On Premature Deindustrialization

Today, the lines between Liberal Capitalism and Conservative Socialism are being drawn as the Left-Right Political Spectrum continues its protracted collapse. As the world continues in this third decade of the current century, the birthing pains of another state of affairs is at hand. Ideas capable of nurturing the strength and vitality of Conservative Socialism are flourishing and have yet to be integrated into the framework of Conservative Socialism. Meanwhile, the Liberal Capitalists are still struggling to maintain their control over the current world order and lack a long-term vision worthy of sustaining it. Neither side appears able to tilt the balance of power in either’s favor as the future of the 21st century has yet to be decided.

Allow me to address an apparent issue among the Conservative Socialists. It is true that we are convinced that the bulk of economic firepower lies in the Manufacturing Sector. The Services Sector needs the Manufacturing Sector to build the finished products that its Enterprises intend to sell, just as the Natural Sector requires tools and machinery from the Manufacturing Sector for its own economic activities. Thus, the Manufacturing Sector occupies an area within the national economy where it serves all other Economic Sectors. Where it supports the Natural and Services Sectors, it also assists in the capabilities of the Information and Government Sectors. Writing The Work-Standard and The Third Place made me fully aware of these implications.

However, the fact that Deindustrialization coincided with the rise of automation, information, and financial technologies and Globalization entails the need for a different perspective. I say this because, when Conservative Socialists advocate for reemphasis on the Manufacturing Sector, there is an expectation that its Enterprises will uplift the well-being of the Totality on their own. Even though Deindustrialization had causes stemming from international trade and the problems of the “social safety net,” both of which are byproducts of the first and second Modes of Production (Production for Profit and Production for Utility respectively), the technological angle must be understood as well. One does not need to be a trained engineer to grasp the implications that Technology played in Deindustrialization. Since ignorance persists, we need to go back to the years leading up to the Death of Bretton Woods.

How did Technology contribute to Deindustrialization? What were the ways in which Technology influenced the direction of Deindustrialization throughout the Western world and elsewhere? Why is it that Deindustrialization has been able to occur in developing countries, particularly those which are not developed enough to begin that process? What does the Deindustrialization of developing countries have to say for the Western world? Is there any precedent outside of the Manufacturing Sector where some conclusions could be drawn and reapplied to the context of contemporary economic affairs?

When a manufactory decides to begin operations, it recruits personnel to participate in its workspace. The personnel themselves are the ones expected to create the finished products. In Production for Profit, the manufactory needed to keep its Quantity of Kapital higher than its Quantity of Schuld. If the employers can run the manufactory with lower Taxation Rates and fewer Labor Unions, they will be able to maintain their Quantity of Kapital. That Quantity of Schuld does not just come from the production and upkeep costs; it is also coming from whatever higher wages and lower working hours that the employers made with the Labor Unions. Production for Utility occurs when the Parliament intervenes and either formalizes the social safety net and collective bargaining or nationalizes the manufactory and its matériel. Privatizing the manufactory or reducing the Parliament’s presence returns the facility back to Production for Profit.

Under normal circumstances, the manufactory’s employers will have to comply with the Incentives of the Parliament and the Labor Unions. One should also recall that the financial markets, namely the shareholders owning Stocks in the manufactory, have their own Incentives. The manufactory in a Parliamentary Democracy has to appease up to three competing interests who may or may not be on the same page with each other. The shareholders at the financial markets are not always going to be the people affiliated with the Labor Unions. We can trace this particular observation back to the issues of Social-Democracy and its Corporatist equivalent, Tripartism, a topic that I had once covered in a relevant Entry from The Third Place.

In the true Corporatist model, the “Corporate State” is meant to act as the intermediate between the “Business Community” and “Organized Labor.” The Self may originate from the Business Community and realign themselves with Organized Labor or vice versa. In either case, the Self is expected to support the interests of the Corporate State in resolving disputes between Organized Labor and the Business Community. Although the financial markets are not supposed to exist in this arrangement, that has not stopped Tripartism from replacing Organized Labor with the financial markets after the Death of Bretton Woods. As for Fascist Corporatism, its adherents have kept the original configuration intact.      

In the Council model, the Council State exists as the final authority, entrusting the State Commissariats of Wages and Prices to resolve any disputes among an Enterprise’s Economic Planners, Inspectors, Administrators, and Civil Servants. Compared to the Corporatist model, the Council model employs a well-delineated hierarchy as part of Council Democracy. The flexibility of Council Democracy allows for a variety of distinct ways in which any Enterprise can be governed, such as Codetermination and Worker’s Self-Management.     

But in a Parliamentary Democracy and Liberal Capitalist world order, which the Bretton Woods System had once promoted, the manufactory’s employers do not need to always comply with those Incentives. They could always conduct Outsourcing by shifting their operations in another part of the Liberal Capitalist nation where Taxation Rates are lower and Labor Unions exert less influence over the production process. The pattern repeats itself if there are any other countries within the Empire of Liberty where the Quantity of Kapital can be raised further. While this aspect is of course where the Globalization and Free Trade aspects of Deindustrialization are discerned, it is not necessarily related to the technological aspect.

From a technological standpoint, Deindustrialization occurs from increases to what mainstream neoclassical economics refers to as “Labor Productivity.” The term itself is misleading because unlike Work-Productivity (WP), which gauges the creation of Arbeit under the Work-Standard, it is defined more so by the production capabilities of Liberal Capitalist conceptions of Technology. In essence, the term focuses on how many goods and services can be created across any given period of Zeit (Time) relative to Kapital. It is here that we encounter how Liberal Capitalists understand Technology: to eliminate all possibilities of Arbeit creation to further facilitate Kapital Accumulation.

When Labor Productivity is increasing for our aforementioned manufactory, the term implies that its production capabilities are high enough to lower Prices in lockstep with the Incentives of Supply and Demand. By having Prices lowered vis-à-vis Technology, the manufactory’s employers now have employees who can be deemed redundant and therefore subject to layoffs. If the Technology is capable of creating more Kapital than the employees, there really is no point in keeping those employees around any longer. After all, the goal in Liberal Capitalism is the greatest Quantity of Kapital for the least Quantity of Schuld. Anything that creates unnecessary Schuld can be justifiably taken out of the equation.  

There is an understandable Explicit Intent as to why the Work-Standard focuses more on the Quality of Arbeit (QW) as opposed to the “Quantity of Arbeit.” The goal is to create the highest Quality of Arbeit conducive to yielding the least Quality of Geld (QM). The real challenge is how to maintain that same Quality of Arbeit on any given workweek across a broad range of goods and services. For if the Quality of Arbeit suffers, not only does the production process yield less Actual Geld, it will also create unwanted Attrition tantamount to Currency Depreciation.

Now, the question that must be ascertained for any future Conservative Socialists is whether or not Labor Productivity can be replaced by Work-Productivity. Can such a transition be done within the realm of Technology? In the context of The Third Place, I am convinced that it can be done insofar as Liberal Capitalist conceptions of Technology constitute a form of Liberalization of Young Minds that needs to be counteracted by a corresponding Socialization of Young Minds. Rather than develop technologies that diminish opportunities of creating Arbeit and Geld, there should instead be technologies capable of increasing those opportunities, eradicating Kapital and Schuld within economic life. All it would take is for a Technology to be imbued with the right design philosophy and be able to stand its ground against the Liberal Capitalist analogue.

The problems of Labor Productivity in connection to Deindustrialization is not exclusive to Western countries. In the last decade, a term called “Premature Deindustrialization” emerged to explain why developing countries are deindustrializing in defiance of Liberal Capitalist expectations. The Liberal Capitalists expected their Technology to industrialize a nation up to a certain point before finally deindustrializing it. This trend is tolerable for Kapital, but not so much for the people in the national economy whose livelihoods are at stake. But when the Technology gets introduced too quickly, the Deindustrialization is going to happen anyway. It does not matter if the national economy happens to be incapable of transferring huge segments of the population away from the Manufacturing Sector and into the Services Sector.

Some notable cases of Premature Deindustrialization include places like Mainland China, Taiwan, Singapore, Hong Kong, South Korea, Mexico, India and Brazil. In certain cases, Manufacturing Sector is not expanding enough to include a sizeable proportion of the population. For others such as Hong Kong and Taiwan, the Manufacturing Sector rapidly grew within a decade or even a few decades, only to make a spectacular collapse sometime around the turn of the 21st century. And then there are others like Mainland China where the Manufacturing Sector climbed across three decades and then began stagnating from 2012 onward. In all of those cases, there was an introduction of a Liberal Capitalist Technology that helped initiate the process of Deindustrialization. This Technology, whatever it was, had to have cause significant increases in Labor Productivity within the Manufacturing Sector that made any further expansions of its economic activities unfeasible and caused manufactories to undergo layoffs and closures.

Of course, we cannot ignore the non-technological trends associated with Deindustrialization. It is possible that increased Labor Productivity in one country could enhance the effects of Deindustrialization in another country. Such a trend could be created through Free Trade Agreements (FTAs), specifically in the transfer of goods and services, but it can even be the result of Technology being acquired by the affected country and introduced to its national economy. Those possibilities should not be ignored in this analysis.    



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  1. On Taxation of Kapital and Geld – The Fourth Estate

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