The 'great moderation' and the new Global Shift

  • Created by: sikemi__
  • Created on: 30-05-21 12:27

The Great Moderation (US)

  • Period of relative calm/economic growth/low inflation after Fordism crisis : 1982 - 2007
  • Called non-inflationary continuous expansion (NICE) in the UK
  • Mianstream economists claimed that...
    • Expansions were longer, recessions were fewer, shorter and milder - done with cycle
    • Productivity reached a permanent high plateau
    • Inflation seemed tamed
    • Spreading of financial risk across institutions and around the world seemed to have reduced the odds of a criss
    • New Economy? Ends of booms and busts
  • HOWEVER, there was a fundamental disconnect between economic indicators which pointed in a positive direction and the lived experience of millions of families who were affected by the crises
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UK discourse vs reality - New Economy


  • New business model - different source of profit than Fordism
    • High fixed costs and low marginal costs (creating the first copy was expensive, reproducing more led to negligible costs)
  • Different types of competition
    • Innovation of new products led to competition
    • Minimise competition by continuously creating new products (creating temporary monopolies) and charging high prices
    • Speed at reaching markets was imperative


  • Changed nature of work
    • Not flexible work, but flexible employment (Benner, 2002)
    • Part-time, subcontractors, temporary labour
    • Employment changes, shaped by legal, institutional environment rooted in older industrial economy (labour law, union structure, role of intermediaries)
  • Top end of labour market was well educated, well paid, working for newer companies as well as established/traditional firms with long hours culture to prove oneself
  • Bottom end of the labour market was contingent, unstable, risky, poorly paid, long hours culture due to desperation/having to work multiple jobs at once
  • Restructuring of work at both ends with increased insecurity and lack of work-life balance (as during Fordism)
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Changing social structures

  • Increased risk and individualisation
  • Increased labour market mobility
  • Time deficit - overwork
  • Little time to invest in children (two working adults with demanding jobs) - smaller families, delayed families, outsourced families (e.g. buying in more food/entertainment)
  • Less involvement in community and public service - less volunteering, church attendance, hobbies
  • Social structure is set up for industrial age (strict and rigid social entitlements)
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Critics of the New Economy

  • Bifurcated economy
    • Growth of low end firms which service high end firms
  • Increasing economic insecurity
    • Shifting risk to employees (Beck)
    • All jobs and earnings are less secure
    • Wages and benefits of many workers have eroded
  • Widening wage inequality
    • Firms no longer compress wages of top earners, they are competing to attract and keep valuable performers
  • Boom based on dramatic rise of household debt (Kitson et al)
    • Consumers can borrow cheaply to spend so the resultant increase in consumer demand stimulated economic growth - unsustainable growth model (not through icnreased wages like virtuous cycle)
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Ford's successor - Walmart

  • Largest firm in the world by revenue (US$ 514.405 billion in 2019)
  • Largest private employer in the world (2.2 million employees)
  • Publicly traded, family owned business
  • 11,438 stores in 27 countries
  • Business model based on...
    • Immense buying power and centralised distribution system
    • Price competition
    • Strongly anti-union
    • Low wage employer - roughly half of their workers are part time, no paid overtime, hiring illegal immigrant labour (became a political issue as the state in some ways allows companies such as Walmart to uphold this model by supplementing challenges faced by workers through the welfare system)
  • Walmarts flexibility is based on...
    • Numeric flexibility (ability to hire and fire workers at will)
    • Sweatshop labour
    • Spatial fix (ability to open and shut shops)
    • Competition is based solely on price (by cutting global labour costs) and also have an immense buying power
    • Walmartism?
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Social changes at work

  • Shift from unemployment to sickness benefit (Beatty and Fothergill)
    • Political strategy to constrain unemployment - politically feasible
    • Male detachment from labour market - older men previously in mining for example were unemployed and unlikely to find a job in local Walmart or nail salon etc - 'lost generation of men' Gordon Brown - increase in number of economically inactive men, put on incapacity/sickness benefits
    • Concentrated in areas of high unemployment
    • Claimants not required to look for work to get benefits
  • Gender
    • More women in the workforce - labour market participation rates went from 57% in 1975 to 78% in 2017 (men were 80%)
    • Most were full time employed
    • Changes in child bearing - of women born in 1945, 60% had given birth to at least one child by 25, of those born in 1975, only 31% had given birth to at least one child
    • Feminisation of labour (McDowell) - rise of services and embodied labour, caring/emotional labour e.g. airline attendant
    • Class and the crisis of masculinity - skills that were benefit during Fordism are now pushed aside
  • The rise of the service sector didn't just occur in the UK and US, but also Japan and Europe
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Was the shift to service sector bad?

  • Manufacturing was traditionally seen as the engine of growth in developed and devloping countries (Kaldor)
    • Many service industries support manufacturing or are based on goods produced by manufacturing sector
  • Ties to the rest of the economy (Cohen & Zysman)
    • We didn't offshore agriculture but mechanised it - same will occur with mfg
    • Spill over effect of manufacturing - drives growth in services (both are intertwined)
    • Still main source of wealth and intl competitiveness
    • Important for skill retention and creation
    • Better income distribution


  • The global shift was occuring and mfg production was being offshored
  • But unevenly distributed - still dominated by OECD countries
  • The most dramatic industrial decline occurred in the UK - betyween 1963 and 1990, the UK went from being 2nd to 5th largest OECD power
  • The global shift starts with low end manufacturing e.g. Fordist production but more skilled jobs progressively moved abroad e.g. services, R&D as developing countries increase their own capacity
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The power of TNCs

  • Global Production Networks which co-ordinate individual production chains
  • Potential to take advantage of geographical differences in distribution of factors of production such as labour and also different policies around the world e.g. taxes, trade barriers, subsidies
  • Potential geographical flexibility - ability to switch and reswitch operations between locations on global scale (Harvey)
  • Are TNCs as powerful as the state or more powerful?
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Restructuring and fracturing of labour markets

  • Widespread insecurity spreading as momentum shifts from full time jobs to shaky, short term employment worldwide
  • Growth of less steady, low paid jobs, increased involuntary retirement
  • More complicated class system - rise of precariat and new forms of class
  • Weakening of unions
  • Increased inequality
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Restructuring the state

  • From the Welfare State to the Workfare State
  • State minimises redistribution function
    • Welfare benefits gradually made more conditional
  • State starts privileging market
    • Privatising the state - subcontracting out services the state once performed and selling off nationalised industry
    • Deregulating the state - oligopolies become deregulated, more red tape for industries such as banking & finance
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