Volume 44, Number 173,
April-June 2013
Adjustment: Origin of the European Crisis
Andrés Musacchio
TRANSFORMATIONS IN THE EUROPEAN ECONOMY FOLLOWING THE 1970s CRISIS

The international economic crisis that occurred at the end of the 1960s and beginning of the 1970s (the crisis of Fordism), led to a profound transformation in the functioning of capitalism in terms of sectors, structures and spaces. In Europe, this fundamentally changed the integration process. Lipietz (1997) proposes analyzing Fordism based on three fundamental and complementary dimensions: the general principle for the organization of labor or an industrial paradigm, a macroeconomic structure and a system of rules . This approach may also apply to understanding later changes, which gave rise not to an indefinite “Post-Fordism,” but rather to models with common features that constituted neoliberalism.

On the basic level, neoliberalism can be understood as a general principle for the organization of labor associated with technological transformations that were implemented in the 1970s and consolidated in subsequent decades. Specifically, the introduction of microelectronics in the production of goods and capital allowed for the partial abandonment of rigid and repetitive routines, and led to growing automation and labor flexibility, adaptable to the growing flexibility of the products themselves, which is possible when machines can be reprogrammed, even for small-scale production, without losing profitability (cf., for example, Hirsch, 1986). At the same time, the process allows outsourcing some of the services required for the productive process.2 Likewise, some of these activities no longer required centralized location in the plants, so some of the production of goods and services was simply moved to wherever the laborer was located, instead of the worker going to the factory, as was done in the past. As such, greater intensity of pressure on the workers reinforces the mechanisms that increase the extraction of absolute surplus, in contrast to the emphasis on extracting relative surplus, as is characteristic of Fordism. Reorganizing production and labor lead to the restructuring of the real economy based on a variety of different forms, where the formula of “lowest wages and most flexible labor contracts possible” (Lipietz, 1997) prevails, supported by a range of technological innovations from which the mechanisms needed to sustain the revenue rate increase both the absolute and relative surplus. Regressive adjustment predominates, combining greater labor intensity with the pressure to reduce salaries and reorganize labor processes to compress the labor demand.

In this way, labor relations were transformed, becoming increasingly precarious. Salary relations became more informal, while labor markets were segmented, salaries were decentralized and labor periods became more flexible and individualized (Freyssinet, 2007: 54-62). The elements of this restructuring had a strong impact on the level of employment and labor processes, which started to weaken the ability of unions to negotiate and was detrimental to their objectives. This occurred together with general changes in the labor market, such as the increase in white-collar workers, increased female participation, growing individualism and decreased importance of a job in defining individual identity (cf. Hyman, 2007: 197).

From the point of view of the macroeconomic structure, neoliberalism breaks the link between productivity growth, salaries and the consumption standards of Fordism. The imposition of small series production in a few key branches, together with accelerated product obsolescence, brought about the permanent transformation in features and design. The fact that large multinational companies were becoming more export-oriented is consistent with an increasingly polarized income distribution. In this sense, the salary is interpreted as a cost that must be reduced to sustain international competitiveness, instead of the salary as a source of demand. This allows companies to redefine negotiations with unions from a stronger position and gradually impose salary reductions (both in functional income distribution as well as in unit salary costs, although not always in nominal salary). A key factor in this situation is the growing dependence of industrial capital on financial capital, which transfers its immediate revenue-oriented logic to the productive sector, making manufacturing operations more unstable.

The third dimension of neoliberalism is that of the system of rules, where there is a double change in the standards of practice. In some cases, such as the financial sector or the labor market, there was a clear path towards making regulations more flexible. Neoliberalism makes the labor market both more flexible and more precarious, reducing protections for workers to benefit capital needs. Altvater and Mahnkopf (2008: 33 and ss.) state that formality acts as a regulated limit on power imbalances and is a fundamental base for cooperation between capital and labor in the Fordism era. “In the context of the process of global transformation, the same institutions now appear – in the language of neoliberalism – rigid and stiff, obstacles to the accumulation of capital oriented towards profits and, as promised, the expansion of activities.” By trying to dissolve these rigid obstacles, capital has pushed to adapt and eliminate standards to make production more competitive and maintain the recovery of revenue rates. It is not a matter of the extent to which this occurs. Rather, it attacks a nerve center of relative consensus between capital and labor in Fordism. Thus it implies a qualitative change in the functioning of the set of labor relations.

2 The question is relevant, as it is part of the process of fragmentation of production, which also breaks down the space of confrontation for laborers, while the concentration and breakdown of capital control further imbalanced the power relations between capital and labor.

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 48, Number 191, October-December 2017 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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