The labor-capital relationship and the long-run dynamics of capital accumulation

The social structure of accumulation theory provides an analytical framework for understanding the labor-capital relationship from a long-run perspective. Capitalist economies are characterized by alternating periods of long-run upswings and downswings, each of which can have a time span of one to multiple decades. In the long upswing, a social structure of accumulation — a set of economic and political institutions — provides a stable and favorable environment for sustained capital accumulation and satisfactory economic growth. The decay of the social structure of accumulation brings the economy into a period of downswing. In this model, a fundamental aspect of an accumulationsupporting social structure of accumulation is the stabilization of labor-capital conflict (Gordon, Edwards, & Reich, 1982; Kotz, 1990, 1994). Such stabilization can be achieved either through a compromise between workers and capitalists, or by the capitalists’ repression of workers’ power and rights.

Gordon et al. (1982) argued that two crucial components of the social structure of accumulation that condition the upswings and downswings of a capitalist economy are the organization of work and the structure of the labor market. First, motivated by the intensification of labor-capital conflict during a period of downswing, capitalists would strategically seek new methods of labor management for controlling workers. Second, these experiments would lead to the emergence and consolidation of a new way of organizing work in capitalist firms and a new set of institutions governing the labor market, which would then become the foundation of a new social structure of accumulation to support a new period of long upswing. Third, workers’ opposition and struggle would eventually undermine the existing organization of work and labor market structure, and, as the laborcapital conflict intensifies, the capitalist economy would enter a new period of downswing.

Gordon et al. (1982) used this theory to explain the dynamics of labor-capital relations in the U.S. For example, in the late nineteenth xentury, capitalists in the U.S. were constrained by the skilled workers’ control of the labor process and the lack of a generalized competitive labor market: the skilled workers’ control of the labor process limited the capitalists’ capacity to intensify worker productivity; at the same time, the lack of a generalized competitive labor market limited the capitalists’ power to threaten to fire the workers. Thus, from the 1890s to the 1920s, to increase labor productivity and profitability, capitalists experimented and consolidated a new system of labor control through increased mechanization. Capitalist control in factories was enhanced by the increased use of assembly line machines. With this there was increased use of foremen to supervise the workers, decreased reliance on skilled workers, the development of centralized personnel departments, the cooperation with and cooptation of craft unions, and the manipulation of ethnic differences among the industrial workers. Factory-based homogenization also increased competition among the workers in the labor market. As a result, this emergent system consolidated capitalists’ power, stabilized labor—capital conflict and supported the growth of the U.S. manufacturing sector in the 1920s. But the stabilization of labor-capital conflict did not mean it had been overcome: worker’s resistance became increasingly hidden, as expressed in the increased labor turnover rate, and the growth of industrial unionism, building on the organizing opportunities that emerged from workplace homogenization. In the late 1920s and early 1930s, the widening gap between wage growth and profit growth finally brought the economy to a crash, and into a period of downswing.

The labor-capital relationship and the strategic behavior of workers and capitalists

Although labor-capital conflict is endogenous to every capitalist economy, the intensity of conflict depends on the specific political and economic conditions. Under a specific set of conditions, workers and capitalists may choose to compromise with each other: workers consent to the appropriation of profits by capitalists, and the capitalists allow workers to make effective claims for the improvement of material conditions via democratic institutions. Under a different set of conditions, however, labor-capital conflict may intensify and lead to either a dictatorial capitalism in which capitalists brutally repress the working class, or a socialist revolution. Przeworski and Wallerstein (1982) analyzed the dynamics of labor-capital conflict by considering these strategic choices of the workers and capitalists.

In a capitalist society, profit-making is the necessary condition for the expansion of production, consumption and employment, and the improvement of material conditions of any social group in the society. Faced with such a situation, workers and capitalists can choose from a set of two class-specific strategies. First, the workers can choose to compromise by consenting to the capitalists’ private profit-making or take a more militant stance by claiming ownership over capital and reorganizing production and consumption in a socialist way. Second, the capitalists can choose to expand production by reinvesting profits, or to disinvest by spending profits unproductively. Different strategies lead to different structures of labor—capital conflict. First, if the workers choose to compromise and capitalists reinvest, then labor-capital conflict would be contained, and economic growth would be sustained. Second, a labor-capital compromise can also be obtained if workers push the capitalists to reinvest by threatening increased militancy, or if capitalists press the workers to compromise by threatening to disinvest. Third, if workers become more militant and capitalists choose to disinvest, then labor-capital conflict would intensify.

The actual strategies chosen by workers and capitalists and thus the resulting structure of labor-capital conflict depend on expectations about future gains. Certainty can be enhanced in a number of ways. First, highly organized workers and highly organized capitalists can reduce competition and free-riding within each class and ensure that individual workers and capitalists or subgroups of each class commit to the compromise. Second, the labor-capital compromise can be institutionalized by law and enforced by the state. Third, the societal risks inherent in the economic system due to short-run fluctuations, technological change, competition and other economic factors, may be minimized.

These three theoretical frameworks — concerning the short-run business cycle, the longer-run institutional changes, and the strategic interaction of workers and capitalists — raise a series of questions regarding the current state and future evolution of labor-capital conflict in post-reform China. First, from a long-run perspective, what is the structure of the current labor-capital conflict that has supported the sustained economic growth in the past four decades in China? Second, are there signs that the labor-capital relationship will destabilize the current post-reform social structure of accumulation and threaten future economic growth in China? Third, from a short-run perspective, does the recent movement of the profit (wage) share imply that China has entered the ‘latter half of its economic expansion, and how will capitalists and workers respond to the new situation? And fourth, given increased uncertainty in the Chinese economy, both due to international pressures such as trade disputes, and domestic factors such as overcapacity and financial risk, how will capitalists and workers respond? In the next section, we analyze the structure of the postreform labor-capital relationship in China and then we discuss the future evolution of labor-capital conflict in China using the three theoretical frameworks.