Bid for World Dominance. London: Verso. Gurria A (2009) Economic crisis: The long term starts now. OECD Observer 270-271: 3. Harvey D (2005) A Brief History of Neoliberalism. Oxford: Oxford University Press. Haynes M (2002) Russia: Class and Power, 1917-2000. London: Bookmarks. Held D (1982) Crisis tendencies, legitimation and the state. In Thompson J, Held D (eds.) Habermas: Critical Debates. Houndmills: Macmillan, pp. 181-195. Held D (1984) Power and legitimacy in contemporary Britain. In McLellan G, Held D, Hall S (eds.) State and Society in Contemporary Britain. Cambridge: Polity, pp.299-369. Held D (1993) Anything but a dog’s life? Further comments on Fukuyama, Callinicos and Giddens. Theory and Society 22: 293-304. Held D (1995) Democracy and the Global Order: from the Modern State to Cosmopolitan Governance. Cambridge: Polity. Held D (2004) Global Covenant: The Social Democratic Alternative to the Washington Consensus. Cambridge: Polity. Held D (2006) Models of Democracy, 3rd edition. Cambridge: Polity. Held D (2007) Reframing global governance: Apocalypse soon or reform!I In Held D, McGrew A (eds.) (2007) Globalization Theory: Approaches and Controversies. Cambridge: Polity. Held D (2008) At the global crossroads: The end of the Washington consensus and the rise of global social democracy? The Global Politics of Globalization: ‘Empire’ vs ‘Cosmopolis’. London: Routledge, pp. 95-113. Held D, Keane J (1984) Socialism and the limits of state action. In Curran J (ed.) The Future of the Left. Cambridge: Polity, pp.170-181. Held D, Koenig-Archibugi M (eds.) (2003) Taming Globalization: Frontiers of Governance. Cambridge: Polity.


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Held D, McGrew A (eds.) (2002) Governing Globalization: Power, Authority and Governance. Cambridge: Polity. Held D, McGrew A (2007) Globalization/Anti-Globalization, 2nd edition. Cambridge: Polity. Held D, McGrew A, Goldblatt D, Perraton J (1999) Global Transformations: Politics, Economics and Culture. Stanford, CA: Stanford University Press. Held D, Mepham D (eds.) (2007) Progressive Foreign Policy. Cambridge: Polity. Hill C (2002 [1961]) The Century of Revolution 1603-1714. 2nd edition. London: W. W. Norton & Company. Lavelle A (2008) The Death of Social Democracy: Political Consequences for the 21st Century. Aldershot: Ashgate. Lenin VI (1974 [1918]) ‘State and revolution’. In Collected Works, Vol. 25. Moscow: Progress Publishers, pp. 385-497. Lenin, VI (1964 [1920]) ‘Left-wing’ communism: An infantile disorder. In Collected Works, Vol. 31. Moscow: Progress Publishers, pp.19-118. Luxemburg R (1970) ‘The mass strike’ and ‘The Russian Revolution’.I In Waters M-A (ed.) Rosa Luxemburg Speaks. New York: Pathfinder. Luxemburg R (1973) Reform or Revolution? New York: Pathfinder. MacPherson CB (1966) The Real World of Democracy. Oxford: Clarendon Press. MacPherson CB (1977) The Life and Times of Liberal Democracy. Oxford: Oxford University Press. Manning B (1991) The English People and the English Revolution. 2nd edition. London: Bookmarks. Manning B (1996) Aristocrats, Plebeians and Revolution in England 1640-1660. London: Pluto. Marx K (1973) The Revolutions of 1848, Vol. 1. Harmondsworth: Penguin. Marx K (1974) The First International and After, Vol. 3. Harmondsworth: Penguin. Marx K, Engels F (1998 [1848]) The Communist Manifesto. London: Verso. McGarr P (1989) The great French Revolution. International Socialism 43: 15-110. McNally D (2006) Another World is Possible: Globalization and Anti-Capitalism, 2nd edition. Arbeiter Ring: Winnipeg. Ober J (2007) ‘I besieged that man’: Democracy’s revolutionary start. In Raaflaub KA, Ober J, Wallace RW (eds.) Origins of Democracy in Ancient Greece. Berkeley: University of California, pp. 83-104. Ollman B (1976) Alienation: Marx’s Conception of Man in Capitalist Society, 2nd edition. Cambridge: Cambridge University Press. Pooge T (2002) World Poverty and Human Rights: Cosmopolitan Responsibilities and Reforms. Cambridge: Polity. Raphael R (2001) The American Revolution: A People’s History. London: Profile Books. Rees J (1991) In defence of October. International Socialism 52: 3-79. Robinson J (1960) Marx, Marshall and Keynes. In Robinson J (ed.) Collected Economic Papers Vol. 2. Oxford: Basil Blackwell, pp.1-23. Roper B (2005) Prosperity for All? Economic, Social and Political Change in New Zealand since 1935 Melbourne: Thomson. Rudé G (1988) The French Revolution. London: Phoenix. Smith T (2003) Globalisation and capitalist property relations: A critical assessment of David Held’s cosmopolitan theory. Historical Materialism 11(2): 3-35. Soboul A (1977) A Short History of the French Revolution. Berkeley: University of California. Strauss-Kahn D (2009) World growth grinds to virtual halt, IMF urges decisive global policy response. IMF Survey Magazine: IMF Research; available online at <www.imf.org>, accessed 5 July 2010. Tannsjo T (2008) Global Democracy: The Case for a World Government. Edinburgh: Edinburgh University Press. Thorley J (1996) Athenian Democracy. London: Routledge.


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Trotsky L (1980 [1932]) History of the Russian Revolution Vols. 1-3. New York: Pathfinder. Wood E (1995) Democracy Against Capitalism. Cambridge: Cambridge University Press. Wood E (2006) Democracy as ideology of empire. In Mooers C (ed.) The New Imperialism: Ideologies of Empire. Oxford: One World. Zinn H (1999) A People’s History of the United States, 20th anniversary edition. New York: HarperCollins.

Author biography Brian Roper is a senior lecturer in politics at the University of Otago, a founding member of the International Socialist Organisation (NZ), and he has been a political activist in New Zealand since the early 1980s. His most recent book is Prosperity for All? Economic, Social and Political Change in New Zealand since 1935 (Thomson, 2005). He is currently working on a book entitled The History of Democracy, forthcoming with Pluto Press.


The rising mafioso capitalists, opportunities, and the case of Turkey


Fatma Ülkü Selçuk Atılım University, Ankara, Turkey

Abstract This article attempts to examine the mafiosi’s potential economic and political power with the help of two analytical tools: the mafioso mode of production, and mafioso capitalists. In evaluating the actual power of the mafiosi, the article presents empirical information on Turkey and other countries. It acknowledges that although the mafioso (capitalist) bosses hold the direct command of armed power, neither their antagonism nor their alliance with the conventional bourgeoisie can be essentialised. The results and prospects are evaluated in a way that stresses the need for a change in our worldviews in order to construct a more compassionate world. Keywords social classes, mode of production, violence, mafia, criminal business

Introduction Property ownership, resources received and authority distributed have been among the criteria widely used in the literature on social classes. Along with their other contributions, Marx’s analysis of exploitation relations and Weber’s analysis of status have contributed much to the social classes literature. Yet studies inspired by Marx and Weber have for the most part been on capitalists, workers, peasants, the middle class, the underclass, bureaucracy and managers. Today, there is a need to study a rising social class – that of the mafioso capitalists, who hold not only economic resources but also substantial armed power, with implications for social, political, and economic life. In Turkey, debates on counter-guerrilla operations in the late-1970s, extensive political torture in the early 1980s, political killings by unknown perpetrators in the 1990s, and shadow paramilitary Corresponding author: Fatma Ülkü Selçuk, Atılım University, Ankara, Turkey Email: [email protected]


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organisations in the early 2000s have made it necessary to reconsider the mafiosi in relation to those authoritarian practices and trans-legal formations. Scandals over the past few decades have brought to light the illegitimate relationships of politicians, police chiefs and army members with the mafiosi. However, the power of the mafiosi is not restricted to Turkey. There has been a growing body of literature on illicit business, especially in ex-Eastern Bloc countries. Indeed, following the collapse of the Soviet Union, there has been significant analytical interest in illicit business. Several authors have directed their interest at Russia, following the implementation of Jeffrey Sachs’s shock therapy there.1 Whether the chaos and poverty there has been attributed mainly (if not exclusively) to the transition to market economy (e.g. Burawoy, 1999; Gowan, 1995; Holmstrom and Smith, 2000) or to the so-called ‘red legacy’ of the ‘communist regime’ (e.g. Anderson, 1995; Dempsey and Lukas, 1998), there has been a consensus on the substantial share of illicit business in post-collapse Russian economic and social life. Inspired by the chapter on ‘primitive accumulation’ in Capital Vol. 1 (Marx, 1867), Holmstrom and Smith (2000) associated this process with ‘primitive accumulation’, calling it ‘gangster capitalism’ and a necessary phase for the transition to capitalism. In terms of the presence of mafioso capitalists, Holmstrom and Smith concluded that Sachs’s programme has had considerable responsibility for the creation of criminal capitalists, while the privatisation process in Russia was drafted essentially criminally by the underground mafiosi, the nomenklatura, top managers of certain industries, and segments of the intelligentsia. As for Burawoy (1999), having reconstructed Karl Polanyi’s argument in The Great Transformation, he analysed the destructive consequences of market economy in Russia, calling the process in effect ‘economic involution’. Rather than seeing the process as a stage of transition to further industrialisation, he called attention to the return to a barter economy and the deindustrialisation process in Russia, which, according to him, implied a future possibility of neo-feudalism. According to him, the Russian case of ‘primitive disaccumulation will turn out to have been no less destructive than original primitive accumulation’ (p. 9). As for those liberal arguments attributing the chaotic atmosphere in Russia to the legacy of ‘red’ bureaucratic control rather than to the market economy, the solutions they propose revolve around so-called ‘liberal governance’ with the tasks of ‘prevention of harm and the protection of property rights’ (Dempsey and Lukas, 1998) or the ‘rule of law’ and ‘reducing the illegal markets produced by the communist economy’ (Anderson, 1995). Regardless of different approaches to evaluating the process in ex-Eastern Bloc countries of the post-Cold War era, the growing wealth and strength of mafioso capitalists gives the impression that the mafioso mode of production is likely to last longer than anticipated by several Marxist and liberal academicians who, whether in this or that way, see the stage in temporary, rather than relatively permanent terms. For that reason, this article analyses the empirical data from various countries and attempts to improve the conceptualisation of the ‘mafioso capitalist class’. Exploring the distinguishing features of the mafioso capitalists helps to decipher the past and future political developments better. For that purpose, firstly I offer a new conceptualisation of the mafiosi and attempt to highlight the economic and political power they potentially hold. In order to understand their actual power, empirical data from different parts of the world is presented. Since a closer look provides further details, I also analyse the case


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of Turkey, where authoritarian politics has not been the exception. Lastly, the results and prospects are evaluated.

On class analysis, the mafioso (capitalist) class and mode of production The majority of those making analyses with reference to social classes are influenced by Karl Marx and/or Max Weber. As for those making their analysis with reference to the ownership of means of production (e.g. Mandel, 1982; 1991), the production of use value (e.g. Poulantzas, 1975), or the process of proletarianisation (e.g. Braverman, 1974), they can all be considered as being influenced by various points (not necessarily identical points) in classical Marx and Engels texts (e.g. Marx, 1857; 1867). As for those defining the concept of class in terms of authority relations (e.g. Dahrendorf, 1965; though with some Marxist influence) or lifestyle and market positions (e.g. Goldthorpe, 1979; 1987; 1988), they can be considered as belonging mainly to the Weberian tradition. There are also combinations of Marxist and Weberian approaches inserting the ‘control’ of the means of production, of the production process, and/or ‘domination’ in the production process into a Marxist framework of analysis arising on the basis of the ‘ownership’ of means of production and ‘exploitation’ in production process (e.g. Callinicos and Harman, 1987; Wright, 1982; 1984; cf. 1989). Therefore, it is apparent that meanings attributed to ‘social classes’ vary from one theoretical standpoint to another. In escaping from any ‘conceptual fetishism’ – and with the acknowledgment that it is possible to define social classes in various ways, only for the purpose of differentiating certain domination and exploitation relations shared by a considerable number of people from others as regards the distance to private/collective ownership of means of production and antagonistic conditioning on account of her or his structural bipolar locations in the production process – the position adopted here can be considered as belonging mainly (if not exclusively) to the Marxist terrain. Here, the precondition of the ‘class relationship’ is conceptualised as the exploitation relationship between the exploiter and the exploited at the instance of production, where the means of production is owned not by the exploited, but by the exploiter, who at the same time appropriates some part of the output (goods/services) produced by the exploited. I hold that ‘class’ is an analytical category useful for analysing the nature of production relations and power relations only in part, conceding that there are, in fact, various types of economic positions and power relations denoting inequality and oppression beyond those that can be explained by the ‘class categories’ conceptualised here, since a non-class member can be even poorer than the exploited class member, and a non-class power relation may be even more oppressive than the oppression of the exploited class member. However, if the category of ‘class’ is reduced to all economic positions or power relations, it loses its analytical power, making the analysis of at least a few of the macro aspects of the production and power relations along with the structurally antagonistic economic interests impossible. Then, if the status of self-employed is to be addressed as being ‘class’, the status of wage-worker in relative (if not absolute2) structural antagonism to the capitalist should not be addressed as ‘class’. Here, I hold that the set of production relations locations includes several subsets, some of which have intersection fields with each other.


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Those positions denoted with the term ‘class’ constitute only one subset of the broader set of production/economic relations locations, while the latter includes further positions such as self-employed people and rentiers, among others. This definition implies that those property owners who do not occupy structurally polar locations in the production process as against the worker may be considered as the elements of the broader ‘category’ of capitalist, but not as the elements of the capitalist ‘class’. In this respect, those who are pure rentiers,3 for example, not exploiting wageworker labour for profits in the means of production they own, whether rich or not, do not denote a class position in my terminology. The same is true of the richer or poorer self-employed, also not denoted as class positions, given that a self-employed person may be richer than a capitalist class element. Here, both the appropriation of a part of the goods/services produced by the labourer in the production process and the de facto ownership of the means of that production are treated as being the prerequisites of the category of ‘exploiter class’, while the de facto ownership here refers to the actual control over what to do with the means of production on such issues as to whom to give or sell them, which is distinct from de jure ownership. For example, if a dependent peasant’s product is in part appropriated by the landlord in the tax form, as the landlord owns the land or has determinant control over the decisions of the peasant as regards what to do with the land, then, here, that peasant is considered as a class member; while if that peasant has the possession of the land and has the power to decide what to do with the land (give, sell, burn, or whatever), here, that peasant is considered as a member of the ‘exploited peasant category’, but not ‘class’. The distinction made here is useful not only because certain exploiting class members may appoint particular individuals as the legal owners of their means of production for the purposes of tax reduction or escape from other legal sanctions (as several mafiosi do), but also in distinguishing the class status of the executives and ordinary wage- (including the salaried-) workers in state positions (including state enterprises) from those in nonstate sectors. Now, for the purpose of clarifying the intersecting and non-intersecting aspects of the mafiosi and the bourgeoisie, I will briefly explain what I mean by ‘capitalist’ and ‘bourgeoisie’. To begin with, the concept ‘bourgeoisie’, to which a number of different meanings have been attributed in relation to its members’ world view, lifestyle, social origin, and location in the production process, 4 is used here as a synonym for ‘capitalist’, regardless of the word’s etymological and other associated meanings. Here, the working-class and capitalist classes are defined in terms of their location in the production process vis-à-vis each other. As for the capitalist class, its members own the means of production, while the unpaid part of the labour of the wage worker is a major source of their profit. As for the capitalists’ (whether as a member of the ‘capitalist class’ in particular or the ‘category of capitalist’ in general) tendential (not fixed, absolute, or unchallenged) common point on account of their structural location in the economy, it covers both their anti-anti-capitalist motive (including anti-communist motives) and their motive of securing their revenue. Yet, apparently, the capitalist class is far from being a homogeneous entity in spite of the characteristics, structural constraints and motivations its members share (this heterogeneity is also the case for the mafiosi). Meanwhile, with the proviso that the following statement is not held to be an essential characteristic of the bourgeoisie, it must be stated that, today, many capitalists do not hold the direct command of armed power (I will call them conventional capitalists/bourgeoisie) Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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in several capitalist societies. Yet this state of being unarmed (or at least, the lack of direct command) cannot be generalised to all capital holders while there is a rising exploiting class, deriving revenues mainly through its direct command of armed power, which has also entered into capitalist production (production for markets exploiting the labour of wage-workers working under mainly economic coercion). These exploiting class elements have a substantial share in the economic domain, and they are the mafioso capitalists. To begin with, it should be made clear that profit, in capitalist societies, is not always derived from legal businesses, while economic activity does not necessarily have an ethically positive content, meaning that the production and consumption of a good or service may challenge the mainstream norms, though it may be at the utility of even a single individual’s relatively temporary/permanent ‘unethical’ need/desire. The inclusive conceptualisation of the economy that I propose refers to the realm of the production and distribution of goods and/services which meet or which are thought to meet relatively individual or collective short-/long-term desires, whether perceived to be ethical or unethical, whether the products are tangible or intangible, and whether they actually meet those desires or not. While not only the production of tangible goods, but also services with market orientation are treated as a part of the economic realm, I see no legitimate theoretical grounds to exclude the non-commodity forms of goods and services (without market orientation) from the realm of the economy, in so far as ‘utility’ is the major criterion, while the criterion of scarcity is itself a matter in question (for example, consider the activity of a person who talks to his only friend once a year – isn’t this a sort of scarcity?).5 Besides, for example, given that both the slave working to clean the house of his owner and the slave cultivating his owner’s land are seen as being engaged in economic activity; and also given that a person cultivating his own land not for the market but for self-subsistence is considered to be engaged in economic activity, there is again no legitimate theoretical grounds for excluding an individual’s labour spent in cleaning the house or cooking a meal from the category of economic activity (whether only she/he benefits or others [also] benefit from that activity). Therefore, in my conceptualisation, economic activity is neither restricted to market-oriented activities nor to the production/distribution of tangible goods. While – whether relatively individual or collective, whether relatively short-lasting or long-lasting – the major criterion is utility, since the human being is not necessarily composed of harmonious desires with respect to his or her multiple orientation (with respect to the multiplicity of desires/impulses) and/or time, meeting a particular desire may at the same time cause harm to the individual, both simultaneously or later. More importantly, human desires in need of fulfilment are not necessarily held to be in line with the ethical norms of the individual/group/society. Although there is much to examine about the nature of economic activity/relations, it is sufficient for now to continue the discussion about the nature of the mafioso mode of production and the mafioso (capitalist) boss class. As for the illegality of the goods and services, it is apparent that those who produce, transport or sell illegal services or goods can also make profits from such activities, the extent of which has already been considered, especially by those who study the so-called ‘informal economy’. In certain instances, the illegal characteristic of the goods/services can make the profit bigger than would be the case if that particular good/service were legal. For example, the price of producing, transporting or selling heroin would be much lower if heroin were a legal product. This type of illicit business makes up a huge part of Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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the world economy, with an important number of entrepreneurs engaged in it. For example, the main source of the unofficial revenue of Afghanistan – a big opium producing country – is the drugs trade (Goodhand, 2000: 267). Besides, Russian organised crime is estimated to control around 50 per cent of the Russian economy (Jamieson, 2001: 381; Lindberg, Petrenko, Gladden and Johnson, 1998a: 240). A United Nations report in 1995 estimated that about 3 million organised criminals were employed in about 5,700 gangs in Russia (Shvarts, 2003: 376). Meanwhile, the illegal profits of just one gambling racket in Chicago, New York and Houston were estimated to be around $11.5 million between 1974 and 1990 (Lindberg et al., 1998a: 223). As for the approaches to illicit business, certain authors (for example Donais, 2003: 372; Lindberg et al., 1998a: 223, 224; Shelley and Picarelli, 2002: 308) prefer to call legal business ‘legitimate business’, implying that illicit business is illegitimate business. Similarly, Granville (2003) makes a comparison and suggests that the Russian billionaire ‘oligarchs’ and the 19th-century American ‘robber barons’ are in no way like each other, since the former ‘made fortunes not by creating new enterprises that increased their country’s wealth, as did Carnegie (steel), Rockefeller (oil), Ford (automobiles), and Morgan (finance)’ (p. 324). However, conceptualising legal business as legitimate business may result in seeing the profit not as a type of exploitation of labour (thus, illegitimate), but as the rightful gain of capital. Thus, in this essay, the concept of ‘illicit business’ will be used to address ‘criminalised business’. On the other hand, defining illicit business is not easy. In fact, an important number of capitalists violate labour laws, occupational health and safety regulations, commercial laws and tax laws during the production process, and become a part of the informal economy. Their activities are partially illegal. However, here, what is meant by ‘illicit business’ is the business of producing, transporting, or selling illegal goods or services rather than the illegal procedures followed in the production, transportation, or sale of legal goods or services. Illicit business makes up an important part of the world economy. Those who are engaged in this sort of business can be organised or not. For example, if a person steals something on his/ her own in an unorganised fashion, then this is his/her own illegal individual business, just like the individual street vendor’s legal individual business. If this action is planned and/or carried out by a group of people in an organised manner, this refers to illegal organised business, just like the legal business of organised street vendors. This may also be called organised crime.6 Organised crime covers such activities as organised illegal gambling, prostitution, pornography, narcotics, racketeering and extortion, public corruption, car theft, financial and document frauds, smuggling, money laundering, and contract killings. Organised criminal groups have even entered into the healthcare industry and stock manipulation. Thus, the organised crime sector amounts to billions of dollars. As Jamieson (2001) suggests, on the basis of the International Monetary Fund (IMF) figures, ‘around one billion dollars of crime proceeds are transferred through the world’s financial markets every day – between $300 and $500 billion each year’ (p. 379). As for the mafioso (capitalist) bosses, their activities should be mainly (but not exclusively) evaluated in terms of this illegal organised business, although all exploiting class members engaged in this illegal organised business cannot be considered as mafioso (capitalist) class elements, since several of them must be considered as elements of the conventional bourgeoisie, deprived of the direct command of armed power. The major distinguishing feature of the mafioso (capitalist) bosses is their command of Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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armed power in their economic activities. Although organised crime is generally accompanied by armed power, armed power is not the prerequisite of all organised criminal activities. For example, smuggling can be done in an organised manner without the holding of any arms. However, the mafioso (capitalist) boss does command armed power. Direct command of armed power is the essential feature of a mafioso group. Just like many lords of the feudal era, there might be a hierarchy of wealth and power in a mafioso group, with the acknowledgment that several mafia groups run their businesses in an autonomous fashion. Again, just like the serfs of the feudal era, those who carry out the illicit business – such as the workers in a heroin factory, or the transporters or the street sellers of heroin – are the labourers in this illegal activity. However, although just like wage workers, who are considered both as a category and as a class subsumed under that category, all labourers (the concept ‘labourer’ should not be attributed an essentially positive meaning) of the mafia business are not evaluated as a part of the mafia labourer class. However, rather than subsuming them under a vague category of ‘lumpen proletariat’ or ‘underclass’ – whether defined in terms of structural or behaviourist terms – which denotes a category mainly rising on the basis of ‘poverty’ in addition to ‘exclusion’, ‘unethical way of life’, or ‘lack of integration’ – mafioso labourers should be treated as a distinct category/class without making any theoretical discrimination on account of the ‘unethical’ content of their jobs. Meanwhile, as for market orientation, although capitalists aim to sell or barter the goods/services produced by the wage worker in the market, all of those exploiting elements orienting the production (the means of which they own) towards exchange in the market are not considered here as capitalists (cf. Wallerstein, 1979). Actually, many mafioso bosses resemble the bourgeoisie, for they generally attempt to sell or barter the goods/ services produced by the labourers they exploit in the market. However, there are also several differences, which make one think that those differences may be the indicator of the presence of a distinct (if not everywhere a dominant) mode of production. First, mafioso bosses widely use violently forced or semi-forced labour during the production process. It is not as easy for a labourer employed in a mafia business to quit a job as it is for a worker employed in a conventional capitalist business. While the former is under the threat of possibly even being killed if he/she quits the job or tells the police what is going on, the latter works principally on account of economic coercion rather than the threat of physical violence (this resembles not only the exploitation terms of serfs, but also slaves). Secondly, the mafioso boss is the commander of an armed group just like feudal lords commanding their own armies. Whereas the conventional bourgeoisie does not make profits by using (or using the threat of ) armed power that they directly command in such a way as to move beyond legal rules – in this case, owners of legal ‘security’ companies are not considered as mafioso (capitalist) bosses – the mafioso (capitalist) bosses privately own and/or directly command armed groups, which become the major source of their revenues. That is why the conventional bourgeoisie may seek strategies to control the state’s armed power not only against possible worker or anti-capitalist rebellions, but also against the directly armed elements of the society who can become a threat to their lives or wealth at the national or international level. For an exploited labourer of the mafioso business, a proper name denoting the core of her terms of exploitation might be ‘violently forced labourer’, meaning that she works not on account of mainly/merely economic coercion in the mafioso business, but because Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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otherwise she (or those she cares about) would be physically wounded or killed by mafioso forces.7 However, members of the mafioso (capitalist) boss class/category seem to resort to several exploitation terms. For example, provided that the mafioso boss is the owner of the means of production (for example, a brothel, whether that brothel is legal or illegal, meaning that even if the mafioso enters into legal business, the exploitation terms may still be those of the mafioso mode) and the labourers (or the people the labourers care about) are physically threatened by the mafioso’s forces to make those labourers work in the enterprise, 1) if the mafioso boss appropriates the whole revenue and then returns a part without any pre-fixed terms, the exploited labourers of the production process can be considered as slaves (as in the case of slaves of antique civilisations). Then 2) if the mafioso boss appropriates a pre-determined amount of the revenue at the end of the production process (for example, 30 per cent of the day’s revenue), the labourers can be considered as serfs (but different from those of the feudal mode of production of the Middle Ages in the sense that the production process in the mafioso business is today oriented mainly towards the market,8 and the taxes collected are not legal and in kind, but illegal and in money; but they are similar to feudal mode of production in another way, in that sometimes the labourers are forced to serve the exploiter without receiving any money, as in the case of forced labour in feudal lords’ estates). If 3) the mafioso boss appropriates the whole revenue and then returns back a part in the wage form (for example, US$1 to the labourer every day, and/or premiums in terms of piecework), the labourers of the job can be considered as dependent wage-workers (dependent in the sense that they are physically forced to stay in the enterprise, and different from those wage-workers exploited by the capitalist who sell their labour power mainly on account of economic coercion. In other words, those who sell their labour power for wages mainly on account of economic coercion in a brothel have to be evaluated as wage-workers; while if the labourer works on his own, then he is to be considered as having self-employed status). The features listed above illustrate a few of the possible forms the mafioso mode of production can take. Although the mafioso’s major source of revenue is the production of illegal goods and services under the protective umbrella of his/her armed gang, he/she can also make investments in the legal sectors and derive profits from the labour of the wage-worker working under mainly economic coercion. This becomes a factor in evaluating a person with mafioso traits as a sector of the capitalist class, and denotes the amalgamation of two different but not structurally antagonistic class positions (with the acknowledgment that this fusion can denote a separate class formation). Today, the Sicilian and Calabrian mafia families are engaged in gaining public contracts (Paoli, 2004: 28), constituting an example of the mafiosi doing business in legal sectors. Another example is the organised criminal gangs that control or own 40,000 businesses in Russia, including 2,000 in the state sector (Volkov, 1999: 747). Thus, as Jamieson (2001) illustrates, there are close ties between the illicit and legal businesses (p. 380). Shelley and Picarelli (2002) suggest that it is ‘hard to detect where criminal funds end and the legitimate funds begin’ (p. 308). Lindberg et al. (1998b) put forward two reasons for mafioso infiltration into so-called legitimate business: first, for the ‘investment of the vast resources it has accumulated’; and second, as ‘a means to launder the profits from illegal activities’ (p. 51). Consequently, the mafioso (capitalist) boss’s power seems to grow further via entering into legal businesses (and/or further illegal businesses) that do not require the direct command Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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of armed power, the source of profit of which is derived mainly by the wage-worker’s unpaid labour in the production process, who works mainly on account of economic coercion and is physically (if not economically) free to quit the job. This makes the class position occupied by such mafioso (capitalist) bosses intersect with the class position occupied by the bourgeoisie; while in the present essay, the term ‘mafioso capitalist’ (or ‘mafioso bourgeoisie’) denotes that intersection field. Meanwhile, new technologies provide opportunities for increasing the wealth of the mafioso (capitalist) bosses.9 As Lindberg et al. (1998a) suggest, ‘The growth of technology has enabled emerging organised crime to operate on a world-wide scale at a time when law enforcement agencies are under resourced, ill-equipped and staffed, and lacking in expertise’ (p. 253). The internet in particular provides new opportunities for the organised criminal sectors.10 About 1,800 internet gambling sites worldwide are estimated to generate a total of $4.2 billion, which also cover various illegal types of gambling and enable money laundering and fraud (Albanese, 2004: 15, 16). Indeed, ‘Internet-based businesses could make a perfect “front” for moving money all around the world through phony transactions that are difficult to track and difficult to document’ (Lindberg et al., 1998b:. 52). Just like the legal conventional bourgeoisie, the mafioso (capitalist) bosses also have international links. Mafioso business also transcends the national boundaries. As Jamieson (2001) states, there have been a number of partnerships and meetings between mafia groups from different nations. For example, the formal agreements between the Colombian narcotics traffickers and Russian mafia groups date back to 1988. Besides, the police and intelligence circles have found out about a series of meetings between major criminal groups (with different countries of origin) in Warsaw (in 1991), Prague (in 1992), and Berlin (in 1993). Furthermore, in 1994, a meeting was organised between the representatives of the Italo-American Gambino family, the Japanese Yakuza, and the Colombian, Russian and Chinese mafia bosses in France (pp. 380, 381). Therefore, it is apparent that international strategic alliances occur among mafioso (capitalist) bosses.

The Turkish political system and the mafiosi of Turkey As for Turkey, a considerable amount of mafia activities have come onto the agenda, especially following the scandals of the post-1990 era. In fact, the post-1980 political and economic atmosphere has provided a convenient setting for the growth of mafioso groups in Turkey. In the first place, the armed conflict between PKK (the armed, illegal Kurdish Workers Party) and the Turkish state created a suitable environment for the illegal trafficking of weapons and narcotics. Besides, the neoliberal economic policies increased the number of public contracts awarded, pushing some capitalists to resort to mafioso power. Furthermore, the need for foreign exchange has also led certain chief exercisers of state power to overlook the mafioso activities.11 Therefore, mafioso power has grown stronger during the course of the 1990s. A brief evaluation of the Turkish political system would provide help in understanding why there has been fertile ground for the mafiosi during the past few decades.12 First, it is important to state that the Turkish Republic was established by a revolution from above, led mainly by the military bureaucracy critical of the Ottoman regime. Up to today, it has witnessed three typical and one untypical military intervention. The monoparty era (1923-1945) and the fifteen years of multi-party regime (1945-1960) were Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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marked by the authoritarian practices of the ruling parties. During the mono-party era, two rebellious incidents were crushed by the military: the Kurdish Rebellion, with its religious demands and discourse, in 1925; and the reactionary Menemen Incident, with its demand for the restoration of the Shari’a in 1930. And while up until 1950, the Republican People’s Party had been in power, in 1950, the Democrat Party came to power with a liberal programme. Its authoritarian practices proved to be similar to those of its rival, although this time, religious sentiments were exploited selfishly. When the 27 May military coup d’état captured political power, there were several clandestine rival groups ready to intervene in civilian politics. Soon after the coup d’état, three Democrat Party ministers (including the prime minister) were executed. Following the ratification of a pluralistic new constitution introducing relatively solid mechanisms of checks and balances in 1961, transition to a civilian regime came onto the agenda. In the course of the 1960s and early 1970s, several coup attempts were neutralised by the stronger wing of the military, while a good number of those defeated were retired or executed.13 The 1960s and 1970s also witnessed the rise of working-class and socialist struggles, while the Constitution provided convenient grounds for organising and unionisation. Along with the paramilitary forces of the extreme rightwing, the repressive apparatus of the state crushed several protests relentlessly. The police was divided into two, between right- and left-wing organisations. While the military was not totally composed of right-wing commanders, several active left-wing commanders were neutralised systematically, and the hierarchy within the military was restored in the course of the 1960s and early 1970s. Following the 12 March military memorandum of 1971, leftist activists were relentlessly oppressed. The 1970s witnessed anti-democratic legal arrangements along with hundreds of political murders and massacres. Anti-democratic psychological war techniques and torture became common practices, while certain politicians started to believe that the counter-guerrilla was at the heart of those illegal violent actions.14 These violent practices reached their peak when the anti-communist 12 September military coup d’état of 1980 closed many of the political parties, unions and associations. Freedom of expression was severely curbed. Mass arrests and torture became the routine. Nobody heard the voice of the suffering. The military and masses were mainly interested in the restoration of order. The anti-democratic 1982 Constitution was accompanied by parallel laws. The military government prepared the ground for implementing the neoliberal programme that was adopted in 1980 (known as the January 24th Decisions). After a few years, following the transition to a multi-party civilian regime, the right/left cleavage was replaced by ethnic problems. From the mid-1980s, the Kurdish movement became one of the main problems of both the civilian governments and army commanders. The 1990s witnessed political killings whose perpetrators were unknown, and severe restrictions over freedom of expression and organisation. This time, certain Kurds suffered much from such measures, while the PKK was also responsible for many murders. By the end of the 1990s, along with further neoliberal measures, reforms for democratisation came onto the government’s agenda, mainly due to its intention to move closer to the European Union (EU). However, military commanders who were growing uneasy about the government’s Islamic activities made a memorandum on 28 February 1997, at the National Security Council meeting. Measures were systematically taken against political Islam up until the first AK Party government in 2002. Since then, there has been a Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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kind of counter-movement led by the AK Party, making use of religious discourse. During the second half of the first decade of the 2000s, contradictory tendencies coexisted. The structure and certain practices of the military have been systematically criticised by the pro-government mass media, while the government’s attempts to strengthen the police have accompanied efforts to put the army under the stricter supervision of the civilian government. Yet at the same time, the government forces’ telephone tapping of even judges and public prosecutors became routine. Today, there is still a ban on publicising information about the investigation of the Ergenekon case, during which several secularist intellectuals have been detained along with certain members of the military and mafioso-like individuals who were, it was claimed, members of paramilitary forces. As this process goes on, intellectuals critical of government policies grow anxious, since there is an impression that several anti-AK Party intellectuals are being held in prison without solid proof. Although this case has officially been said to be about the coup d’état plans, there is insufficient data to understand the process fully. Democratic reforms concerning the Kurdish ethnic group in Turkey have been in progress, while facing the opposition of certain Kurdish nationalists. Throughout this process, one has to make the analysis not only at the national level, but also at the international level, taking into consideration the process of restructuration of the Middle East. As for the mafiosi, although authoritarian practices may have fed the criminal business to a certain extent, the majority of those within the state networks who are said to be mafiosi have been members of the police or civilian bureaucracy or politicians, while few members of the military have been considered to be mafiosi. Although at the time of the military coup d’état, there was almost no tolerance for mafiosi, the Kurdish conflict has fed both the Turkish and Kurdish mafiosi. Yet since the mid-1990s, systematic police operations against mafiosi and bribery have continued to take place, while the power of the mafiosi is still considerable.

Mafioso activities in contemporary Turkey As for mafioso activities in contemporary Turkey, they are quite extensive. One common type is the collection of money, cheques and bonds by means of violence. This type of activity is said to be mainly dominated by certain Ülkücü-origin individuals who were once part of the anti-communist paramilitary forces, with close relations with the police. Nevertheless, several of them were arrested subsequent to the 12 September 1980 military coup d’état. Another type is the threat or use of violence to secure the awarding of contracts to the bidder employing the mafiosi. Some politicians also take part in mafia contract activities. As for the purchase of certain lands via mafioso power, similar methods are implemented. Protection rackets constitute another common activity. Mafioso gangs are organised even in prisons, despite being under supposedly strict state control and discipline. There are also widespread activities around the illegal trade of humans, uranium, antiques, weapons and narcotics. Trafficking activities have international links, and not only the Turkish mafia but also the Kurdish mafia has had a considerable market share (Bovenkerk & Yes¸ilgöz, 2000: 47-96). In Turkey, mafioso capital has grown so much that these groups have made huge investments in the legal economic sector. Although it is not easy to estimate the exact figures, an incident that reveals the extent of mafioso capital is the Türkbank bidding Downloaded from cnc.sagepub.com at Senate House Library, University of London on July 7, 2011

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process, which indicates that a powerful mafia boss may possess the financial means sufficient to buy a bank. On the basis of the parliamentary, police, court, and telephone records, S¸ener (2004) explains the mafia, business and state relationship in this process as follows: in the course of the 1990s, some mafiosi wanted to buy a bank that would help in their monetary operations. In this respect, Alaattin Çakıcı, a very powerful mafia boss, got in touch with the businessperson Korkmaz Yig˘it and supported him in the awarding process. This included threats and assassination plots against other bidders. Although M T (the national intelligence organisation) informed the prime minister, Mesut Yılmaz, of the phone calls between Çakıcı and Yig˘it and explained to the state minister, Günes¸ Taner, that Çakıcı had threatened Yig˘it’s rivals, the government took no measures. Emniyet’s (police force) report, sent to the Central Bank’s president, Gazi Erçel, did not set him into action, either. On 4 August 1998, Korkmaz Yig˘it won the bidding. However, shortly after the Republican People’s Party MP Fikri Sag˘lar’s presentation of the recorded Çakıcı-Yig˘it phone-calls, at a press conference on 13 October 1998, the government fell. The intricate relations between the chief exercisers of state power and mafioso groups were best revealed in the incident known as the Susurluk Scandal. In Susurluk, a district of Balıkesir, a car crashed into a lorry on 3 November 1996, and three of the four travelling in the car died. A police chief (Hüseyin Kocadag˘), a mafiosi with Ülkücü origins (Abdullah Çatlı, a heroin trafficker on Interpol’s wanted list, whose fake identity card had the police chief Mehmet Ag˘ar’s real signature on it), Çatlı’s girl friend (Gonca Us), and an MP from the True Path Party (Sedat Edip Bucak, the leader of a large tribe in South East Anatolia) were in the car. Only Bucak survived. Subsequent to the crash, it was reported that registered and unregistered weapons were found in the car. Then, the MP and police chief ’s relationship with the mafioso, who was accused of narcotics trafficking and the murder of leftists, has long been questioned. The photographs and documents published and broadcasted in the media revealed further relations between Çatlı and the chief exercisers of state power. However, the parliamentary commission for investigating the allegations made little progress on account of difficulties in accessing certain documents. Besides, on 8 December 1997, Judge Akman Akyürek, the Reporter of the Parliamentary Commissions for Imaginary Exportation, Perpetrator Unknown Political Killings and the Susurluk Investigation died in a traffic accident; and on 22 November 1999, Bedri incetahtacı, a Virtue Party MP and a member of the Parliamentary Commission for the Susurluk Investigation, also died in a traffic accident. Fikri Sag˘lar, a member of the same commission, declared that all commission members’ lives were in serious danger.15 But the story is much deeper than this. Mehmet Eymür’s (a former M T [Turkish intelligence service] executive) second M T Report (in Ünlü, 2001) gives an idea of the extent of these relations, suggesting that a special criminal team was established within Emniyet (the Turkish police force) to fight against the PKK and Dev-Sol, the organisations considered by the state authorities as terrorist. The report claims that this team is mainly composed of former Ülkücüs (the anti-communist Nationalist Action Party militants) who later became involved in threatening, racketeering, extortion, narcotics trafficking, and murders. The most crucial point in the report was the allegation that this team was directly linked to the chief of police Mehmet Ag˘ar,16 and was directed by the consultant chief of police, Korkut Eken. 17 The M T report suggested that Emniyet provided police identity cards and green passports to this group as its members travelled to

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Germany, Holland, Belgium, Hungary, and Azerbaijan under the guise of the ‘fight against terrorism’, but in fact engaged in narcotics trafficking. The report continued with details and further names (pp. 151-156). A number of other studies also indicated that the state’s measures against the socialist and Kurdish movements included illegal operations in which mafioso groups were employed.18 These studies also indicated that some chief exercisers of state power were involved in mafioso activities even in the pre-1980 era,19 while the post-1980 period witnessed a greater growth.

Against the gangs In fact, the 1990s were the years of a growing mafioso threat to other capitalists in Turkey. A number of businesspeople were threatened, killed or kidnapped.20 Many businesspeople grew uneasy about the rising mafioso power and began to express this, and to make policy proposals against this trend. For example, the prosecutor Antonio Di Pietro (the national hero for his inquiry against corruption in Italy) was invited to make a speech in the TÜS AD (Turkish Industrialists’ and Businessmen’s Association) General Council Meeting in 1995 (Alkan, 1998: 315). Following this, the capitalists spoke of the problem in subsequent meetings, conferences and publications. Demands for democratisation and transparency became a major concern for those feeling the actual or potential threat of mafioso (capitalist) bosses. In this process, some sectors of the state also started to take measures against the mafioso gangs. This may be due to both the rival groups in the state and the rising opposition. It was shortly before the Susurluk Incident when the operations of the state’s armed apparatus started. For example, as Türk (2002) suggests, an operation was carried out against the gang known as Söylemez Kardes¸ler on 11 June 1996. Among the gang’s alleged crimes were an assassination plot against Mehmet Ag˘ar. An important number of gang members were from the police or army. On 27 May 1997, Meral Aks¸ener, the minister for internal affairs, stated that between 11 June 1996 and 3 November 1996, except from those in Susurluk, the police caught nine gangs, of which 21 members were from the police force and 6 members were from the army (pp. 40, 54). But it was after the Susurluk Incident that these operations gained momentum. Mafioso leaders and members were arrested one after another in 1997 and 1998. Due to the extensive scope of these arrests, the operations were called the ‘1997 Gang Operations’. In the years 2000 and 2001, a series of operations also took place. While some mafiosi were arrested, an important number of the chief exercisers of state power who were alleged to be the part of these gangs survived with little or no penalty.21 The first decade of the 2000s also saw several gang operations, during which people inside and outside state networks were arrested. This amalgamation of state elements and mafioso power has very important implications for the prospects concerning the ‘capitalist state’. The post-1990 gang operations in particular signalled the failure of the conventional bourgeois ideas/values for those who have become part of such gangs. The rising opposition of the big (TÜS AD) bourgeoisie against corruption and mafia formations can be considered as the forerunner of a serious line of future conflict, including the future possibility for the mafioso mode of production – which has already penetrated even the intelligence networks of the state – to become the dominant mode.

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A remark: No essential antagonism or alliance However, it is not possible to assert that conventional capitalists never make alliances with the mafiosi. While they can sometimes collaborate with the mafiosi in pursuit of their short-term interests, they may also particularly make such collaborations when their collective long-term interests are threatened. A generalisation might be made as follows: in terms of those forces attacking the private ownership of means of production in general, the exploiting propertied classes are likely to unite against this common threat. However, when such a common threat is weak or perceived to be insignificant, it becomes quite difficult to fix the threshold of a possible bloc of the exploiters. While in Turkey, mafioso power can be considered to be significant, the elements of which at the same time hold substantial state power, the laws and form of the state may seem to favour the not-directly armed bourgeoisie (conventional bourgeoisie), outlawing the mafia business and bands.22 In such a case, to claim that the power bloc is composed of conventional capitalists and mafioso (capitalist) bosses would be quite difficult, especially when large segments of the conventional bourgeoisie try to defeat, rather than collaborate with the mafia gangs. But in such a case, it could also hardly be claimed that the power bloc is restricted to the segments of the conventional bourgeoisie in the face of the real power the mafiosi possesses. Besides, theoretically, there are further difficulties in demarcating those within and without the power bloc, especially when the cement of the power bloc is claimed to be ‘ideology’. Indeed, both the dominant and the official ideology in a country may be communism, and there may be a de jure ban on the private ownership of means of production, but the de facto ownership of certain legal and illegal enterprises may belong to certain state elements. It is true that the state structure is biased especially on account of the laws defining the state positions, granting opportunities and putting constraints on the interests/actions of those inside (and sometimes even outside) the country occupying different positions (whether a dictator or a representative assembly makes those laws). However, although official laws generally constitute an important aspect regulating and intervening in social life, the actual power holders may, at least partially and sometimes to a considerable extent, challenge this structural de jure selectivity regardless of the vitality of the laws generally, and considerably (if not always and absolutely) shaping the actions of the state elements. Analysing the de facto power structures without restricting the analysis to the structural de jure selectivity of the state would have the effect of a kind of ultrasound, providing an opportunity to detect further lines of power structures and the factors enabling and threatening further hubs of power. Besides, in analysing the relationship between the conventional capitalists and the mafiosi with reference to state power, we should focus on the questions, ‘who holds how much power on account of which factors, in which context’, again in a manner so as to move beyond the examination of the state’s structural legal selectivity. That would enable a more thorough analysis, as well as enabling the concrete phenomenon to be highlighted with further precision, with the opportunity to draw conclusions for action strategies in a relatively solid way. Shifting the focus of the analysis to also include the factors acting upon the conflict and alliance-generating motives would add further details to the picture, again with implications for strategies for handling those motives, rather than remaining at the level of over-generalisations in strategy formation.


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I agree with the classical Marxist accounts in that, in the face of the rising power of forces with the aim of eliminating the private ownership of means of production, the elements of the exploiting classes that privately own the means of production are likely to (not essentially) unite (though in a contradictory way, as Poulantzas suggested) due to the perceived common threat. For example, feudal lords, conventional capitalists and mafioso (capitalist) bosses may make alliances against the communists, while this alliance may also include those forces defending the short-term interests of the categories that are not part of exploiting classes (e.g. associations of the self-employed, some labour unions). However, it is also possible for the pro-capitalist forces and pro-worker forces to unite against a common perceived threat, as in the case of alliances made between various forces on the side of the short-and/or long-term interests of the conventional (not directly armed) capitalist sectors and wage-workers (in addition to possible other non-class sectors) as against the rising mafia power. The substantial mafioso power, which is in no way restricted to the ex-Eastern Bloc, suggests a considerable probability that the next stage faced by the human race may be marked by brutal mafia practices. Although what comes next will most probably depend on the course of struggles (in case the human race does not come to an end due to nuclear, environmental or any other possible disaster), there is no reason to be optimistic about the future unless the growing destructive capacity of the power holders is destroyed.

Conclusion In this article, I have presented empirical knowledge on the mafiosi of mainly Turkey along with other countries. The evidence appears to show that although authoritarianism and the non-transparency of governmental processes are likely to feed mafioso activities, mafia activity is not restricted to authoritarian countries. The state’s repressive apparatus, in particular, is exposed to the penetration of the mafiosi, while cooperation with the mafiosi on the parts of certain civilian politicians, bureaucrats, and armed members of the state outside the officially defined state networks is far from being exceptional. The mafiosi’s capital has been growing at the international level. Technology provides new opportunities to them, while forced prostitution and organ trafficking are among their most brutal practices. The conceptualisation of ‘mafioso capitalists’ indicates the intersection of mafioso and capitalist modes of production. Along with the convenient material conditions, we must also consider the corrupt values of the capitalist world in analysing the mafioso mode of production. In so far as limitless individualistic material gains and the worship of power continue to be celebrated, ‘respect for life’ will remain only as an abstract idea. Although these are not values invented by the mafiosi or the capitalist, the capitalist and mafioso production relations reinforce and spread them further. It is apparent that the mafioso (capitalist) bosses should be considered as an actually or potentially significant factor in analysing the power relations in several countries, including Turkey. They hold something the legal conventional bourgeoisie lacks; that is, the direct command of armed power. The less the conventional bourgeoisie holds the direct command of armed power, the severer it becomes to appeal to ideological means and material resources to control state armed power for realising short and/or long-term capitalist interests. Nevertheless, neither the antagonism nor the alliance between the


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conventional bourgeoisie and mafiosi can be essentialised. As for Turkey, what is to be done against corruption and criminal business should not be restricted to only repressive measures and further transparency of the state. Fighting against greediness and the worship of power should be considered as a part of the solution. Human relations, including the relations of production, that promote solidarity and respect rather than individualism and competition, should cover the world. Yet most probably, the path of struggles with clashing forces, tactics and strategies will determine the future of the direction of the class and other conflicts. Today, it is clear that humankind is in a state of collective insanity. Narcotics bring death, while the organs of the poor are stolen and sold to the rich for transplantation. The flesh of men, women and children is put on the market for money. In all of this, the mafiosi assumes the leading role. As for the conventional capitalists, short-term orientation to profit has been warming the globe, and the pursuit of market advantages has been killing thousands of people. In the arms race, the destructive capacity of the holders of power has been steadily increasing. Today, not only the poor but humankind in general live under the threat of the greediness of human beings. Unless the destructive capacity of the power holders is destroyed, the prospect is not only a state of global insanity but also the extinction of the human species. Given humankind’s extremely gloomy prospects, the time spent in analysing capitalist and mafioso power seems time well spent. Acknowledgements This paper is based on its author’s dissertation, ‘Mechanisms for the bourgeois hold of state power and the case of Turkey’, which was approved in March 2007 by the Department of Sociology at the Middle East Technical University, Ankara, Turkey. This paper is also, at the same time, a slightly revised version of the paper, ‘The growing mafia: Amalgamation of arms and money’, presented at the 24th Conference of the Nordic Sociological Association (‘Violence and Conflict’) in Aarhus, Denmark, 14-17 August 2008.

Endnotes 1. Jeffrey Sachs’s ‘shock therapy’ is summarised in What is to be Done? (Sachs, 1990), in which he argues for the need for a rapid transition to private ownership and a market system in Eastern Europe. 2. Not absolute, because sometimes their structural interests may coincide. 3. For a discussion of rent and monopoly, see Wallerstein (1988). 4. For a critical evaluation of the concept ‘bourgeoisie’, see Wallerstein (1988) and Poulantzas (1967). 5. Meanwhile, in the mainstream economy, regardless of the widely resorted criterion ‘scarcity’, that activity is not considered to be an ‘economic’ one. But with reference to the conceptualisation proposed here, that activity can be considered as an economic one while the criterion is not ‘scarcity’, but production of ‘utility’. 6. For definitions of organised crime, see Lindberg et al. (1998b: 48); Donais (2003: 364); Rush and Scarpitti (2001: 529). Also see Dishman (2001: 45); Jamieson (2001: 378, 379); and Shelley and Picarelli (2002: 306) for a comparison of organised crime (specifically the transnational criminal organisations) with terrorism. 7. Note, though, that the wage worker in antagonism to the capitalist also sometimes, but not mainly, works under direct physical threat, as in the case of several workers who were forced to return to their workplaces due to the armed threat of state forces subsequent to the 12 September military takeover of the Turkey in 1980.


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8. Although the production process is mainly oriented towards the market in the contemporary mafioso business, there are also certain mafioso strategies for accumulating wealth that are hardly engaged in production (for example, killing and taking the money of an individual) which recall Marx’s conceptualisation of primitive accumulation. However, from the point of view of the ‘inclusive conceptualisation of the economy’, even this activity may refer to some sort of production/economic activity insofar as some ‘utility’ is sought as regards even a single individual (e.g. the killer), regardless of the harm caused in other respects. 9. For the opportunities provided by information technology, see Shelley and Picarelli (2002: 309-311). 10. For computer crime and the Russian mafia, see Serio and Gorkin (2003). 11. Bovenkerk and Yes¸ilgöz (2000) point out an instance that fits this tendency very well. It was Prime Minister Özal’s visit to Shakalarchi, the worldwide master of money laundering, in 1989, in the Grand Dolder Hotel, Zurich, allegedly in order to persuade him to shift his activities to Turkey. It was reported that although Özal asked Shakalarchi whether he would like to be a Turkish citizen or not, his answer was ‘no, Minister’. In this instance, Özal also forgave economic crimes, and this was interpreted as encouraging investments for money laundering (pp. 94, 95). 12. See Ahmad (2000) for a compact political history of modern Turkey. 13. See Akyaz (2002) for the struggle within the Turkish military up to the 1980s. 14. For counter-guerilla activities in Turkey and NATO’s secret armies, see Daniel Ganser (2005) and the memories of Talat Turhan (2001), a leftist former colonel reported to have been detained and tortured in 1972. 15. See the interviews in Düzel (2002: 119-174); and the Susurluk chronology in Türk (2002). 16. Following his career in the police, Ag˘ar became a True Path Party (TPP) MP in December 1995. In the Motherland-TPP coalition government, he served as the justice minister, and he became the minister for internal affairs in the Welfare Party-TPP government. He had to resign from office subsequent to a conflict with Erbakan, the WP leader. After the Susurluk Scandal, he also had to resign from TPP, and his immunity as an MP was lifted. In the April 1999 and November 2002 general elections, he was elected as an independent MP, and in December 2002, he became the leader of the TPP. For further information on Mehmet Ag˘ar, see <www.kimkimdir.gen.tr>. 17. Korkut Eken started his career in the army. In 1978, he was appointed to the Special War Department’s Special Union Commandership (Özel Harp Dairesi Özel Birlik Komutanlıg˘ı). After 1980, he trained the Special Teams (Özel Harekat Timleri). In 1987, he resigned from the army as a lieutenant colonel. He started to work in M T as the vice-president of the Security Department, but retired in 1988. Eken worked at Emniyet between 1993 and 1996, at Ag˘ar’s invitation, where he participated in a number of operations. For further information on Korkut Eken, see <www.kimkimdir.gen.tr>. 18. For example, see Bovenkerk and Yes¸ilgöz (2000); Gökdemir (2002); S¸ener (2004); Türk (2002). 19. For example, Mumcu (1998) pointed out a narcotics trafficking case about Kudret Bayhan, a NAP senator, who was caught with 146 kilos of base morphine in Menton, a small town on the Italy-France border, in 1972 (p. 81). A similar case took place in 1979, when the NSP senator Halit Kahraman was sentenced to eight years for narcotics trafficking in Germany (Bovenkerk and Yes¸ilgöz, 2000: 202). 20. See Bovenkerk and Yes¸ilgöz (2000); Gökdemir (2002); S¸ener (2004); Türk (2002); Ünlü (2001). 21. See Bovenkerk and Yes¸ilgöz (2000); Gökdemir (2002); S¸ener (2001), S¸ener (2004); Ünlü (2001).

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22. With the acknowledgment that such laws may have both a positive and negative side for the mafiosi: positive in the sense that an outlawed illegal act may sometimes bring more material gains; and negative in the sense that the state elements empowered to implement those laws constitute a constant threat to the survival/relative freedom of the mafiosi and to mafia business.

References Ahmad F (2000) The Making of Modern Turkey. London: Routledge. Akyaz D (2002) Askeri Müdahalelerin Orduya Etkisi: Hiyerar¸s i Dıs¸ı Örgütlenmeden Emir Komuta Zincirine. letis¸im Yayınları. Albanese JS (2004) North American organised crime. Global Crime 6(1). Alkan H (1998) ‘Türkiye`de Baskı Grupları: Siyaset ve adamı Örgütlenmeleri’. Unpublished doctoral dissertation, Marmara University, Turkey. Anderson A (1995) The red mafia: A legacy of communism, online at . Bovenkerk F, Yes¸ilgöz Y (2000) Türkiye’nin Mafyası. letis¸im Yayınları. Braverman H (1974) Labor and monopoly capital. Monthly Review 25. Burawoy M (1999) The great involution: Russia’s response to the market, online at . Callinicos A, Harman C (1987) The Changing Working Class: Essays on Class Structure Today. London: Bookmarks. Dahrendorf R (1965) Class and Class Conflict in an Industrial Society, Stanford, CA: Stanford University Press. Dempsey G, Lukas A (1998) Features: mafia capitalism or red legacy, online at the Foundation for Economic Education website, <www.fee.org>. Dishman C (2001) Terrorism, crime and transformation. Studies in Conflict and Terrorism 24(1). Donais T (2003) The political economy of stalemate: Organised crime, corruption and economic deformation in post-Dayton Bosnia. Conflict, Security and Development 3(3). Düzel N (2002) Türkiye’nin Gizlenen Yüzü. letis¸im Yayınları. Ganser D (2005) NATO’s Secret Armies: Operation Gladio and Terrorism in Western Europe. London: Frank Cass. Goldthorpe JH (1979) Social stratification in industrial society. In Thompson K, Tunstall J (eds.) Sociological Perspectives. Harmondsworth: Penguin. Goldthorpe JH (1987) Social Mobility and Class Structure in Modern Britain. Oxford University Press: Oxford. Goldthorpe JH (1988) Intellectuals and the working class in modern Britain. In Rose D (ed.) Social Stratification and Economic Change. London: Hutchinson. Goodhand J (2000) From holy war to opium war? A case study of the opium economy in northeastern Afghanistan. Central Asian Survey 19(2). Gowan P (1995) Neo-liberal theory and practice for Eastern Europe. New Left Review I(213). Gökdemir O (2002) Pike: Bir Polis S¸efinin Kısa Tarihi. Chiviyazilari Yayınevi. Granville J (2003) The rise of Russian organised crime and Russian kleptocracy. Global Society 17(3). Holmstrom N, Smith R (2000) The necessity of gangster capitalism: Primitive accumulation in Russia and China. Monthly Review 51(9). Jamieson A (2001) Transnational organized crime: A European perspective. Studies in Conflict and Terrorism 24(5). Lindberg K, Petrenko J, Gladden J, Johnston WA (1998a) Emerging organized crime in Chicago. International Review of Law, Computers & Technology 12(2). Lindberg K, Petrenko J, Gladden J, Johnston WA (1998b) Traditional organized crime in Chicago. International Review of Law, Computers & Technology 12(1).

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Mandel E (1982) The Class Nature of the Soviet Union. Review of Radical Political Economy 14(1). Mandel E (1991) Marksist Ekonomi Kuramına Giri¸s . Ünlü Yayıncılık. Marx K (1857) The Poverty of Philosophy, online at <www.marxists.org>. Marx K (1867) Capital Volume 1, online at <www.marxists.org>. Mumcu U (1998) Silah Kaçakçılıg˘ı ve Terör. um:ag Vakfı Yayınları. Paoli L (2004) Italian organised crime: Mafia associations and criminal enterprises. Global Crime 6(1). Poulantzas N (1967) Marxist political theory in Britain. New Left Review I(43). Poulantzas N (1975) Classes in Contemprary Capitalism. London: NLB. Rush RJ, Scarpitti FR (2001) Russian organized crime: The continuation of an American tradition. Deviant Behavior 22(6). Sachs J (1990) What is to be done? The Economist, 13 January. S¸ener N (2001) Tepeden Tırnag˘a Yolsuzluk. Metis Yayınları. S¸ener N (2004) Kod Adı Atilla. Güncel Yayıncılık. Serio JD, Gorkin A (2003) Changing lenses: Striving for sharper focus on the nature of the ‘Russian mafia’ and its impact on the computer realm. International Review of Law, Computers & Technology 17(2). Shelley LI, Picarelli JT (2002) Methods not motives: Implications of the convergence of international organized crime and terrorism. Police Practice and Research 3(4). Shvarts A (2003) The Russian mafia: Expulsion of law. Contemporary Justice Review 6(4). Turhan T (2001) 27 Mayıs 1960’tan 28 S¸ubat 1997’ye … Devrimci Bir Kurmay Subayın Etkinlikleri. Sorun Yayınları. Türk H (2002) Susurluk Labirenti. Akademi TV. Ünlü F (2001a) Eymür’ün Aynası: Eski M T Yöneticisi Anlatıyor. Metis Yayınları. Volkov V (1999) Violent entrepreneurship in post-communist Russia. Europe-Asia Studies 51(5). Wallerstein I (1979) The Capitalist World-Economy: Essays. Cambridge: Cambridge University Press. Wallerstein I (1988) The bourgeois(ie) as concept and reality. New Left Review I(167). Wright EO (1982) The status of the political in the concept of class structure. Politics and Society 11(3). Wright EO (1984) A general framework for the analysis of class structures. Politics and Society 13(4). Wright EO (1989) Classes. London: Verso.

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Author biography Fatma Ülkü Selçuk is an assistant professor in the Department of Political Science and Public Administration, Atılım University, Ankara, Turkey. Her work prior to her dissertation had been mainly on working-class and labour organisations. During that time she published, amongst other things, a book in Turkish, Organizing the Unorganized: Labour Organizations in the Informal Sector (2002), for which she received the Turkish Social Science Association’s Young Social Scientist Award (2005), and an article, ‘Dressing the wound: Organizing informal sector workers’ (2005), in the Monthly Review. Social theory has become her major research interest since the final year of her dissertation, ‘Mechanisms for the bourgeois hold of state power and the case of Turkey’ (2007).


On value and abstract labour: A reply to Werner Bonefeld


Axel Kicillof

University of Buenos Aires, Argentina – CONICET (National Council for Scientific and Technological Research)

Guido Starosta

National University of Quilmes, Argentina

Abstract This article offers a reply to Werner Bonefeld’s recent contribution to the debate on value and abstract labour, in which he critically engages with our previous articles dealing with these questions. We argue that Bonefeld’s criticisms are not simply based on disagreements over these controversial issues, but also on a misunderstanding of our stance on abstract labour and value. In addition to clarifying our position, the article provides some brief critical remarks on Bonefeld’s own intervention in the debate and shows that his contribution fails to offer a solid analysis of the fundamental categories of the critique of political economy. Keywords value, abstract labour, materiality, social form Werner Bonefeld has recently published an article in this journal (Bonefeld, 2010), in which he critically examines our contribution to the Marxian debates on the nature of abstract labour and value (Kicillof and Starosta, 2007a; Kicillof and Starosta, 2007b; Starosta, 2008). While we welcome the critical reactions that our articles have stimulated, we feel that Bonefeld’s criticisms are not simply based on disagreements over these controversial issues, but also on a misunderstanding of our position on those more Corresponding author: Guido Starosta, National University of Quilmes, Argentina Email: [email protected]


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abstract determinations of the capitalist mode of production. Since we believe that this misunderstanding has led Bonefeld to fail to reconstruct our argument accurately, we would like to use this short note to clarify our stance on abstract labour and value. Also, we shall offer some brief critical remarks on Bonefeld’s own intervention in the debate. In this way, we shall argue that despite his claim to make explicit what is already implicit in Marx’s treatment of abstract labour and value in Capital (Bonefeld, 2010: 261), he actually departs from the latter considerably. More importantly and regardless of ‘what Marx really said’, we show that Bonefeld’s contribution fails to offer a solid analysis of the fundamental categories of the critique of political economy. At the broadest possible level, Bonefeld rightly captures the essence of our argument: namely, we claim that while value is the simplest economic form specific to the capitalist mode of production, abstract labour (i.e. the former’s social substance) is a material expenditure of human corporeality that bears no historical specificity (Bonefeld, 2010: 259, 270). However, beyond this very general point, which Bonefeld finds ‘intriguing’ (Bonefeld, 2010: 259), he misunderstands and/or misreads our position on several scores. Here, we shall mention only a few of them. In the first place, he states that we ‘see abstract labour as a transhistorical category that in capitalism is “represented” by the value-form’ (Bonefeld, 2010: 259), when we state very clearly that it is materialised or objectified abstract labour that is socially represented in the form of value (or ‘coagulates’, in Marx’s parlance. See Marx, 1976a: 142). This might seem an all-too-subtle difference, and therefore a minor issue. But this is precisely one of the central points on which, among other things, our critique of the circulationist view of labour as becoming abstract through the exchange of commodities against money rests (Kicillof and Starosta, 2007a: 20; Marx, 1976a: 152-3). Second, Bonefeld misrepresents our careful textual reconstruction of Marx’s dialectical presentation in the opening chapter of Capital. Where we state that Marx’s initial discovery of abstract labour in the first few pages of Chapter 1 only brings out the physiological materiality of abstract labour without actually explaining why this productive expenditure of human corporeality in general objectifies in the historically-specific form of value (Starosta, 2008: 308), Bonefeld reads exactly the opposite: that ‘the analytical reduction of value to its substance reveals only the capitalist representation of abstract labour – it does not tell us anything about its generic materiality’ (Bonefeld, 2010: 260).1 In addition, we explicitly argue that Marx’s starting point is the commodity as the most abstract form of capital (thus a social form specific to the capitalist mode of production) (Kicillof and Starosta, 2007b: 16, Kicillof and Starosta, 2007a: 28) and that, as a consequence, his dialectical presentation consists in the ‘ideal reproduction’ of the ‘immanent determinations’ characterising this historical form of social wealth (Kicillof and Starosta, 2007a: 35; Starosta, 2008: 298). This should be done by taking ‘the individual product in our hand and [analysing] the formal determinants that it contains as a commodity and which stamp it as a commodity’ (Marx, 1976b: 1059). And yet, according to Bonefeld, we state that ‘before developing the capitalist categories, Marx first sought to “discover” their generic material presupposition’ (Bonefeld, 2010: 260).2 Third, we are said to postulate that ‘class struggle rests on and develops the fundamental contradiction between transhistorically conceived materiality and social form’ (Bonefeld, 2010: 261). Bonefeld seems to have in mind here the contradictory existence


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of abstract labour as a generic material determination which in capitalism acquires a historically-specific social determination as substance of the most general social relation, namely, value (Bonefeld, 2010: 258). In other words, he appears to be suggesting that we consider the class struggle as the unmediated expression of this latter contradiction of the capitalist mode of production (Bonefeld, 2010: 269). But, on the one hand, we argue that the essential immanent contradiction of capitalism is between its historically specific materiality and its social form. This is why we highlight capital’s inner tendency for the development of the universality of productive subjectivity, which only this mode of production brings about, and only on the basis of previously achieved historical presuppositions (Kicillof and Starosta, 2007a: 39; Kicillof and Starosta, 2007b: 30; Starosta, 2011; Marx, 1993: 162). This entails a historically specific socialisation and universalisation of the concrete character of labour. In this strict sense, the materiality of abstract labour is of no immediate relevance to our argument. And far from endorsing positivist notions of progress (Bonefeld, 2010: 272), we explicitly note the alienated character of this historical process and the material mutilation of their productive subjectivity that workers suffer due to the inverted existence of their social being as an attribute of dead labour (Kicillof and Starosta, 2007a: 37). On the other hand, the whole gist of our critique of De Angelis revolves around the historicity of class struggle as a specifically capitalist social form. More precisely, against its widespread ‘ontologisation’ in many Marxist currents, we see the class struggle as the most general collective direct social relation through which the indirect unity of social labour through the commodity form asserts itself (Kicillof and Starosta, 2007b: 28). In other words, in our approach the foundation of the class struggle is socially mediated through and through, and has nothing to do with an abstract, unmediated contradiction between transhistorical materiality and social form, as Bonefeld believes. Finally and more importantly, Bonefeld further claims that we consider that ‘the transhistorical materiality of abstract labour obtains through specific historical forms’ (Bonefeld, 2010: 272: 259), presumably because, in his (mis)reading, we allegedly argue that ‘abstract labour is the material foundation of the human metabolism with nature’ (Bonefeld, 2010: 259). Against this, we actually state that it is labour in its material unity as conscious productive activity (which always has a two-fold material character, abstract and concrete), that constitutes the specifically human form of the life process, i.e. the human speciesbeing (Kicillof and Starosta, 2007a: 19-20). As for abstract labour and its ‘historically changing social forms’, we are absolutely emphatic and unequivocal that, despite its character as a generic material determination of labour, its role as mediator in the establishment of the unity of the social character of productive activity is uniquely capitalist (Kicillof and Starosta, 2007b: 16). Since this is probably the main source of Bonefeld’s confusion over our position, we shall say a few more words on this crucial point. Perhaps the single most important point that we tried to make in our articles in this regard is that the contemporary view of abstract labour as the specifically capitalist form of labour, downplays, or simply obliterates, the actual historical character of valueproducing labour. This historical specificity, we argued, lies in the private and independent form taken by social labour (or private labour for short). Our contributions therefore were not simply a case for the generic material nature of abstract labour but, more fundamentally, an attempt to restore the centrality of private labour in the debate over the


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determinations of the value-form.3 In order to bring out this historical specificity and the determination of abstract labour in it more clearly, let us first examine the case of noncapitalist societies. All those ‘first social forms’ that precede capitalism (whether patriarchal, ancient or feudal) were based on direct personal relations in production (Marx, 1993: 156), in which the process of social reproduction was established through the ‘natural or political super- and subordination of individuals to one another’ (Marx, 1993: 159). Although all individual labour also had a social character in those societies, the material unity of the process of human metabolism as a whole was consciously organised before production actually took place and, therefore, ‘it was the distinct labour of the individual in its original form, the particular features of his labour and not its universal aspect that formed the social ties at that time’ (Marx, 1987: 275). In other words, it was the concrete character of labour, its particularity, which directly or immediately realised the establishment of the material unity of the social division of labour (Marx, 1976a: 170). This does not mean that abstract labour, as the universal or general aspect of the materiality of the labour of the individual (i.e. the expenditure of brains, nerves, muscles, etc., regardless of its particular form), did not exist or had no reality. But it did not act as the social form of individual labour and, consequently, its materialisation in the product (its existence not as ‘motion’ but as ‘rest’ – see Marx, 1993: 143) did not have to be socially represented in the form of value or in any other social form whatsoever. When social labour is consciously organised through direct social relations, ‘there is no need for labour and its products to assume a fantastic form different from their reality’ (Marx, 1976a: 170). This is why Bonefeld cannot find any reference to other historical forms of social representation of abstract labour in our papers other than the capitalist form (Bonefeld, 2010: 259). To put it in plain English, it follows from our approach that there are no other historically specific social forms of representation of (congealed) abstract labour. And note that, in opposition to what Bonefeld believes we think, this applies to communist society as well. As the fully conscious organisation of the social life-process by the thereby free individuality of universally developed individuals (Marx, 1993: 158), communist society will not mediate the establishment of the unity of social labour on the basis of the abstract or general materiality of individual labour (i.e. of abstract labour). As much as the first social forms based on relations of personal dependence, the communist stage of development of the human species-being will establish the social character of labour on the basis of its concrete character. Communism consequently does not entail the affirmation of the abstract character of labour as social mediator beyond its capitalist integument. It involves the abolition both of value and of the alienated social determination of abstract labour as substance of that objectified form of social mediation. Contra Bonefeld, however, it does not and cannot conceivably entail the abolition of the abstract character of labour either, whose material determination as universal aspect underlying the varied useful kinds of labour remains a ‘physiological fact’ (Marx, 1976a: 165). The object of revolutionary action is not the overcoming of abstract labour but of private labour, through the conscious production of the direct association of the thereby truly free individuals. Let us now return to the private character of labour that defines the historical specificity of the capitalist mode of existence of human productive activity. This mode of



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production ‘presupposes the dissolution of all fixed personal (historic) relations of dependence in production, as well as the all-sided dependence of the producers on one another’ (Marx, 1993: 156). This means that at the very moment when the human individual has to set into motion the expenditure of her productive subjectivity in a particular concrete form, the only remaining social nexus among the private producers is that each of them embodies an aliquot part of the total labour power of society (Iñigo Carrera, 2007: 51). As Marx puts it in the section on the fetishism of the commodity, ‘from this moment on, the labour of the individual producer acquires a twofold social character’ (Marx 1976a: 166).4 As in any other mode of production, she has to expend her productive subjectivity in a socially useful form. However, she has no manifest direct social relations that could tell her how to articulate the exertion of the individual labour power that she embodies with the needs of the rest of society. The material unity of the social division of labour is thus manifested indirectly through the determination of the products of labour as generally exchangeable things, i.e. as bearers of value. But as we argued at length in our articles (Kicillof and Starosta, 2007a: 22), this social equivalence of different use-values as commodities can only be premised on the material identity of the varied useful labours as a physiological expenditure of human labour power in general, that is, ‘as labour whose materiality as the expenditure of human labour power has not yet assumed a specific concrete form’ (Iñigo Carrera, forthcoming). The private labour of the commodity producer thereby acquires a second, historically specific social character that must mediate the affirmation of the first sense of labour’s sociality discussed above. Its material or physiological aspect as human labour in general (i.e. as abstract labour) has to socially relate the varied privately undertaken labours by ‘congealing’ in the form of the ‘ghostly’ objectivity of value (Marx, 1976a: 166). But in doing so, abstract labour does not abstractly negate its generic material nature; instead, it gives this materiality a unique social determination in the establishment of the unity of social labour. To put it differently, abstract labour as such cannot be simply identified with value-producing labour. The latter actually is privately performed (socially necessary) abstract labour. The following passage from Marx’s section on the form of value (hardly a Ricardian one!), nicely and succinctly captures this twofold determination of abstract labour in capitalist society (material/generic and social/historically specific): The innumerable equations of which the general form of value is composed equate the labour realized in the linen with the labour contained in every other commodity in turn, and they thus convert weaving into the general form of appearance of undifferentiated human labour. In this manner the labour objectified in the values of commodities is not just presented negatively, as labour in which abstraction is made from all the concrete forms and useful properties of actual work. Its own positive nature is explicitly brought out, namely, the fact that it is the reduction of all kinds of actual labour to their common character of being human labour in general, of being the expenditure of human labour-power. The general value-form, in which all the products of labour are presented as mere congealed quantities of undifferentiated human labour, shows by its very structure that it is the social expression of the world of commodities. In this way it is made plain that within this world the general human character of labour forms its specific social character (Marx 1976a, 159-60). 5


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Bonefeld on value and abstract labour Methodologically, Bonefeld’s perspective on abstract labour can be inscribed within the broad tradition initiated by Rubin, which we have already extensively critiqued in an earlier article (Kicillof and Starosta, 2007a: 16 and ff.). Briefly put, through an axiomatic declaration of principles that stated that ‘political economy does not analyse the material-technical aspect of the capitalist process of production, but its social form’ (Rubin, 1973: 1-2), Rubin dogmatically ruled out from the outset all possible material character in the determination of abstract labour. As we have argued, the result was the formalist substitution of a ‘sociological theory of abstract labour’ for Marx’s analysis of the commodity. Along the same lines, Bonefeld adopts an idiosyncratic ‘social form-analytical’ approach that, by definition, ‘says that capitalist economic categories do not have a transhistorical validity’ (Bonefeld, 2010: 263). And also like Rubin and in opposition to Marx, he ‘applies’ this approach to the ‘concept’ of abstract labour instead of starting out ‘from the simplest social form in which the labour-product is presented in contemporary society’ (Marx, 1975: 198) and seeing what the analysis of this ‘concretum’, the commodity, tells us about its own immanent determinations (including abstract labour among them). In this way, Bonefeld unsurprisingly concludes what he already knew from the beginning on the basis of his general methodological principles: namely, that ‘abstract labour is a specific capitalist form of labour’ and that to claim otherwise inevitably ends up naturalising capitalist economic categories (Bonefeld, 2010: 259). Again like Rubin, he assumes that in order to secure his conclusion he needs to deprive abstract labour of all generic materiality.6 Bonefeld, however, admits that our reading of Capital is on strong textual grounds, but seems to attribute this strength to an alleged ambiguity on Marx’s part in the treatment of abstract labour. According to Bonefeld, ‘he defines it in asocial physiological terms, and insists that it is a specifically capitalist form of labour’ (Bonefeld, 2010: 258).7 But rather than being ambiguous, the logic of his argument should lead him to claim that Marx’s treatment of abstract labour is definitely and simply wrong. In effect, in the section on the twofold character of labour, Marx states that ‘if we leave aside the determinate quality of productive activity, and therefore the useful character of the labour, what remains is its quality of being expenditure of human labour-power (…) a productive expenditure of human brains, muscles, nerves, hands, etc.’ (Marx, 1976a: 134, emphasis added).8 The originality of Bonefeld’s contribution lies precisely in the rejection of the validity of this initial analytical move in which Marx discovers the abstract or universal aspect of the materiality of human labour by abstracting from its concrete particularity.9 Whereas most Marx scholars who see abstract labour as historically specific would not deny this ‘physiological fact’, but would argue that this is not the correct ‘concept’ of abstract labour as substance of value (and some would also claim that Marx tended to confuse the two), Bonefeld directly denies the reality of a material identity among the various kinds of useful concrete labours, irrespective of the problem of the connection between this ‘physiological’ abstract labour and value-production.10 For Bonefeld, ‘in (material) reality’ there is only concrete labour; the physiological identity between different useful labours has no materiality, hence no reality.



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The real existence of labour is always concrete. Every physiological expenditure of labour is expenditure of concrete labour. That is, physiological expenditure of labour entails a specific productive application, and is thus concrete. Muscles do not burn sugar in the abstract. Labour is concrete labour, not labour in the abstract. (Bonefeld, 2010: 266)11

This outright rejection of the reality of the physiological determination of abstract labour leads Bonefeld to challenge Marx’s discovery of a material identity between the various kinds of useful labours as sheer expenditures of human labour power. Instead, he argues that ‘if we abstract from the useful labour expended on a product, we do not discover the so-called “generic materiality” of abstract labour. What we find is matter, something for use, furnished by Nature’ (Bonefeld, 2010: 264).12 But if this is so, how is it possible for different commodities to establish an exchange relation given that, as Bonefeld rightly claims, ‘exchange cannot take place without equality, and equality not without commensurability’ (Bonefeld, 2010: 265)? Since in his view, this commensurability cannot be grounded on the universal material determination of all human labour, he must of necessity conclude that that this equality is ‘socially imposed’ on irreducibly diverse concrete labours. This social imposition, his argument goes, is actually the subsumption of the variety of human activities to ‘abstract time’ (Bonefeld, 2010: 262). According to Bonefeld, the reality of abstract labour and its objectification is not the premise of the exchange of use values as commodities (i.e. as material bearers of value), but rather is in the first place ‘forcibly brought about by exchange’ (Bonefeld, 2010: 264). This abstraction then ‘projects the ghost of value that achieves validity in the form of money, back into production (…) that sucks living labour dry, reducing it to a “time’s carcass”’ (Bonefeld, 2010: 266). In so far as products are exchanged, concrete labours come to be considered as labour in motion that is in turn measured by labour time, ‘a time of abstract, constant, and equal time units, measured by clock time’, an ‘homogeneous and empty time’ (Bonefeld, 2010: 268). In other words, the ‘abstraction’ that socially forces the equalisation of otherwise irreducibly unequal human labours is their subjection to the same economy of time, so that ‘the expenditure of labour does not occur in its own good time. It occurs within time – a time made abstract, and imposing’ (Bonefeld, 2010: 267). Thus, in this view the different private labours are not socially related as equal on the basis of their existing material equality as expenditures of human labour power regardless of its form. Rather, their equality is forcibly imposed upon their irreducible material heterogeneity through their social reduction to an embodiment of abstract time. Strictly speaking, then, it is not first and foremost labour that becomes abstract but, more fundamentally, the time that measures concrete labours (the abstraction of labour being derivative of this according to Bonefeld’s train of thought).13 This theoretical construction definitely parts company with the analysis of the commodity made by Marx, who after discovering the abstract character of labour as the substance of value asks, ‘How, then, is the magnitude of this value to be measured? By means of the quantity of the “value-forming substance”, the labour, contained in the article. This quantity is measured by its duration, and the labour-time is itself measured on the particular scale of hours, days, etc.’ (Marx, 1976a: 129). In other words, (socially necessary) labour-time determines the magnitude of value or constitutes value’s quantitative determination. But the abstract character of (privately-undertaken) labour constitutes the substance of value and therefore constitutes its qualitative determination.


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Moreover, as the quote from Chapter 1 reproduced in the previous section makes clear, abstract labour plays that part in the qualitative determinacy of value not simply as abstraction from concrete particularity, but in its ‘positive nature’ or quality as expenditure of labour power in general. In brief, whereas Marx in Capital clearly distinguishes between the qualitative and the quantitative determination of value, Bonefeld conflates them and actually converts the determinant of the magnitude of value into its qualitative content. Thus he approvingly quotes Bensaid’s confused view that ‘time appears simultaneously as measure of value and as its substance’ (Bensaid 2002: 80, cited in Bonefeld, 2010: 267). Very much like Rubin’s contribution, Bonefeld’s approach suffers from a conceptual collapse or amalgamation of categories, not only value and abstract labour, but also their qualitative and quantitative determinacy.14 Still, Bonefeld’s contribution cannot be simply read as a reinstatement of Rubin’s position. In fact, he recognises limitations in Rubin’s circulationist strand of thought (Bonfeld, 2010: 274). Thus, he tries to reconcile some of the insights found in the circulationist approach with a perspective that gives the sphere of production its due place in the determination of the value-form. He partly draws on the works of Chris Arthur and of Riccardo Bellofiore, but also takes insights from De Angelis’s view of abstract labour as imposed work and therefore a concrete form of the class struggle (Bonefeld, 2010: 267). We have offered an in-depth critical assessment of the latter perspective in an earlier article in this journal, so we will not repeat our arguments here. Bonefeld, however, does not engage with our detailed critique of the idea of abstract labour as a mode of existence of the class struggle. More importantly, Bonefeld’s argument on abstract labour is either circular or incomplete. Thus, he grounds the abstract character of labour as activity in the projection of the ghost of value ‘forcibly brought about by exchange’ (i.e. the form of general exchangeability of commodities) back into production. But this begs the question of how different use-values can become formally identical, and thereby establish an exchange relation in the first place. Surely not on the basis of their identity as materialisations of abstract labour, since, according to Bonefeld, the latter is explained by the exchange relation itself. As we argued in our critique of Rubin and his contemporary ‘circulationist’ followers, to postulate that commodities are equal because they exchange and that they exchange because they are equal involves a logically fallacious reasoning. Alternatively, he would have to ground the abstract character of labour in a further social form taken by social labour, but this analytical step is missing from Bonefeld’s account, thereby rendering his explanation incomplete. Endnotes 1. On this specific point, Bonefeld completely glosses over the relevant methodological distinction between the analytic and synthetic phases of the dialectical exposition that is more fully developed in Starosta (2008). 2. This obviously does not preclude the possibility that the dialectical analysis of the commodity encounters more abstract determinations that pertain to the social production process in general, and are therefore not specific to capitalist society. However, two methodological points are in order. First, these more general determinations are not discovered as external presuppositions of the concrete social form under investigation, but as an aspect of its immanent content. This means that they are not discovered by finding the common elements



3.

4.

5. 6.

7.

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between capitalism and other modes of production (and here Marx’s methodological remarks on ‘production in general’ in the 1857 Introduction are insufficiently dialectical, or at least not rigorous enough). Instead, they are discovered by searching ‘within’ the singularity of the individual commodity as the simplest economic ‘concretum’ of capitalist society (Marx, 1975: 199). Following from this, the judgement about the validity or relevance of these more abstract determinations should not be the result of the application of general methodological principles, whether ‘historical materialist’ or ‘form-analytical’. Dialectical analysis must proceed by ‘reflecting in ideas the life of the subject-matter’ (Marx, 1976a: 102) without any methodological prejudice. It also aimed at emphasising the materiality of private labour as a historic form of development of human productive subjectivity. Bonefeld overlooks these other, more important aspects of our intervention in the debate. In fact, the private character of labour is mentioned only once in Bonefeld’s article and, furthermore, in a rather confused (if not incoherent) formulation: ‘The peculiar social character of labour in capitalism comprises the existence of private labour as “directly social in its character”’ (Bonefeld, 2010: 263). The essence of the private character of labour is precisely the indirect nature of its immanent social character! This means that the negation of the individuality of the human subject implied in her reduction to mere bearer of an aliquot portion of the total social labour power emphasised by Bonefeld is a historically specific determination. However, it does not follow from this that it is not the individual material expenditure of human corporeality that produces value, as he further concludes. It only means that, from the perspective of value-production, the only exertion of individual labour power that matters is that which is socially necessary (Kicillof and Starosta, 2007a: 32; Marx, 1976a: 129; Marx 1986, 274). As we shall see below, Bonefeld evidently reduces abstract labour to its ‘negative’ determination as ‘abstraction from the concrete character of labour’ and wholly misses its own ‘positive’ nature. One possible source of Bonefeld’s misunderstanding of our position is that he seems to be projecting his own formalistic method onto our substantive argument. Thus, he sees our approach as a mirror image of his own: all categories should be treated as a unity of an invariant generic material content and a historically specific social form. At this stage of our argument, it should be clear that nothing could be farther from our method. Unfortunately, we are afraid that we cannot return Bonefeld’s complimentary comment on the textual strength of our reading of Marx’s Capital. The textual evidence supporting his claim that Marx insists that abstract labour is a specifically capitalist form of social labour is rather weak. In fact, like Rubin he tends to conflate value and abstract labour (simply assuming on the basis of general methodological principles that if value is specific so must be its substance, which is precisely what he should actually demonstrate). He then takes passages in which Marx is referring to value and ‘applies’ them to abstract labour. For instance: ‘Marx conceives of abstract labour as a “purely social reality” that can only appear in the social relations of “commodity to commodity” (Marx, 1983: 54)’. (Bonefeld, 2010: 259)

The text that Bonefeld is paraphrasing is from the second paragraph of section three of Chapter 1, ‘The form of value or exchange-value’, but a cursory reading suffices to see that Marx is unequivocally referring to value as having a purely social reality and not to abstract labour. 8. The reason for the emphasis in ‘quality’ will become clear below. 9. The full grounding or actual explanation of this initial analytic discovery (the ‘why’ rather than the ‘what’) occurs only later in Marx’s presentation, in the synthetic phase of the dialectical exposition in chapter one that starts in Section 3 ‘The form of value or exchange-value’. On this, see Starosta (2008).


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10. Cf. Rubin and his tripartite division of the concept of labour into ‘physiological labour’, ‘socially-equalised labour’ and ‘abstract labour’. Similarly, Murray (2000) distinguishes between the general concept of abstract labour and the capital-specific ‘practically-abstract labour’. As we have argued in relation to Rubin, the introduction of additional categories obscures rather than sheds light on the inner connection between materiality and social determination of abstract labour in capitalism (Kicillof and Starosta, 2007a: 23). Be that as it may, note that even authors on whom Bonefeld relies heavily do not seem to deny the reality of the physiological determination of abstract labour. They just do not consider that that is the relevant concept as the substance of value. Thus, Heinrich dismisses the physiological definition because it is a ‘mental abstraction, in which at any rate any labour can be subsumed, irrespective of whether it is commodity-producing or not’ (Heinrich, 2008). However, he does not seem to question the reality of the physiological determination. 11. Bonefeld seems to be offering a peculiar reason for his rejection of the reality of a material identity between different kinds of labour (i.e. of ‘physiological’ abstract labour), namely: it cannot be apprehended through sensuous perception. ‘Abstract labour is not a substance that one can touch, see, smell or eat’ (Bonefeld, 2010: 266). Unless we are missing something, this statement relapses into the crudest kind of empiricism, which seems strange coming from someone who has made interesting and sophisticated methodological contributions to dialectical thought (see, for instance, Bonefeld, 1992). The fact that a certain determination is only accessible to us by means of thought or what Marx calls the ‘power of abstraction’ (i.e. by means of the specific attribute that sets our speciesbeing apart from other life-forms) does not deny its materiality. No one can touch, see, smell or eat gravity. And yet it is obviously a real material determination of all bodies, as anyone jumping out of the window can tell. 12. We have to confess that we are simply perplexed by Bonefeld’s denial of the reality of the underlying universal material identity between different useful labours. For us, and Marx seemed to believed this as well, it is just a self-evident fact. We are afraid we cannot even find ways of engaging with that view. 13. In our view, there is nothing historically-specific about ‘abstract’ time per se. Time is a quantitative differentiation of nature in which therefore quality is sublated (see Hegel, 1999: 189, although as usual he inverts the real determination into a category of ‘pure thought’ which is then repeated in an external form in nature). In this sense, time is always ‘abstract’ if by this we mean indifference to quality. As Marx notes in the passage that Bonefeld quotes, this temporal dimension of nature exists in human activity as well: ‘Just as motion is measured by time, so is labour by labour time’, which is ‘the living quantitative aspect of labour as well as its inherent measure’ (Marx, 1986: 272). What Bonefeld describes as ‘abstract time’ is actually a concrete expression of the alienated relation of human beings to the materiality of their own life-activity entailed by value-production. And this obviously includes its temporality. But it is not the ground of the value-producing character of labour. 14. Before Capital, Marx himself had not fully established the ‘positive material nature’ of abstract labour as expenditure of labour power in general. That is why it is possible to find several occasions on which he uses formulations that conflate qualitative and quantitative determinacy of value and abstract labour, especially in the Grundrisse but even as late as the 1859 Contribution. On this, see Iñigo Carrera (forthcoming). Bonefeld himself acknowledges that there is a potential tension in the way he handles qualitative and quantitative moments of the determination of value, but does not see this as a problem since ‘there is no substance without measure’ (Bonefeld, 2010: 273 fn. 12). This is true enough, but that is precisely the reason why his sheer dissolution of qualitative determination into quantitative determination of value is problematic: he is postulating a ‘measure without a substance’, that is, without a quality whose magnitude is being measured.



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References Bonefeld W (1992) Social constitution and the form of the capitalist state. In Bonefeld W, Gunn R, Psychopedis K (eds.) Open Marxism. Volume I: Dialectics and History. London: Pluto Press. Bonefeld W (2010) Abstract labour: Against its nature and on its time. Capital & Class 34(2). Heinrich M (2008) Critica De La Economia Politica: Una Introduccion A El Capital De Marx. Madrid: Escolar y Mayo. Hegel G (1999) Science of Logic. Amherst, NY: Humanity Books. Iñigo Carrera J (2007) Conocer el capital hoy. Usar críticamente El Capital. Buenos Aires: Imago Mundi. Iñigo Carrera J (forthcoming) The Method, from the Grundrisse to Capital. In Bellofiore R, Starosta G, Thomas P (eds.) In Marx’s Laboratory. Critical Interpretations of the Grundrisse. Leiden, The Netherlands: Brill. Kicillof A, Starosta G (2007a) On materiality and social form: A political critique of Rubin’s valueform theory. Historical Materialism 15(3). Kicillof A, Starosta G (2007b) Value-form and class struggle: A critique of the autonomist theory of value. Capital & Class 92. Marx K (1975 [1881]) Notes on Adolf Wagner. In Carver T (ed.) Texts on Method. Oxford: Basil Blackwell. Marx K (1976a [1867]) Capital, Vol. I. Harmondsworth: Penguin. Marx K (1976b [1867]) Results of the Immediate Process of Production. In Capital, Vol. 1. Harmondsworth: Penguin. Marx K (1987 [1859]) Contribution to the Critique of Political Economy. In MECW 29. London: Lawrence & Wishart. Marx K (1993 [1857]) Grundrisse. Foundations of the Critique of Political Economy. Harmondsworth: Penguin. Murray P (2000) Marx’s ‘truly social’ labour theory of value: Part I, abstract labour in Marxian value theory. Historical Materialism 6, Summer. Rubin I (1973) Essays on Marx’s Theory of Value. Montreal: Black Rose Books. Starosta G (2008) The commodity-form and the dialectical method. Science and Society, 72(3). Starosta G (2011) Machinery, productive subjectivity and the limits to capitalism in Capital and the Grundrisse, Science and Society, 75(1).

Author biography Axel Kicillof is a professor of macroeconomics and history of economic thought at the University of Buenos Aires. His research interests lie in the areas of the political economy of Argentina and the history of macroeconomic theory. Guido Starosta is a professor of economics at the National University of Quilmes. His research interests are in the political economy of development and in issues of method and subjectivity in the Marxian critique of political economy.


A comment on Bonefeld’s ‘Abstract labour: Against its nature and on its time’


Guglielmo Carchedi York University, Toronto

Keywords material substance of abstract labour In a recent article in this journal, Werner Bonefeld (2010) raises some criticisms of my position on abstract labour (Carchedi, 2009). Bonefeld quotes Rubin to the effect that, ‘it is not possible to reconcile a physiological concept of abstract labour with the historical character of the value which it creates’ (Bonefeld, 2010: 258). Bonefeld agrees, and finds an ambiguity in Marx because Marx supposedly holds both a physiological and a social/historical notion of abstract labour. Clearly, the supposed ambiguity arises because one clings for some reason to the notion that abstract labour must be either one thing or another, and cannot be both at the same time. However, as I submit, for Marx, ‘value is the specific social dimension of a material reality. It is neither only physical nor only social, it is both’ (Carchedi, 2009:154). Notice that even if this notion were not Marx’s own, it is one that fits perfectly well into his theory, and does away with the ambiguity Bonefeld claims to have found in Marx. Is this notion a Ricardian one? Bonefeld seems to think so (Bonefeld, 2010: 274 18ff.). But then he should indicate where in Ricardo’s work a notion of abstract labour as both material and historical (class-determined) can be found. As long as no theoretical proof or textual evidence is provided, the charge of Ricardianism can be easily dismissed. But this aside, the denial of materiality to abstract labour before exchange is absurd, given that any labour (including mental labour) is an expenditure of human energy, and

Corresponding author: Guglielmo Carchedi,York University, Toronto Email: [email protected]


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given that any expenditure of human energy is material. If it is material, it is quantifiable, as my example of human metabolism indicates. And there is no question that labour, abstract and material, is also socially or class determined (has a social dimension) already in the process of production. Bonefeld’s critique is based on a misrepresentation of my position. First of all, mine is not a ‘physiological definition of abstract labour’ (Bonefeld, 2010: 274). It is evident that for me (following Marx), abstract labour is both physiological and social, with a class content (see below). Second, I do not submit that ‘calories are the measure of value’ (ibid.). I have been at pains to stress that the example of calories is just that – an example meant to show that abstract labour is both material and measurable, as it is evident if one chooses, for example, calories as a unit of measurement. Concerning the physiological aspect, as I state, what is needed is the proof that abstract labour is an observable expenditure of physiological and undifferentiated human energy. The following proof cannot be explicitly found in Marx … However, it is inherent in and consistent with his work. The process essential for our purposes is the human metabolism. The analysis of the human metabolism shows that people, irrespective of their differences, produce the same undifferentiated type of energy and thus consume the same undifferentiated type of energy, no matter which specific activities they engage into. This is consonant with Marx’s ‘physiological’, ‘material’ expenditure of undifferentiated human energy. As Marx says: ‘all labour is an expenditure of human labourpower, in the physiological sense, and it is in this quality of being equal, or abstract, human labour that it forms the value of commodities’. Abstract labour is a ‘purely abstract activity, a purely mechanical activity … a merely formal activity, or, what is the same, a merely material [stofflich] activity, activity pure and simple. This is exactly what human metabolism is. The observation of the expenditure of calories during production is the observation of abstract labour. If one wanted to, one could measure a labourer’s physical fatigue or the consumption of calories while at the same time observing her producing a specific use-value, i.e. engaging in concrete labour. This is what is commonly done in sport when the expenditure of calories is measured when one is running, swimming, etc. Denial of the existence of the material substance of value (abstract labour) is simply incompatible with modern medical science. (Carchedi, 2009: 149-150)

But, I add, ‘emphasis on calories as one of the possible measures of the expenditure of undifferentiated human energy is not meant to replace time as a measure of value; (Carchedi, 2009: 150, emphasis added). Let me repeat it. Value measurement in terms of calories is not meant to substitute value measurement in terms of labour time; it is only meant to argue for the materiality of abstract labour also before exchange. Once the materiality of abstract labour is ascertained (and this is the usefulness of the example in terms of calories), i.e. once it is ascertained that it is something material that can be measured, the proper unit of measurement is a unit of labour time. As for the social nature of abstract labour as the substance of value, I state, ‘The expenditure of undifferentiated human energy is common not only to all people but also to all people in all societies. In this sense, it is trans-epochal. Nevertheless, its discovery as a trans-epochal phenomenon is socially determined,’1 and its significance (as abstract labour and thus as the substance of value) is socially specific both because ‘abstract labour [is] expended during production’ and thus under capitalist production relations, and


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because ‘in a society in which the different products of labour (use-values) must be exchanged, there must be a feature common to all different concrete labours. This is abstract labour’ (Carchedi, 2009: 150). To hold that abstract labour and thus value is only social (the supposed break with Ricardo) is not only inconsistent with Marx (something presented as if it were Marx who is theoretically inconsistent, on the basis of a false ‘either/or’ ungrounded dichotomy), but is also inconsistent with the material reality of abstract labour. Criticism of the double nature of abstract labour requires theoretical arguments and textual evidence. Gratuitous charges of Ricardianism will not do. Bibliography Bonefeld W (2010) Abstract Labour: Against its nature and on its time. Capital & Class 34(2): 257-276. Carchedi G (2009) The fallacies of ‘new dialectics’ and value-form theory. Historical Materialism 17(1): 145-169.

References 1 Footnote 22 states, ‘It is perhaps not by chance that studies on the human metabolism started in the seventeenth century. “The first controlled experiments in human metabolism were published by Santorio Santorio in 1614 in his book Ars de statica medecina that made him famous throughout Europe. He describes his long series of experiments in which he weighed himself in a chair suspended from a steelyard balance … before and after eating, sleeping, working, sex, fasting, depriving from drinking, and excreting (see ).”’

Author biography Guglielmo Carchedi is a retired professor of the University of Amsterdam. He is now adjunct professor at York University.


Capital & Class, June 2011, 35 (2)

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Snack Food & Wholesale Bakery June 2011

Paint & Coating Industry June 2011

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