The 'great moderation' and the new Global Shift
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- 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
Discourse
- 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
Reality
- 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
BUT
- 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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