transformation and
THE Annual Report issued by the Bank of Italy in May 1991 was quite instructive for those interested in the transformations currently taking place in the one of the world's most advanced industrialised countries.
Italian industry seemed for a long time to be shrouded in mystery. The most varied interests, from the employers on the one hand to the left parties and unions on the other, agreed that Italian industry suffered from structural weakness, was not competitive in the international arena, and so on. The former used such an analysis to justify their refusal to satisfy worker demands, while the latter hoped to prove that the workers' movement was burdened
Throughout the 1980s, a prolonged period of re-tooling and innovation in methods of production have allowed industrial enterprises to make up lost ground in competitive capacity and profitability; the reinforcement of the productive apparatus has been accompanied by
However, the Report also claimed that "industry, along with the most efficient tertiary sectors, determines the actual dynamics of the economy." From
EUGENIO PREO
Industrial offensive with overcoming historical backwardness.
financial renewal.
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the employers' Accordingly, the analysis of the 1991 report was clear:
64 International Marxist Review this simple phrase, a whole series of arbitrary simplifications which have been widely accepted have flowed, for example, the definition of the most advanced industrial countries as "post-industrial"
If the above analysis is correct, one can draw several conclusions concerning the state of Italian industry. These involve several features not shared by other industrialized countries. For example, investment for research and development remains below half of that devoted by other countries (as a percentage of industrial production) where the industrial sector remains fragmented (among the 500 most important European enterprises only 23 are Italian while 201 are British, 111 French, 81 German, etc.).
However, changes have occurred in the share of the world market between the most important industrialized countries. The commercial war of the 1980s took its toll: though all the most industrialized countries registered important increases in the value of their exports, these increases were quite varied. Besides the "four Asian tigers" who tripled their exports, the following countries have more than doubled their exports. They are, in the following order, Italy, Japan, and Germany, while increases of approximately 80% for France and the USA and 50% for Britain have been registered. On closer inspection, we see that Italy, like nearly all other countries, has not obtained the same results in all sectors. It has lost much in the sectors where the renewal process is to a large degree tied to net cost (for example in the motor industry). It has declined in the sectors characterized by important investment for research and development while making considerable progress in the "specialized offer" sectors (for example, machine tools). As far as the exportation of manufactured products are concerned, which account for 80% of all exports world wide, only Germany, Japan and Italy, among the most industrialized countries, have conquered new parts of the market throughout the 1980s. In conclusion, all this indicates that Italian industry is well integrated into the international economic system and is fundamentally competitive, even if globally it does not have the industrial efficiency of Germany or Japan. The transformations of the 1980s There are three principal elements which explain industrial performance during the 1980's. 1) Sweeping restructuring, carried out through significant investment in
Industrial transformation and the employers' offensive 65 rationalization which has changed ways of organizing production and has radically changed the structures of large factories.
2) The role played by the government on the legislative and financial plane, which favoured, and to a degree, assured the above mentioned restructuring.
3) Setbacks for the labour movement as a whole.
As far as the first point is concerned we will restrict our analysis to several of the most important elements. • The quantity of investment continuously declined until 1984, while it risen regularly since. In any case the investment for rationalization rose as a percentage of investment as a whole, rising from 60% in the first part of the decade followed by a decline to 40% in 1990. • The reduction of the labour force in the large factories over the last five years has averaged 2.5%, which coincides with the period in which numerous activities have been transfered out of the country. During the last ten years the number of jobs has decreased by more than 30% in the large factories and these trends have not stopped even if they have slowed down. • In the 1980s labour productivity increased considerably. While figures drawn from national and international sources vary, often considerably, they all show that Italy, after Japan, is ahead of all the other advanced countries in this regard. • Since 1982 the large firms have begun to carry out an orientation whose goal was to concentrate financial and strategic functions and decentralize operational functions. These reorganizations have been followed by a sweeping up of money in the stock market, and later, by buy-outs, mergers, minority holding participation at a national and international level. However, the international presence of Italian industry contained a weak point: the number of workers in Italian industries or with Italian participation outside of Italy, remains much more limited than those of its French, German and especially British competitors.
According to a widely shared opinion in Italy, the government has not created an overall industrial policy. This is partially true. It is true for example, that over the last decade the role of state controlled enterprises, which have weight unequalled elsewhere in Europe, have been less important than in the past. But the decision of the government to renounce the running of its own industries corresponds to the interests of large private industry. After all, in a period characterized by large changes and difficult growth for the valorization of capital, it is logic enough that a bourgeois government would
In any event, the central axes of the Italian government's industrial policy
• A rising cost of money, determined among other reasons by a rate of inflation higher than that of other European countries, which forces the enterprises to carry out heavy restructurations as a counterweight to competition.
• Generous aid under various forms and unparalleled in Europe to manufacturing industries (9.5% of the Gross National Product in the first half of the
1980's, 6.7% in the second half, in both cases, double of that in France and
• The creation of all the necessary conditions for the transfer of the most profitable sectors under the control of the state and private capital.
The institutional crisis which is developing, and could lead to the reinforcement of executive power, is without doubt also the premise for the sweeping changes in the key economic sectors. In fact, financial institutions, banks, and of course, state-run enterprises are coveted by the peninsulas' powerful families. Even the most lucid political leaders seemed to have lost all capacity for critical analysis and do not hesitate to call for the massive sale of state property as a necessary means of reducing the public debt. They offer a pitiful argument: it is enough to keep in mind that the eventual sale of the Italian
Institute of Housing (IMI, the most important credit institution of the country and surely one of the most precious, only brings in one-thirteenth of what
Investments, the consolidation process, government aid, and so on, incontestably contributed to the success of Italian industry in the 1980s. But in the last analysis, the decisive factor was the defeat dealt to the workers'
We can briefly synthesize the stages of this defeat which explains the political changes that took place and the reversal of values in comparison to the
• From 1980 to 1984, industrial sector employment fell by 16%. The more limited decline of the following years was almost completely counterbal-
66 International Marxist Review favour private capital.
triple that of Germany.
is necessary for the treasury a year.
movement.
1970s.
in the 1980s can be synthesized in the following way.
The defeat of the workers' movement
Industrial transformation and the employers' offensive 67 anced by a inversion of the tendency starting in 1988. • The number of hours of technical unemployment reached a maximum in 1984, before declining and then reaching once again in 1990 its level of ten years before. In order to give an idea of the shock absorbing role played by technical unemployment, let's keep in mind that in 1984 the totality of hours paid for under this form was the equivalent of more than 10% of actual labour furnished in the entire industrial sector. • Overall strike hours, which had reached 140 million in 1982, fell spectacularly, stablizing at an average of 20-40 million in 1985 — the lowest level of the post-World War II period. This decline can be attributed to the manufacturing sector, since strike hours in the agicultural and public sector did not change during the 1980s.
It is from these figures that we conclude that the defeat which developed during the first half of the 1980s laid the ground for subsequent years: • The unemployment rate rose continuously until 1987 when it stabilized — only declining in 1990. • The purchasing power of industrial workers, an object of much debate, only reached the 1980 level in 1987 (according to union estimates). • Average hours worked by each industrial worker only reached its 1980 level in 1987 when industrial production finally attained its 1980 level. It is significant that it soon rose: in 1990, each worker put in 7% more hours than in • Unionization of active workers fell, especially from the second half of the decade. As far as the three central labour confederations, the General Confederation of Italian Labour (CGIL) lost 21.8% of its members in two years, the Confederation of Free Unions (CISL) 16.7%, and the Italian Labour Union (UIL) 5.5%.
Is it possible to quantitatively estimate the "contribution" of industrial workers to the performance of the industrial sector in the 1980s? If we admit that the pace has not picked up (which is only partially true) this "contribution" takes the following forms: • A drastic reduction of the percentage of remuneration paid on the totality of wealth added. Since there has been a decline in real wages, that means that capital totally appropriated the increased productivity (according to the official statistics, the percentage of wages on the total value added went from 48.9% in 1981, to 46.7% in 1989). • Through a strict control of labour, symbolized by the decline of paid leave
68 International Marxist Review a well as the the unlimited use, according to the circumstances, of technical unemployment and supplementary hours.
The decline of real salaries is a concrete fact that can be measured, and with other facts allows the calculation of the rise in profits that has occurred. It is more difficult however, to calculate the results of the control exercised over the labour force allowing the more efficient use of all the factors which contribute to the productive process: investment capital, available equipment, stock, and so on. However, according to Mediobanca, who each year analyze the results obtained by the large industrial groups, gross profits, in relation to the overall value added, have increased from 25.6% to 33%. "Total quality"
It is not difficult to predict that in the near future, there will be developments which aim to increase the globalization of the largest Italian capitalist companies (they will invest outside the country not only because labour is more costly in Italy, but because it is objectively necessary for it to have a presence on an international scale). What is particularly important however, is knowledge about the strategical axes of the inevitable transformations nin the productive process.
A recent inquiry on the manufacturing of parts for the motor industry has highlighted an extremely important fact: over the last several years investment priorities have not been directed towards work centres, robots, flexible productive systems, and equipment which in general allows the reduction of labour time, but towards individual numerical command machines, measuring machines and so on. This represents a tendency which has its origin in a different approach from that of the past as far as the organization of labour is concerned. Such an approach has certainly been stimulated by the decision of FIAT management to reorganize their production system along the lines of "total quality", following the Toyota model. Because of the importance of FIAT in Italian manufacturing industry, which extends well beyond the enterprises it directly controls, it is probable that in the medium term the strategic orientation of the manufacturing sector as a whole will involve increased initiatives which aim to rationalize production systems overall. This process encounters serious problems. The elimination of difficulties in production is an objective which, in the last analysis, can be reached, but it is
Industrial transformation and the employers' offensive 69 difficult to do it by reducing costs. To reduce in one enterprise all the functions that do not add value to a product is quite difficult; it is even more difficult to orient all available efforts towards common objectives.
Such a process would demand a conscious decision to sweep aside internationally recognized models of controlling labour costs on the part of leading groups who have been educated differently than the current ones. Those who would like to combine all of this with workers' participation, along the lines of the Japanese model, have not taken into account the need for necessary intermediary steps, if only because workers' participation is not the decisive element for arriving at a more rational organization, with less waste, than that of the system currently in place. In any event, it is again a problem to be dealt with afterwards. The objective: reduction in costs
Contrary to what some think, industry cannot be compared to a clock where everything functions according to rules set once and for all. Tools wear out, blast furnaces do not respect deadlines, parts must be repaired or replaced, instructions are not always followed, forecasts are not always accurate, conflicts between managers and different sectors occur. and so forth. Those working in the factories who do not, for different reasons, give their all must be taken into account as a factor as well. In other words, an enterprise is a living organism which like all other living organisms must resolve problems on an everyday basis. Those who have conducted calculations have discovered considerable costs are necessary to overcome these problems: on average, 30-40% of estimated production is lost.
This involves a complicated problem. That is, a good part of this waste is invisible because the system used to calculate costs does not allow it to be done.
Let us examine a realistic example. At the beginning of the year, enterprises make two plans. The first involves all the expenses that the company must make (wages, return on investments, rent, interests payments to banks, electricity, expenses for various inconveniences, as experience has taught to expect. The second involves the total hours that must be put in by the workers or by workers directly engaged in production. If the total expense is divided by hours we get what is called the hourly rate. Therefore, all labour furnished will have a value corresponding to the time used by the workers directly engaged in production multiplied by the given
Is this an erroneous criteria? No, but this system does not allow for the appreciation of aspects which are important today. A job finished in the space of one month, costs, in the number of hours, the same as that which takes several months. The expenses due to various problems, as long as they
What is more, since they are part of the costs, it is considered normal that there are workers who do not add the value to the product (for example, those
Since these two elements are fixed — the total costs and the hours directly put in — the reduction of costs for a given product inevitably depends on investments which reduce labour time and increase control in order to obtain a better quality product. In other words, activities which add no value to the
Such a system functioned in the 1950s and 1960s when the absorption capacity of the market was unlimited; there was little worry about the quality of products, companies had many workers and very few employees, money was cheaper, and so forth. But today, the situation is no longer the same.
In the 1970s and 1980s, companies confronted market conditions by introducing automatic machines, robots, computers, and so on, and thus made savings. The problem lies in the fact that the system became more and more rigid and more difficult to manage. It cannot be improved, and above all, it is extremely vulnerable (consider for example the consequences of a trucker strike for an enterprise that applies "just in time"; that is, works without stock
In an interview which appeared in the financial daily, Sole-24 Ore, the president of Falk, one of the most important steel enterprises in Italy and Europe, after having described the programme recently adopted with the goal of
The road of recovery involves a reorganization of the whole cost system, a new overall approach of the ways of reducing costs...; the program (that we have adopted) is aimed at making intermediary leaders understand that they have a specific importance in enterprise management...; henceforth the employees have been also invited to collaborate and in a following stage we are going to have the workers participate as well..; the investments in this
70 International Marxist Review hourly rate.
who order and find spare parts).
product.
What is to be done?
or with extremely limited stock.)
New organisation at work reducing costs, explained:
do not exceed their budget, are considered normal.
programme are rather limited and they can produce very rapid returns.
Industrial trnasformation and the employers' offensive 71
In fact, Mr. Falk's objective is to reduce costs by 40%. The reorganization model set up with the help of the McKinsey corporation is actually quite simple. Each establishment will be subdivided into work units which will furnish or receive products or services from other units. Each of these units will have a leader who will analyze all the elements which determine the costs of the unit and will link them to the corresponding products or services. On this basis the leader will review and analyze different ideas on cost reduction at least until the goals are reached. These ideas will then be presented to a head committee composed of the top leadership, who for every approved idea will set a programme to realize the goal by choosing the leaders, the investments, the time and so on. In the final analysis, Falk, who calls his system an Operational Growth Service Programme (PIP), limits this system to Toyota.
Will "total quality" in its numerous variations amount to a reference point for industrial reorganization in the 1990s? We believe so, not so much because everyone talks about it, but because with little investments, considerable savings can be made, because the system goes in the direction and because on paper everything seems to work well.
The subdivision of an establishment into numerous units radically modifies the current organization of labour. The use of space must be changed and each worker must accomplish different tasks. It is therefore probable that we are witnessing an increase in investments to construct new establishments. But attention must be paid above all to the effects on living labour. In the case of the Falk firm, which we take as an example, each unit has its own autonomy, controls the units at the beginning of the production process and is controlled by the unit at the end with the same criteria that is applied today to sub-contractors. As a result, each unit is like a small artisanal unit which does not produce a finished product but a part of a product. In other words, this is not a return to the assembly teams that Volvo introduced long ago to eliminate the boredom of repetitive labour. It is in fact, something completely different. It is rather, a very sophisticated attempt to confront alienated labour. Alienation flows from the fact that in existing society labour is not an activity to satisfy a need, but a means to satisfy needs and that it has become more and more a means following the fragmentation of typical fordist production. From this flows the fact that the worker only feels free outside of work and that therefore they want to avoid work like the plague. The implicit aim of "total quality" aims at replacing in the conscience of the worker what is produced by how it is produced. That is a productive sys-
72 International Marxist Review tem which has as its universally recognized goal quality and the reduction of costs. If, in addition to this, the producers are offered the possibility of actively participating in the realization of these goals, it should be possible to create the conditions for the workers to freely express their physical energy and for satisfaction to replace alienation. In the final analysis the production of medicine to treat wounds from arms amounts to the same thing if the goal of labour is the quality of what is produced with reduced costs.
The division of a given enterprise into small or medium units corresponds to the need to make entirely visible, perceptible and controllable the results of physical and intellectual effort that everyone is asked to make. It would involve a sort of artisanal workshop which has as an ultimate goal a way of organizing production where everyone does what is necessary, where the hierarchy is reduced to a minimum and serves only to co-ordinate the efforts of all, and where the objectives are constantly increased.
Such an organization of labour cannot fail to have consequences for workers. The historical division between workers and employees should be surpassed as well as the rigid hierarchy of functions, to the degree that the system necessarily involves polyvalance. If a machine stops it would be those who use it who will have an interest in fixing it without waiting for the intervention of maintenance personnel; if there are defects everybody must have an interest in eliminating them, and so on. If, due to multiple problems which occur in every stage of production, the quantitative objectives cannot be reached during regular working hours, it seems logical to either do it with extra hours or introduce flexibility in the modification of the beginning and ending hours of labour.
It is clear that such a system tends to accord value to labour in and of itself. The conception of alienated labour can be eliminated - "one must work to live" and be motivated by the idea that it is necessary to "live to produce merchandise always of higher quality and less and less expensive". What role for the unions?
What role can a craft union play in this new situation, given that until now it has negotiated wages on a national as well as a company level? What role can unions and confederations play overall who have until now taken on more general social problems, for example, unemployment or employee-paid retirement plans?
This is not the place to judge what craft or confederation unions have done
Industrial trnasformation and the employers' offensive 73 in the past. We raise the question of knowing if the new system calls into discussion the current mode of structuring of union organizations.
A number of unionists think that "total quality" finally gives unions the possibility to play a new and decisive role after years of defeats to the degree where the employers need to appropriate the "know how" of the workers. This is a dangerous illusion!
If what we have said is true, the employers can without any problem accept an institutionalized union that negotiates on company benefits and retirement plans, but cannot accept a union which draws its legitimacy from conflicts and attributes to different categories the national negotiations on wages and working conditions.
The institution over the last few years of production costs tied to obtained results on an enterprise by enterprise basis, indicates that the employers can tolerate a union that is in harmony with the interests of each enterprise and accepts the idea that the fate of the workers is directly tied to that of the enterprise. The slogan "workers of the world unite" is replaced by the slogan "workers of each factory unite against each other."
In Japan where the system of "total quality" was introduced long ago, but with various degrees of success, it has been the company union which has been affirmed. But the essential condition was a constant economic growth, each crisis being overcome thanks to the conquest of new openings in the world market, with a very low rate of unemployment This was a very different situation from Italy where only 70% of young people work.
It must be remembered that the Japanese capitalists benefit from the division of workers into "guarantied" and "non-guarantied", in other words, into workers who are assured of life-time employment, and those who do not enjoy such a guarantee. The restructurations which have taken place in Japan, in for example, the Navy yards, were instituted without problems thanks to this division between workers as much as the fact that were other markets (it can be said in passing that in Japan, the big financial groups hold enterprises in several sectors so that movement between sectors is relatively easy).
We believe that in Italy the conditions exist for the introduction for a part of the "total quality" principles and that its effects in terms of costs are considerable. But it will be very difficult to win the mass of workers to this. Amongst others, a reduction of costs, if one wants to maintain the same number of workers, implies that new markets must be found, which is not easy. Otherwise, it is necessary to have the option of technical unemployment or layoffs. It will be difficult for those who bear the costs to make the effort to
74 International Marxist Review reduce costs!
We are confronted with a wide-reaching attack. The worst way to respond is to mistake dreams for reality or to only deal with some elements like for example, the tendency of the "total quality" system to drastically reduce skills and therefore to establish a greater equality among workers. The unions can only meet the challenge on the condition that it elaborate its own independent political orientation by stressing its own values. The choices are clear: either it is recognized that production in and of itself is has a values and it is estimated that it must cost less and less and constantly improve from the point of view of quality, or to consider the needs of the men and women who must work to live as the priority.
It is not a question of opposing in principle increasingly productive systems to qualitatively superior products, but of reconstructing a value system that corresponds to the needs of working class and rejects the social costs that a new system delivers.
We have pointed out that the "total quality" system involves a greater equality among workers. But it must not be forgotten either that it stimulates at the same time, corporatist tendencies to the degree that it involves an identity between the interests of the workers and those of the enterprise which the consequence is the acceptance of a maximum of flexibility and of the ties between the wages and the results obtained the enterprise and so on. beyond this, as concerns especially Italy, the problems that have always concerned the working class in its entirety (employment, retirement, worker-paid company programs and so on) will only be dealt with at the Parliamentary level. Only the parties or institutionalized unions outside of all workers control.
Finally, it is necessary to reflect on the experiences that have been made not only in Japan, but also in the USA. It is absurd that while a "model" of production is spreading on a world wide scale, the workers do not know what is happening in other countries. Such knowledge is necessary for the elaboration of any unified response.
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