Wednesday, 30 March 2011

Enterprise Zones - Part 1

As a central part of its “growth” strategy the Liberal-Tory Government has decided to establish a series of Enterprise Zones around the country. The idea is not new. The last Tory Government established Enterprise Zones and Freeports in various parts of Britain.
The idea is supposed to be that by removing businesses from restrictions of bureaucracy and regulation in parts of the country where industrial development is low, and unemployment is high, Capital will flow in, stimulating growth, and providing alternative employment for those hundreds of thousands of workers from the State Capitalist sector who are to lose their jobs. The experience of the last experiment back in the 1980's does not bode well for the success of such a plan. There is no evidence that they created any additional growth, nor any new employment. Moreover, not only did they provoke opposition from Trades Unions – though not much – and from the Labour Party – on paper at national level, but not at local level – but they provoked even more opposition from local small business people that found themselves discriminated against where their businesses were just outside an enterprise zone. Moreover, as part of a plan to reduce Public Spending they were a complete failure. In order that an Enterprise Zone could be established, a huge amount of investment and planning, and other work had to be done by the Local Councils and other bodies in the area. Huge amounts of State intervention were required for the establishment and functioning of Enterprise Zones, including large amounts of Public Expenditure. Moreover, in order to remove some of the regulation and controls from the local councils etc. other bodies had to be established, and so the commitment to reduce the number of Quangos was also undermined. But, like most of the Liberal-Tories policies today, the idea is not so much to do with an economic strategy for growth, or even to promote the interests of Capital – Enterprise Zones have little to offer Big Capital, and as stated above they tend to even divide the local small Capitalists – and everything to do with promoting the ideology of the Liberal-Tories.

John Shutt gave an excellent account of the original Enterprise Zones in an article in Capital & Class 23, in Summer 1984. The Liberal-Tories recognise that there will be opposition to their plans for Cuts, and privatisation. The strength of the opposition from within Higher Education last year probably shocked them in its intensity.
Moreover, the Liberal component of the Government will undoubtedly find that its grass roots begin to rebel as they are faced with implementing these policies, and worse for them, of losing their Council seats in the process. The Government like all bosses recognises the importance of the tactic of divide and rule in such circumstances.

Shutt comments in relation to the proposals for Freeports and Enterprise Zones,

“In fact, freeports, like Enterprise Zones, are important for the Government because they pitch locality against locality. They provide a means of dividing the Labour Movement and coaxing Labour controlled authorities into supporting and implementing Tory policies. A clearer analysis of this strategy is required if the Left and the Labour Movement is to combat the way in which small policy initiatives like enterprise zones and now freeports can be utilised to force through much wider attacks on the local state and on the Labour Movement itself.”

In fact, the Tories were able to use this strategy on a wider basis. The introduction of the Single Regeneration Budget, extended the tactic to every local authority in the country. Under SRB, Councils were forced to bid for grant aid that would previously have been allocated automatically. Straight away it set Council against Council, but more significantly it set one part of a Council area, against another part of a Council area, as they competed to be defined as a deprived area.
The consequence of the strategy was heightened as a result of the requirement by Councils to match fund any SRB grant. At a time of restricted Government financing, it meant that any Capital Councils had went almost exclusively to match fund SRB projects, ensuring that other parts of the Council area got nothing. It ensured division and hostility, thereby weakening the Council, and local Labour Movement as against the Government.

The concept of Enterprise Zones had been elaborated by Professor Peter Hall, who argued that in the same way that such zones had provided rapid economic growth and dynamism in South-East Asia, they could also provide a solution for Inner City deprived areas in developed economies. The idea only has to be given slight consideration to see just how ridiculous it is.
In South-East Asia, it was not Enterprise Zones per se that were responsible for the rapid development of the Tiger economies. Such Zones were a means of the State in these countries concentrating its resources to ensure that infrastructure was created. The development of that infrastructure was necessary if foreign Capital was to be attracted to set up in these areas. But, the real reason, once that basic infrastructure is in place, for that foreign Capital setting up there is not the existence of an Enterprise Zone, but the existence of a large amount of exploitable Labour Power at very low wages. In the early stages, the role of Bonapartist regimes to enforce labour discipline in the interests of that Capital perhaps performs a useful function, but, in reality the living standards of the former peasants drawn into such employment was often so abysmally low, and tenuous that even the poor conditions, and low wages offered in the EZ, were an improvement. Initially, foreign Capital is able to set up in these areas, because they formed very low cost production centres, using very low-paid, unskilled workers who were using large amounts of modern equipment, to produce large runs of commodities that were in the mature phase of the product cycle.
That is they were products whose development costs had already been sunk, whose production now required only unskilled machine minding or assembly work, and which operated on a high volume, low profit margin basis. As essentially assembly and export centres, these firms provided little in terms of internal development, because their output was for export rather than a home market, and the labour employed provided little in the way of stimulus of a home market, or the development of a skilled workforce. It is only when the MNC's setting up in these countries begin to source inputs for these factories from within the country, often via the kind of decentralised and putting-out system developed by Capital in the 1980's, that I have described elsewhere, that this has an effect on developing a home market, and providing the basis for rapid development.

But, the point is that it is ridiculous to think that the low wages and poor conditions that could be applied in South-East Asia in the 1980's could ever have been implemented in the Inner City areas of Britain or any other developed economy. And, without that, businesses establishing on that basis would be bound to fail. In a race to the bottom, South-East Asia and other such areas were bound to win. The only basis upon which small businesses could have been established in Inner City or any other areas in developed economies, that would have been able to operate on a globally competitive basis would be if they were competing on the basis of either quality, or on the basis of high value products produced by high value adding labour.
But, it is precisely that kind of high value added, very skilled labour that did not exist in those deprived Inner City areas. Moreover, at the time the Tories were scrapping Apprenticeships, and Industrial Training Boards, and much else that would have been vital to providing the education, skills and training, for those young and sometimes not so young workers, in the Inner City Areas, if they were to be turned into such skilled workers. Moreover, the kinds of Capitalist required to establish such firms was hardly to be found in such areas either. To produce quality products along the lines that the German economic model developed along, or high value products requiring large amounts of expensive technical equipment, and high waged workers capable of using it, and developing new products etc., requires Capitalists with access to lots of Capital, and prepared to wait some time before the payback in profits from its investment. Such Capitalists are hardly likely to be that bothered about whether they can avoid this or that insignificant regulation that might save them a few quid, or even whether their already high paid workers want to join a Trade Union.
It was always likely that the whole ethos of Enterprise Zones would be to attract precisely those kind of Capitalists whose business model DID rely on penny-pinching, and screwing already low paid workers. It always was going to attract the cowboys, the fly by night's and so on.

Forward To Part 2

1 comment:

W said...

Perhaps, you should do a blog on the Enterprise Zone in the ROyal Docks, London. We did have the LLDC which in the 1980s was charged with regeneration of docks and provide jobs.

So they built new houses, however, they stupidly also built the London City Airport, which was meant for VIP businessmen. It was not a problem in the beginning. But the airport has grown so much that it is unsuitable for the site. Instead of a handful of flights, you are talking 1 fligth every 90 seconds. Can't open windows during the summer.

Yet I am angry why did they build my house (built inthe 1980s), if they wanted London City Airprot to such an extent. Now i am trapped, with my house price falling and having trouble to move out...

It is making my life hell. All teh nice open spaces they built in the 1980 are unuable now, as all your can hear is jet planes.

The airport has won sucessive planning application to increase flights. It has never delivered on any of the projected jobs. But it has the local council on its side.
For instance, some BA fligths are operated by Cityflyer based in Ireland, so they pay taxes to the Irish Government.

Now 30 years on, you have a new Enterprise Zone in the Royal Docks, trying to bring investment into the area, which is funny because the airport lots of investment and jobs in the area.

But what concerns me is that lax Planning Rules, in the Royal Docks Enterprise Zones, which will allow the airport to expand moer and even into night flights without much restriction.

The airport has totally screwed up the regeneration of the area. Just look at Building 1000 (on flickr) and see this vast Buidling empty for 5 years, because of the airport. Who wants an office block next to a runway?. In the end Newham Council saved the airport the embarement at a cost of £100m to the local tax payers.

The airport has cost a lot in regeneration, but now we have to give freebies to get companies to move into the Royal Docks.