“…the global economic impact of cold war chill-out will put strong pressure on U.S. capital… [and] intensification of competition on a world scale”

Kim Moody

SO FAR, THE debate over the domestic economic and political effects of the fading Cold War has focused on the division of the future “peace dividend.” That is, as the defense budget gradually shrinks to a merely outrageous proportion of the gross national product, who will reap the savings?

Capital hopes that declining interest rates resulting from budget relief will stimulate more investment, making the 1990s a decade of growth. In particular, capital hopes to devote a larger proportion of the nation’s surplus value to industries that can vie in global competition. The demise and devaluation of some defense-oriented businesses will not be mourned by firms out there in the world market and the unemployment of numbers of skilled workers will be welcomed. The different sectors of capital will squabble over the degree of defense reductions, but the days of the ever-growing war chest are over.

Labor, too, has its eye on the void it supposes will appear in the federal budget Of course, unions with members in the defense sector will try, as the Machinists union and the United Auto Workers already are doing, to convince Congress that the weapons their members make are the indispensable ones. Nevertheless, reborn reformist urges are surfacing around a legislative drive for “family” programs, above all, for national health insurance. Defense cuts will be seen as the means of financing such social legislation.

At the same time, however, the global economic impact of Cold War chill-out will put strong pressure on U.S. capital. Three trends, in particular, will create both opportunities and problems for American business: growing technological transfer from West to East, intensified trade and investment with the Eastern bloc; and, as a consequence, a general intensification of competition on a world scale.

Defense cuts in the West will be matched or exceeded by those in the East Barring a workers’ revolution or a neo-Stalinist backlash, the liberated surplus will, as everything we know about perestroika makes dear, go primarily toward technological modernization. This will provide markets for Western purveyors of technology, as well as investment opportunities, as Japan’s $1 billion leap into Poland and Hungary indicates. The net effect of both, however, will be the development of new export-oriented pockets of high-tech industry in the East Low labor costs and new technology will make some of these competitive despite the low productivity of Eastern bloc labor. A whole new space will come into play in global markets already haunted by overcapacity.

Some radical economists see the opening of the Eastern market (and the European Single Market) as a breathing space for Western capital. But, even aside from the obvious limits of such a pauperized market, this one-sided view fails to look at the competitive effects on capital’s accumulation crisis. Growing competition will continue to put pressure on profit rates and technological “solutions” will fuel the tendency of profit rates to fall. Declining military waste production will also add to this tendency.
None of this points toward a rerun of the 1950s “social compact” between labor and capital. Instead, it points to more pressure by business to contain labor costs, increase “flexibility” in the workplace, and hold down social spending.

These conditions will intensify the fight within labor between those sections of the bureaucracy (most of it) who pander to the employers’ competitive concerns and growing elements in the rank and file pushing for “new directions.” This internal conflict will gather momentum from the perception that increased investment (abroad or in job-displacing technology) makes further concessions or speed-up inappropriate.

Labor’s legislative impulse will be supported by the rank and file, particularly for comprehensive programs like national healthcare, childcare, education, etc. But the logic of the ranks’ support will differ from that of the bureaucracy: The labor leadership understands legislation like national healthcare, in part, as a new front in the competitive battle of American capital, as these programs socialize key elements of labor costs. Within this competitive logic, such savings by the employers will not be viewed as much as relief on collective bargaining as a means toward “job security.” The labor leadership will, by and large, continue to accept wage restraints and workplace flexibility as necessary elements in saving American jobs. The ranks, on the other hand, will see the hope or realization of new social legislation as relief for their declining living standards and as a sign that labor can force concessions out of capital. This will encourage more boldness on the job, more pressure from below on collective bargaining and more initiatives in organizing the unorganized.

The 1990s, then, promise both intensified class struggle within the United States and the growth of opposition movements within the unions. A renewed political aggressiveness, regardless of contradictory motivations, could also point to new developments in the fight for labor’s political independence. These are potentials, not predictions. Their realization calls for more aggressiveness by the rank and file, the left and the social movements (which will also perceive greater opportunities) in prying open political space that capital will seek to contain.

March-April 1990, ATC 25