Deindustrialisation, Technology and Crisis in US
Sanjay Roy
THE desperation of US establishment to restrict imports and revive manufacturing is a futile attempt to create jobs for high school educated labour force who otherwise enjoyed a decent living in the twentieth century. The jobless growth which the US embraced during the neoliberal regime was a strategy to consciously relocate manufacturing to the global South taking advantage of cheap labour and natural resources while emerging as the financial centre of the world attracting profits from across the globe. Such inflow to purchase dollar denominated assets enabled the US to maintain huge current account deficits and paid for US imports. In this process the US corporates and the wealthy oligarchs amassed huge profits out of asset bubbles but the poor and the middle class faced long term stagnation in real wages. This has become politically sensitive over the years and in the last decade job creation became an important issue in US presidential elections. With declining real income and rising debt in US average households, and chronic lack of job opportunities, have fanned racial tensions and intolerance. The status quoist Democrats who hardly paid any heed to real issues of working people during their rule have led to a turn towards the right with Trump emerging to be the messiah of the white working and middle class. Demobilised US population, in a scenario of acute crisis and helplessness, was in search of a demagogue, a powerful leader who could break the equilibrium of the elite politicians and talk and implement policies which might appear irrational and bad for the external world but good for average American. ‘Make America Great Again’ or MAGA is a political project with a promise to address the immediate crisis of hegemony that the ruling class faces both internally and externally.
DEINDUSTRIALISATION IN THE US
Deindustrialisation in the US started with the end of the Second World War. Till 1944 US happened to be the manufacturing hub of the world. The declining share of manufacturing in GDP began since 1950s and the decline was sharpest since 1980s. Although this decline is often attributed to rising imports from China, but China joined the WTO only in 2001 and hence the deindustrialisation in the US cannot be solely attributed to imports from the Global South, particularly from China. Also, US saw the fastest deindustrialisation in the period of neoliberal globalisation. Neoliberal policies allowed global capital getting easy access to the untapped reserve army of labour in the global South and the natural resources available there. The MNCs relocated their manufacturing facilities and US companies derived 40 per cent of their profits from outside US. This was possible because the labour cost was 60 per cent lower in these countries compared to the US. Also, despite deindustrialisation, US continued to be the financial centre of the world where 80 per cent of the transactions of world stock market were concentrated even today.
The unique advantage of the US is that its domestic currency dollar is also the global reserve currency. Hence profits made across the world by global companies are recycled to US in buying dollar denominated assets which are safe wealth. This allows US to maintain huge current account deficits, that is, their imports are much higher than exports. For other countries such a huge share of trade deficit to GDP ratio eventually leads to depreciation of domestic currency and hence squeezing of domestic incomes. But since US can easily print dollars, they can sustain huge trade deficits without suppressing average income. In other words, they can fund their imports through sucking profits from across the world. In sum instead of exporting goods and services the US economy pumped dollar or exported capital to the world and accumulated recycled dollar in the form of capital inflows which were used to buyback stocks, inflate values of bonds or other financial assets creating huge profits for the US and the global rich who hold dollar denominated assets. But this architecture works so long as the share of US in world trade and GDP continues to be large. The crisis that the US faces now is a declining share in world trade and rise of economic cooperations that tend to undermine the use of dollar by trading in alternative currencies. Therefore, US under Trump wants to impose taxes upon other trading partners saying that countries should pay high tariff to enter US markets, they have to open their domestic markets for US producers, they have to buy military air craft from US by expanding their defence expenditure or they have to buy US treasury bonds which do have very low longer term yield. In other words, the world must pay to access US market and pay for security provided by the US military infrastructure and to maintain dollar hegemony that ensures safe assets. This is simply arm-twisting and weaponisation of dollar but at the same time the last resort of a declining hegemon. This is nothing but a last attempt to restructure the world according to the US image and regrouping of countries as allies and enemies vis-à-vis China.
TECHNOLOGY AND CRISIS
The crisis is even deeper because the immediate issue of managing trade deficit and creating jobs for average US citizens is linked to the structural problem that new technology invokes. Capitalism is in the midst of a new technology wave, and technologies are primarily meant to replace human effort. But these new technologies, while replacing labour in some sectors, may also create job opportunities in other sectors. The net effect depends on how dispossessed workers are being absorbed in labour using sectors. In the beginning of the nineteenth century, we see the Luddite movement against use of machines as well as social tension and discontent on the condition of the working class particularly in the context of exploiting women and child labour. But there was no such resentment during the second industrial revolution which was driven by electricity as the new general-purpose technology that radically mechanised industry as well as household activities. Expansion of services created job opportunities particularly for high school educated typists, clerks, tellers. This went with massive expansion of manufacturing in automobile industry together with growth of roads and railways. The bargaining between capital and labour shifted from fights against machines to equitable distribution of productivity gains derived from use of machines. It was also supported by public provisioning of high school education in the US that ensured supply of requisite labour.
The situation is different this time. AI and ‘Internet of Things’ are going to replace middle level repetitive work both in manufacturing and in services. Manufacturing has entered the phase of dark industry, that is industrial activities being performed by robots. With the decline in the price of robots, human beings would be increasingly replaced by robots in manufacturing. And the relocation of manufacturing in the US is only feasible if huge difference in wage costs can be bypassed by using robots. But again, that would not create job opportunities for the US workers. Therefore, although US may somehow increase the share of manufacturing in their GDP but that is not going to generate employment opportunities for their workers. New technology may create opportunities for symbolic analytical skills but would not create job opportunities for average high school educated workers the way it happened in previous phases of technology revolutions. On the other hand, as the knowledge content increases in the production process it is necessary to create supply of knowledge workers. But neoliberalism restricts public provisioning of such education and hence the skill premium would increase for the rich who can afford to acquire those skills. The widening difference in incomes between low skilled and high skilled workers is going to aggravate income inequality together with rising unemployment. It seems capitalism is entering a terminal crisis. The social relations are incongruent to high technology growth. Capitalism always displaces a crisis by increasing the burden upon the working people. But with increased mobilisation of the exploited and the oppressed, working people in history had been able to resist such imposition and initiate a radical change in social relations. Such a change not only ends the crisis of capitalism but brings an end to capitalism altogether.
