Thursday, 1 February 2018

Carillion, Outsourcing and Conservative Protectionism (5), Reactionary Protectionism

Reactionary Protectionism 

There has been a worrying drift into forms of protectionism in recent years, not just in the economic sphere.  For example, basic liberties have started to be eroded, in relation to free speech, and so on.  In order to avoid anyone conceivably being offended, not only social pressure has been applied to limit what can be said, but institutional limitations on free speech and thought have started to be established.  We have the free spaces movement in Universities, and at the same time we have the government introducing a new official to tackle "extremism", however that might be defined, by any government at any particular time!  The moral panic created after the Harvey Weinstein scandal has also followed a similar path, that leads back in a reactionary direction from the liberation achieved in the 1960's, towards the kind of prudish, puritanism that preceded it, that seeks to control the relations between adults from above by rigid rules, rather than on the basis of individual and collective responsibilities.  

The discussion over Carillion has illustrated a relapse into another form of protectionism. It is the protectionism that flows from any form of state control, particularly state control at a national level, for example, with nationalisation. The use of PFI, and other forms of outsourcing of government contracts, such as the introduction of CCT, and Best Value for Local Authorities, took place in an environment, in which the ideology of conservative social-democracy (that others call neo-liberalism) was dominant, and in which the idea that the private sector was more efficient than the public sector was more or less an article of faith. The pendulum has swung in the opposite direction, back towards the idea of state intervention and state control. For Marxists, this is a false dichotomy, and if anything, Marx and Engels themselves would have tended to have come down on the side of the former rather than the latter, as both were intently hostile to the state, and state intervention.

Marx and Engels, in The Communist Manifesto, for example, were openly hostile to the feudal monopolies, and the dead hand of the feudal state, and saw the breaking apart of those monopolies, by capitalism, as its most revolutionary and progressive role, and a necessary component of its drive to raise social productivity, increase efficiency, and thereby drive up the surplus social product, which, in turn, enables the accumulation of the productive forces, required for the construction of Socialism. Marx and Engels, spelled out their support for Free Trade, precisely in those terms, of its revolutionary function, not because they, in any way, saw Free Trade, as better, or a solution for workers problems within capitalism. Both emphasised their support, not for control by the state, but control by workers themselves, organised as the associated producers. Engels, wrote, for example, 

“It seems that the most advanced workers in Germany are demanding the emancipation of the workers from the capitalists by the transfer of state capital to associations of workers, so that production can be organised, without capitalists, for general account; and as a means to the achievement of this end: the conquest of political power by universal direct suffrage.” 

To consider the question of outsourcing, in its economic context, it amounts to nothing more than the application of the principle of the division of labour. And, as Marx and Engels make abundantly clear, it is the division of labour, which has been the most important factor, not just under capitalism, but for all of human existence, since the most primitive societies, in driving up the level of social productivity, to increase efficiency, to increase the size of the social surplus, and thereby to enable the accumulation of means of production, and the development of ever wider spheres of production and consumption. As Marx points out, as against Adam Smith, division of labour within the primitive commune, long precedes the development of trade, and creates the potential for it. 

What capitalism did was to raise this division of labour to new heights, and thereby raised the level of social productivity by corresponding magnitudes. It not only increased the division of labour within the factory, but turned individual components into commodities in their own right, produced and exchanged by separate capitals established for that specific purpose, and globalisation is simply the inevitable extension of that principle, as co-operative labour, itself becomes a global power. The attempt to row back against that progressive development of the productive forces, via the division of labour, and globalisation is itself a reactionary response. Its wider manifestation is the growth of right-wing populism and nationalism, which Marxists should resist, rather than accommodate to. 

The use of outsourcing is being presented, by those who want to promote the role of state capitalism, as ideologically driven, and, in part, that is no doubt true, as set out above, but, in large part, it is not. Some time ago, I wrote about this trend to outsource non-core activities, which all large capitals adopted during the 1980's, as this process of an intensification of the division of labour on a global scale took place. That drive towards decentralisation certainly was not ideologically driven, but was driven by the desire for those large capitals to raise their efficiency, and thereby their annual rate of profit. It was itself facilitated by the development of the productive forces themselves, via greater automation, and by the growth and development of telecommunications systems, and later by the Internet, which facilitated global supply chains, and the introduction of systems of Just In Time production and stock control, alongside systems of flexible specialisation

As the blog describes, many of the smaller contracting firms to whom the large corporations outsourced their non-core activities, were themselves thereby tied into and made dependent upon the larger companies, in a similar way to the operation of sweated workshops in the 19th century. The difference between this outsourcing, by these large private companies – and Carillion itself engaged in such outsourcing to smaller firms used as subcontractors – is that the large capital can exercise this role of dominance over the smaller contractors, forcing them to compete amongst themselves for the work. The problem with the state outsourcing these huge contracts is that the larger companies often have more power than it does. Moreover, if, as in the case of Carillion, the company goes bust, whilst the smaller sub-contractors are also often dragged under with it, the state, which still must obtain the work that had been contracted, is left with having to pick up the tab. If a large company producing say ceramic tiles, outsources its maintenance work, to a local small engineering firm, and that firm goes bust, the tile maker simply transfers its maintenance work to some other small local company, and its only those who loaned money-capital to the first engineering firm who lose their money

Even if the state lets the share and bondholders in Carillion lose their money, however, that is not the end of the story. The state has to pick up the tab for the workers who lose their job directly or indirectly, and where the firm had been used in a PFI, to provide ongoing services, the state must also then take on that responsibility. Monopsonist buyers enjoy power over sellers of goods and services, but the state is not just any other monopsonist. Precisely because it is the state it also acts as a guaranteed buyer, and it also has to pick up these subsidiary costs, where things go wrong. 

The real question is not whether the public provision of services is better than the outsourcing of those services. General experience, and the laws of economics would suggest that the division of labour raises the level of productivity, and drives up efficiency. Large sections of service provision is already in the private sector, and it too outsources non-core activity, precisely for that purpose of raising efficiency. For example, the London Stock Exchange, and other financial services firms outsource the cleaning of their offices and so on. The actual building of large constructions, such as motorways, schools, hospitals and so on, has generally been undertaken by large private companies, even where the work was paid for out of public funds. In the NHS, the services of pharmacists has always been outsourced, to private firms, initially to small private chemists, and more recently to larger chains. The prescription drugs themselves, as well as all of the medical equipment used in clinics, hospitals and so on, are produced by large companies. 

When the idea of the capitalist state taking over these functions was raised, Engels specifically opposed it.  He wrote,

"These points demand that the following should be taken over by the state: (1) the bar, (2) medical services, (3) pharmaceutics, dentistry, midwifery, nursing, etc., etc., and later the demand is advanced that workers’ insurance become a state concern. Can all this be entrusted to Mr. von Caprivi? And is it compatible with the rejection of all state socialism, as stated above?"

The opposition to outsourcing since the collapse of Carillion is a knee-jerk reaction, that is based upon a conservative, if not reactionary protectionism that seeks to reassert the role of the state. But the state has itself often, in the past, proved to be at least as bad as these large private companies. The answer does not lie, in a reactionary protectionism, and promotion of state capitalism, but in the question of workers control whether in the state or private sector. It is inconceivable that had the Carillion workers controlled its capital, rather than shareholders and their representatives, that this situation would have arisen. 


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