From Socialist Voice, February 2010

Workers and competition

Garret Fitzgerald recently argued that “the undermining of competitiveness” in the Irish economy is as important an issue as the banking crisis. Pay costs are “grossly uncompetitive,” he said, but the impact of this loss of competitiveness was concealed by the housing bubble and associated “artificial inflows of credit from abroad.” Fitzgerald assumes that conditions of free trade exist, where the market determines what is produced and consumed (and by whom) and where competition drives efficiency. There is little recognition of any social dimension.
     There is much ideology and propaganda in the public discourse about competitiveness. The objective is transparent: to achieve further reductions in pay rates for Irish workers. Fitzgerald’s article is based on the National Competitiveness Council’s annual report for 2009, and that is a good place to start to unravel the ideology.
     The report itself is hesitant about blaming pay increases for the loss of competitiveness it found. Why, then, have the business organisations, politicians and media been heavily emphasising unsustainable pay rates, while acknowledging only in passing high non-pay costs (electricity, communications, waste, etc.)?
     Let us look at the data presented in the report.
     The first finding of note is that while Ireland suffered a 35 per cent loss in international price competitiveness between 2000 and 2008, exchange rate movements accounted for two-thirds of this. Ireland is a member of the euro zone, and euro exchange rates are set in the interests of the bigger European economies, particularly Germany—not the Irish economy, which depends on exports to non-euro countries, such as Britain. A recovery of control over exchange rates from the European Union would be in the interests of Irish workers and would provide an alternative to attacking pay rates.
     It is notoriously difficult to make meaningful comparisons about the competitiveness of pay rates. If Irish pay rates are compared with low-pay economies in eastern Europe, India or China they may seem high; if they are compared with the euro zone or countries such as Germany and Denmark they will appear competitive.
     Another problem is that like is not being compared with like: these economies have different structures and industrial bases, and even businesses in the same sectors will be performing different functions or producing different products in different economies. How can pay rates for producing heart medication in one country be compared with rates for producing televisions in another?
     Given these limitations, the report provides some interesting information. Firstly, productivity rose faster than pay in Irish manufacturing between 2000 and 2007—which means that, in terms of labour costs, Irish manufacturing was more competitive in 2007 than 2000. Secondly, while the growth in Irish labour costs between 2004 and 2007 was higher than for the EU-15 average it was considerably lower than in the eastern European countries to which the Dell and other jobs have been moved: in other words, Ireland was gaining in competitiveness with these countries while losing jobs to them. Thirdly, the cost of employing a worker in Irish manufacturing was below the EU-15 average (e.g. Germany, Sweden, Denmark) but higher than the OECD average (much higher than in Poland or Hungary).
     The report found that non-pay costs were comparatively high in Ireland: electricity, waste disposal, accountancy fees, IT services, legal fees, child care and interest rates all undermined competitiveness as measured in the report.
     There is ample evidence here that singling out workers’ pay for attack will not solve the problems in the Irish economy. This evidence suggests that ideology is behind much of the discourse about competitiveness. It is part of the class struggle to determine how the wealth that is socially created is distributed in society.
     The ideology of competition is worth examining. According to Adam Smith and the classical economists, competition allocates resources to their most efficient and valuable use (i.e. the use of resources that produces the largest profit), leads firms to innovate and develop new technologies and products, and forces firms to keep prices as low as possible.
     Karl Marx shared this assessment but subjected it to class analysis. Competition is not an ahistorical, natural state of things: it occurs in specific historical contexts with particular class relations. Competition is a law of capitalist production that necessarily drives the price of a commodity down towards its cost of production. Because of this, capitalists are forced to innovate in different ways to be able to continue extracting profits: new divisions of labour, new machinery and technology and even new products are introduced by capitalists in order to reduce the costs of production and increase productivity. Although this allows capitalists to go on taking profits, it does not overcome the problem of the downward movement of the price of a commodity towards its cost of production.
     Capitalism is trapped in a ceaseless effort to expand the exploitation of the means of production. Marx argued that the concentration of production, expansion of credit and periodic systemic crises would be the inevitable outcome; 150 years later, this may sound familiar.
     Competition among capitalists also leads to greater competition among workers—after all, in capitalism, workers sell their labour power in the market. Longer hours, higher productivity (i.e. more intensive work) and lower wages are among the consequences for workers. Marx insisted that as capital grows, so competition among workers also grows, and their terms and conditions decrease proportionately. He understood that it is possible for workers to make gains in pay and conditions, but this is only as a result of struggle. Trade unions are important organisations of workers in this respect. Important as this is, it will not transform capitalism: only the action of class-conscious workers can do this.
     Neither did Marx share the indifference of the classical economists to the consequences of crisis for humanity: capital, he said, “drags with it into its grave the corpses of its slaves, whole hecatombs of workers, who perish in the crises.”
     Lenin argued that by the twentieth century capitalism was leading to monopoly and the concentration of business and capital. Competition was much restricted, and firms became price givers instead of price takers, thereby increasing their profits. The concentration of capital in a smaller number of huge financial corporations was leading to a form of capital where finance exerted control over manufacturing and production.
     John Bellamy Foster and others argue that we live in an era of monopoly and finance capital. This challenges the view of neo-liberalism as a system of free markets, deregulation, and unrestrained competition. A more complex understanding is required. Neo-liberalism has applied deregulation, free markets and competition in the interests of monopoly. Workers have been primary targets: laws protecting workers’ organisation and action have been undermined; freer movement of labour across borders has allowed business to attack pay and conditions by importing cheaper labour; and freer movement of capital has allowed firms to move to low-pay countries to exploit workers there. Indigenous companies in many countries have suffered as neo-liberal policies opened markets to the big conglomerates and monopolies.
     But, by and large, the corporations that operate as monopolies and oligopolies have only benefited: they have not been forced to introduce price competition, divest arms of their operations, or break up oversized organisations. Not only have they escaped the neo-liberal policies that have been so detrimental to workers, native capitalists and developing and poorer countries but they have also been supported with workers’ taxes in the current crisis because they are “too big to fail.”
     This should not surprise us: monopoly is all about escaping the downside of competition for capitalists.
     So when we are told that competition is essential for the efficient running of the economy and that wages must be cut because the economy is uncompetitive, we should realise that this is another part of the class struggle. Those who insist that wages should be cut to restore competitiveness should be challenged. Ordinary Irish wages are not excessively high according to the statistics of the National Competitiveness Council; profits and the remuneration of those who serve capitalism’s interests are. “Competitiveness” could be restored by cutting profits and high pay appropriately; the Government finances could be restored by taxing profits and high pay at realistic levels. The 1,600 PAYE payers who take home more than €1½ million per year on average and the further 31,000 who take home more than €240,000 could provide an extra €4½ billion in taxes each year and still take home multiples of the pay of ordinary workers.
     They might also be asked what the point of economic growth is if it can only be sustained by keeping wages low and depressing the living standards of workers. And why should workers think it a good thing to compete with each other to provide cheap labour so that capitalists can make profits? Why should workers engage in a global race to the bottom?
     150 years ago Marx exposed the barbarous and anti-human nature of capitalism; today’s capitalism bears out his judgement.

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