Deindustrialization and regionalization: Class alliance and class struggle

T H I R T I E T H N O R T H A M E R I C A N M E E T I N G S OF THE REGIONAL SCIENCE ASSOCIATION

DEINDUSTRIALIZATION AND REGIONALIZATION: CLASS ALLIANCE AND CLASS STRUGGLE

Neil Smith Department of Geography Columbia University 420 IV.. 118th Street New York, N Y 10027

ABSTRACT The process of deindustrialization is place-specific, and is partly responsible for the redefinition of the regional structure and the transformation of the basis, function and scale of regional differentiation. Defined as a secular, uncompensated devaluation of capital, it is part of a larger spatial restructuring, associated with economic crisis. Most participants in the debate over deindustrialization have assumed that some form of class alliance is the best strategy for workers to pursue in overcoming the regional unemployment problems caused by deindustrialization. This paper argues the opposite.

1. INTRODUCTION At the scale of the world economy, something quite remarkable was

accomplished in the quarter century following World War II. What had begun as nominally separate national markets and economies in the developed world became integrated into a single world market. First intimated at the financial level with the 1944 Bretton Woods agreement, the integration of national markets was consummated in the 1970s with burgeoning corporate organization of industrial production at the world scale. This globalization of industry occurred rapidly in a number of sectors, of which the automobile industry with its world car is the best known. The resuits of this process have been dramatic and complex, reaching into virtually every home and every work place, as well as into numerous Third World economies which have been strongly (if still partially) integrated into the unified world system. Pervasive throughout the developed industrial world, deindustrialization is one major effect of this transformation. The economic integration that accompanied rapid economic expansion laid the vital foundations for the equally rapid deindustrialization which emerged as one aspect of economic crisis.

As a proportion of total labour force, the number of manufacturing workers in the United Kingdom peaked in 1961. By the mid 1960s the proportion had peaked in most of the northern European nations, which then experienced a secular decline throughout the 1970s and early 1980s. In the United States the proportion of manufacturing workers peaked in 1973 at 32.5% of the labour force, dropping to 29% in 1975. France peaked in 1974, followed by Italy and West Germany. Among the major industrial economies, only in Japan, where the figure was still well below that of the other industrial nations, did the proportion of manufacturing workers actually continue to grow throughout the 1970s. This relative decline in industrial employment was matched by an equally profound growth of service employment such that 64.2% of U.S. jobs fell in that category by 1973, while even in Japan the figure was 49.4%, higher than any of the other major industrial nations except the U.S. and the U.K. (54.5%) (Harris 1980 and 1983).

This is, by now, a familiar picture. Equally familiar is the observation that

114 PAPERS OF THE REGIONAL SCIENCE ASSOCIATION, VOL. 54, 1984

industrial decline has not been a balanced process but was markedly uneven, affecting different territories to different degrees and in different ways. Deindus- trialization is an inherently spatial concept. At the scale of the national states, the U.K. and the U.S. seem to have been more deeply affected than the other national fragments of the world economy. At the regional scale, and this too is familiar, the pattern is more complex, with deindustrialization concentrated in certain regions, while in others it is compensated by new investment, new high- tech industries, and new employment opportunities. (Table 1 provides data on job change, by region, for the U.S.) This has led to a rapid restructuring of traditional industrial geography and new patterns of labour migration, as well as public political responses to runaway shops, plant closures, factory shrinkage and high regional concentrations of unemployment.

But it is not just the internal industrial geography of the advanced territories that is being changed, as a result of the globalization of industry. Less commonly understood is the fact that the old configuration of subnational regions is being entirely restructured as part of this global integration; the regional geography of advanced capitalism looks radically different today than it did even twenty years ago. It is not just that regions have experienced important changes in industrial mix and employment levels, external trade relations and internal resource bases. Rather, alongside these changes, there has been a more profound transformation in the very constitution of regions, in the differentiation of geographical space into regions. These changes have irradicably transformed the boundaries of contemporary regions, the scale at which they are structured into coherent territorial units, and the functional basis upon which the constitution and differentiation of regions takes place.

Briefly, the composite pattern of regional differentiation is based first and foremost (not exclusively) upon a territorial division of labour; regional specialization in the production process is the primary determinant of the overall regional structure of a given territory. This territorial division of labour can itself reflect the differential importance of the various components involved in the production and circulation of commodities. Thus twentieth-century capitalism inherited a territorial division of labour and regional structure rooted firmly in the differentiation of the natural environment: iron and steel manufacturing arose in regions where coal and iron ore were available; the hog belt, cotton belt and wheat belt in the U.S. were agricultural regions determined mainly by climate and physiography; textile regions arose in hilly landscapes where sheep

TABLE 1. The Ratio of Jobs Destroyed to Jobs Created, Through Openings, Relocations, Expansions and Contractions of Private Businesses, from 1969 to

1976, in the U.S., by Region Jobs Destroyed

Region Jobs Created

New England 1.15 Mid Atlantic 1.20 South Atlantic 0.76 East South Central 0.80 West South Central 0.75 East North Central 0.85 West North Central 0.88 Mountain 0.80 Pacific 0.82

U.S. as a whole 0.88

Source: Birch (1979).

DEINDUSTRIALIZATION AND REGIONALIZATION 115

could be raised and water power was available, etc. And this, naturally enough, was the basis of traditional high school regional geography. Although the transformation from this nature-based differentiation of geographical space has progressed as part of the increasing capitalization of the economy, it was only following World War II that socially produced differences became firmly rooted as the basis of regional differentiation. Particularly as transportation costs were reduced, the limitations of natural divisions of territory were overcome, and wage rates, levels of union organization, workers' skills and productivity, worker militancy and other socially produced differences became the basis for regional differentiation. Uneven development based on accidents of uneven natural endowment is replaced by uneven development based more and more systematically upon the spatial differentiation of the social determinants of capital accumulation (Smith 1984).

This restructuring of the regional geography of capitalism is accomplished in part through the deindustrialization process. As much as (indeed, in consort with) capital investment, disinvestment is responsible for the production of a whole new configuration of regions. It is no accident, therefore, that the so- called regional question has appeared on the agenda at the same time as deindustrialization. Far from being an abstract question of geographical classi- fication, the regional question, like deindustrialization, is a concrete question thrown up by the specifics of capital accumulation and the organization of global production. Deindustrialization and regionalization are as twins hatched from the same economic egg. This paper seeks to sketch some of the salient aspects of the relationship between these processes. We shall examine the causes of deindustrialization and attempt to explain the relationship between the economic events and emerging spatial patterns. We shall also consider the question of solutions to the process of deindustrialization, which is the focus of a developing debate. In all of this, the attempt is to synthesize research concerning questions that are usually treated separately. It should therefore be treated as suggestive rather than assertive.

2. THE DEINDUSTRIALIZATION DEBATE Contemporary arguments and debates in the U.S. over deindustrialization

revolve as much around policy alternatives as around fundamental causes. It is possible to identify three major positions, within each of which there are several variations. The first, essentially conservative, position seeks free market solutions to the problems inherent in deindustrialization. The second position, more liberal at times but not consistently so, relies upon government intervention through some sort of industrial policy. The third general position is much more mixed in political pedigree and proposes a broader, more comprehensive economic, political and social strategy for resuscitating the economy.

Free Market Policies Reagan's supply-side economics and the policies of Margaret Thatcher

represent the most publicized versions of this position. The nation's economic woes are blamed primarily on the wasteful and inherently inefficient intervention of the central government in the sphere of production. The solution to deindustrialization is therefore to supply private capital with much-needed funds for investment and to leave it free to invest where the profit rate is highest. If capital does not invest in cities and regions where unemployment is high due to plant closures, then workers ought to move to where jobs are available. Only to the


extent of seeding private enterprise, as envisaged in the enterprise zone, would government be involved at all (Butler 1981).

As the supply-side solution proved to be no solution at all and was dropped in all but rhetorical reference, at least in the U.S., a second conservative free market policy has begun to attract support. According to this position, what is required is a basic renaissance in the techniques of management, broadly conceived. The free market in itself works as efficiently as ever, but inevitably there are winners and losers, and American companies have become losers because they have not kept up with new management methods, especially concerning product quality and technological innovation, and have thus become less competitive. Enlightened management is the essential solution (Abernathy, Clark and Kantrow 1983).

Government Intervention and a National Industrial Policy The general position here is that the free market alone cannot, or is unlikely

to, reverse the process of deindustrialization without strong subsidy and support from the state. Only state intervention can realign the nation's industrial development and compensate for those features both within and beyond the free market which led in the first place to industrial decline. Here also, there are two basic positions. The reconstructionists, typified and to some extent led by Felix Rohatyn, insist that the old and declining industries must be supported by the state until they are again competitive (Rohatyn 1981). Against this the reindustrializationists argue that while strong state support is necessary, it should be directed not at those hopeless sectors which have already begun to d e c a y - the so-called sunset or smokestack i n d u s t r i e s - but at the "sunrise" industries such as electronics, microcomputers, biogenetics, and high-tech in general (Thurow 1980a and 1980b).

Comprehensive Social, Political and Economic Strategies The most widely publicized of these strategies can be labeled corporatism.

In that it involves crucial state involvement, corporatism is similar to the alternatives offered above, but in this case the emphasis is less upon the precise target of state support, more upon a thorough restructuring of the set of social relationships involved in the capitalist production process. Thus in 1980, Business Week produced a report on "The Reindustrialization of America," which in its barest essentials called for a new social contract between the three major participants in the economy: labour, business and government. There would have to be sacrifices, they warned, but this "social partnership" represented the most promising way forward (Business Week 1980 and 1982).

A qualitatively more extreme version of corporatism emerges from a rather short-sighted fixation with the success of Japanese economic development. The "Japanization" of the American economy is seen as the only means or the most efficient means for industrial success in a world market increasingly dominated by Japanese exports, Japanese companies and Japanese methods. This would involve state intervention in the economy (to the point where the distinction between public and private no longer made sense) and also the inducement of standards of loyalty between workers and employers, and vice versa, that are quite foreign to American labour relations (Vogel 1979; see also Junkerman 1983).

Finally, there is the proposal for a "radical reindustrialization" of the American economy. According to this scenario, deindustrialization results from the specific characteristics of the post-war capitalist system, and can be traced


back to the undemocratic character of that system. As long as the system is undemocratic and organized in pursuit of profits rather than human needs, social conflict is inevitable and periodic crises will ensue. Only the extension of democratic rights will provide the means for averting crisis and thereby solving or even avoiding the problems of deindustrialization. With broader "community" control guaranteed by this extension of rights, the movement of capital in search of profits could be carefully controlled so as to minimize the social problems ensuing from capital flight (Bluestone and Harrison 1982; Bowles, Gordon and Weisskopf 1983).

These different prescriptions are by no means as neatly divided from each other as they appear here. And this becomes even clearer when we examine the causes of deindustrialization implied by the different positions. Albeit with differing emphasis, the failure of American corporate management figures in most accounts, as does the struggle by American organized labour for higher wages and better work conditions. But there are three more general threads of agreement to which it is worth drawing attention. First, deindustrialization is, without exception, seen as a defect within the overall economic system, a temporal and spatial maladjustment of lesser or greater concern, rather than a product of the underlying spatial-economic nature of the capitalist mode of production itself. Second, the solution to the problem is viewed as essentially national. Third, this solution involves to a greater or lesser extent the creation of a class alliance, at different geographical scales, between workers and employers. All three of these shared assumptions, I dispute.

It is not the function of this paper to provide a comprehensive critique of the assorted positions on deindustrialization. Rather, by attempting to show why deindustrialization is a necessary correlate of the present word economic crisis, I hope to show the limits to class alliance as a means of defending or resuscitating any given regional economy, and to demonstrate the role of deindustrialization in forging a new regional geography.

3. ECONOMIC CRISIS AND THE ORIGINS OF DEINDUSTRIALIZATION Economic crisis does not abstractly imply a pattern of deindustrialization,

but in the context of post-World War II capitalism, economic expansion followed by crisis provided the essential stage upon which the deindustrialization drama was initiated. The origins of crisis lie in the tendency toward the falling rate of profit, which Marx (1967 edn.) discussed in volume 3 of Capital. At its most basic, the argument goes as follows. The capitalist mode of production is built upon the political relation between on the one hand a working class who must sell their labour power for a wage, and on the other a capitalist class who own the means of production as well as the surplus value produced as a result of its employment. Surplus value, or profit, is produced solely by human labour and being "freed" of any ownership of the means of production, the working class has little choice but to sell its labour power for a wage. For its part, the capitalist class, which owns among itself the social means of production, must make its profit on the market amid conditions of competition between individual capitalists and capitalist enterprises. As with the working class, therefore, the strncture of the mode of production sets certain (albeit different) limits and necessities on the capitalist class." Specifically, in the present context, individual capitals are compelled tocompete in order to survive. A capital which is unable to compete fails to make a profit and is squeezed out of the market.

Competition implies the production of larger and larger quantities of a good at lower prices, and so at the scale of the individual enterprise, most capitals


must expand in order simply to survive. "Accumulate, accumulate" becomes the motto of capital. This passion to accumulate can be fulfilled simply by adding more workers, more machines and more raw materials to be worked up, but the process is speeded up and competition intensified if part of the accumulated surplus value is reinvested in more productive technologies, thus allowing the same number of workers in the same period to convert a larger quantity of raw materials into a larger number of commodities which sell at a lower price. Technological innovation becomes the cutting edge of capitalist competition, and this is both the greatest achievement of capitalism and also its fatal flaw. Thus while economic expansion and the development of the forces of production become institutionalized, the price is severe. Driven,by technological competition, the ratio of constant capital (raw materials, machinery, factories, etc.) to variable capital (the value of employed labour power) increases steadily. Even if the mass of profit continues to rise, the rate of profit inevitably begins to decrease at some point as the very basis upon which profit is produced systematically diminishes. This tendency toward a falling rate of profit was the spine of Marx's theory of crisis.

New the actual history of the development of crisis in the world capitalist economy is a far more complex affair than suggested in this abstract theoretical account. And of course there is no shortage of competing interpretations of crisis theory, more or less rooted in Marx's work (Shaikh 1978). But whatever the theoretical debates, the empirical evidence is unambiguous. Although there have been brief periods of increased profit rates, especially at the beginning of the period, industrial profit rates have declined overall since 1949 to the present day (Weisskopf 1979). Further, capital does not simply acquiesce in the face of this tendential decline in profit rates, but attempts an ingenious array of counteractive and avoidance strategies. It is in the details of these strategies as well as in the overall dictates of crisis that we begin to find the roots of deindustrialization.

The rate of profit does not decline evenly in all sectors and in all geographical locations. Depending on differential rates of profit, capital accumulates more rapidly in some sectors and areas than in others, leading to a more rapid overaccumulation and a faster decline in the profit rate. Capital is always free to move between sectors and locations, but as profit rates begin to decline, the intensity of capital movement increases. Some capital remains devoted to forging new, more profitable opportunities in old arenas, but substantial quantities of accumulated capital switch arenas in search of higher profits. To the extent that profit rates fall in other parts of the economy, new investment outlets are diminished, competition for investment opportunities is intensified in the face of massive accumulation, and the rate of profit is driven down more quickly. The falling rate of profit is generalized, not just across several sectors, but throughout an increasing proportion of the industrial and eventually the non- industrial economy (see Harvey 1978). To take just one recent, obvious illustra- tion, the overaccumulation of capital in certain segments of the energy industry led to a crisis of profitability within a whole layer of energy corporations, concentrated in Texas, and this in turn led to the bankruptcy of several large regional banks.

One of the remarkable features of the recent period is that whole layers of capital, which had still been somewhat restrained by national boundaries, found themselves in the 1960s competing in a truly international market. When the falling rate of profit began to nudge specific capitals toward reinvestment elsewhere, these capitals suddenly found themselves in a landscape whose horizons were determined only by the confines of the globe. While this globalization of


the market contributed to the prolonged expansion of post-war capitalism, aided in no small degree by a permanent arms economy which pumped large quantities of capital into heavy engineering sectors, it also opened up the domestic economy to massive capital influxes from abroad; globalization is a two-way process. It was in this period, beginning in the 1960s, that the Eurodollar was born, European capital moved into the U.S. in unprecedented quantities, and the "Newly Industrialized Countries" rose to prominence. The latter have played an unexpected role. According to Harris (1983 and 1979), the brief but sustained growth in the world economy following the slump from 1973 to 1975 was led by the Newly Industrializing Countries of East Asia, some of the more advanced Latin American economies, and even some of the Eastern Bloc economies. With the second slump, beginning between 1979 and 1981, this partial integration of more marginal economies was halted, but to the extent that it had permitted the continued frenetic movement of capital toward poles of profit, it also seriously intensified the adverse effects of economic crisis. Thus Brazil's $98 billion debt or Poland's $28 billion are simply the other side of the deindustria~dzation coin.

The solution to crisis inevitably involves the devaluation of overaccumulated capital. This is true not because in some basic sense the word has too many jobs, dollar bills, tractors, sewing machines or loaves of bread, but because, on the contrary, the profit from making these things is so low, despite the over- whelming need for them, that capital moves instead into gold, stocks and bonds, or the futures market. To the extent that capital can remain liquid, or more properly, mobile, it can escape problems of devaluation, but it does so at the cost of never being invested in real production. As the profit rate declines and crisis develops, different capitals are caught in different states and different bodily f o r m s - as inventory or workers' wages, machinery or raw materials, factory buildings or krugerrands. Depending upon its form, capital may be highly mobile or not mobile at all (Harvey 1982). The point is that capital invested in the built environment tends to be among the least mobile forms of capital and hence the most susceptible to devaluation during crisis. This is due not to the physical immobility of capital in the landscape but its temporal immobility in that investments in the built environment tend to have a relatively long turnover period, and so capital must remain immobilized in one particular physical form for an especially long period, before its value is entirely "liquidated."

Devaluation takes many f o r m s - unemployment, inflation, market gluts, mergers, bankruptcies, even the physical destruction of capital in war. What interests us here, however, is the systematic disinvestment from productive capital invested in the built environment. Devaluation in this form is the most basic determinant of deindustrialization. It comes in a variety of forms. The most obvious is plant closures (temporary or permanent) where fixed capital invested in buildings and machinery is simply made idle, regardless of the value it embodies. But devaluation also occurs where plants are scaled down, either in size or in the range of functions they perform, or when companies pursue a deliberate strategy of disinvestment - - the non-performance of maintenance and repairs. What begins as an almost ad hoc individual strategy for dealing with overaccumulation soon becomes an overriding social necessity for the capitalist class. As overaccumulation progresses it is not just odd capitals here and there which are pressured into devaluation, but the whole social capital which must be devalued in response to crises. Competition on the market over price, quality and market share is turned inward as different factions of capital fight to defend their capital against devaluation and to displace the pressures for devaluation onto other capitals. "So long as things go well" Marx says, "competition effects


an operating fraternity of the capitalist class." With only minor skirmishes, "each shares in the common loot in proportion to the size of his respective investment" But with the onset of crisis, the world is turned upside down: "How much the individual capitalist must bear of the loss, i.e., to what extent he must share it at all, is decided by strength and cunning, and competition then becomes a fight among hostile brothers" (1967, III, p. 253).

The capitalist class, as a class, attempts to localize and isolate the crisis in certain sectors and locations, but its success is only ever limited. To the extent that devaluation is concentrated in some areas and not others, these are withdrawn from the range of available investment opportunities and the overall crisis tendencies are exacerbated (Harvey 1982). They find themselves caught in an essential contradiction, therefore, and one which lies at the heart of most policies for reindustrialization and reconstruction. First, there is a mass of accumulated capital in liquid form available for investment but there are diminishing opportunities for such investment, and that investment which does occur intensifies the crisis. Second, new technologies are increasingly available for a reconstruction or reindustrialization of the economy, based on the ability to produce old commodities more cheaply and to introduce new items. But with low rates of capacity utilization in working plants, and a reservoir of idle plants that could be brought back into service, massive investment in sophisticated new technology rarely makes economic sense.

Although their analysis penetrates more fully to the systemic causes of deindustrialization, even proponents of "radical reindustrialization" seem not to comprehend that reconstruction and reindustrialization cannot follow smoothly on from crises of devaluation. The "Economic Bill of Rights" proposed by Bowles, Gordon and Weisskopf (1983), as well as Bluestone and Harrison's (1982) "Reindustrialization with a Human Face" both assume this gradualism in industrial evolution (see also Luria and Russell 1981; for an excellent critique see Peet 1982). In reality, however, the falling rate of profit and the overaccumulation of capital lead to "violent and acute crises, to sudden and forcible devaluations [Entwertung]" such as those experienced in the depths of the Great Depression and eventually in World War II (Marx 1967, III, p. 254; Harvey 1983). It is this cataclysmic change which separates the period of devaluation from that of reconstruction or revaluation.

As regards the present period, it is clear that for the time being at least, we are still in a stage dominated by the devaluation of capital. Reagan's war ambitions may well change this assessment very quickly but for the moment there is comparatively little reconstruction in those industries which bore the brunt of devaluation. There are mergers and takeovers, and there is some capital export, even modest investment within the U.S., but the restructuring which has begun, however much it points to the future, is dwarfed in comparison to continuing devaluation of old capital. Only after the larger scale devaluation and destruction of capital, wherein a virtue is made out of grim necessity, is the economic debris cleared sufficiently to create significant new spaces for investment and reindustrialization.

Deindustrialization is the direct result of this cyclical devaluation of capital, although it is far from an automatic result; previous bouts of devaluation have not led to deindustrialization. It is the specific sectoral, temporal and spatial characteristics of this devaluation of capital that combine to make it a process of deindustrialization. Beginning with the sectoral component of devaluation, it is clear that the most seriously affected were the old manufacturing industries which were heavily concentrated in the developed w o r l d - steel, auto, ship-


building, textiles, electrical durables, and so forth. These sectors were the most vulnerable to the giobalization of industry because their concentration in old industrial centers was primarily the historical product of high transport costs, forcing the production process to be located near raw material sources or markets, or both. But the globalization of industry is precisely the result of a dramatic tendency toward the equalization of transport costs. If revolutions in transport technology enabled production to take place at the world scale, the expansion of the scale of production in most of these industries itself almost necessitated supranational markets. Thus considerations other than transport costs became more influential determinants of locational efficiency. This is what allowed the development of multiple assembly processes, whereby the manufacture of a commodity, say a shirt, no longer takes place in a single building but involves a number of discrete operations in different places, often separated by thousands of miles.

This new spatial freedom does not apply to all sectors of the economy. In the production of specialized electronic components, machine tools, computer systems and high-tech research and development in general, access to skilled labour may be the overriding determinant of location. Thus Massey (1978) found a systematic locational difference between R & D functions on the one hand and mass production in the other, within the same sectors of the British electronics and electrical engineering industries. Other sectors may remain locationally bound by raw material sources, for example mining and extractive industries. To the extent that devaluation affects those sectors, it is unlikely to involve the massive, systematic, secular movements of capital generally associated with deindustrialization.

What are the temporal characteristics of devaluation that incline toward deindustrialization? In the first place, any investment of fixed capital involves a process of devalorization (distinct from devaluation) as the invested capital progressively loses its value to the commodities produced. Devaluation may begin from devalorization (as with disinvestment, for example) but unlike the latter, devaluation implies not merely a transfer of value but a general loss or destruction of value (Smith 198 I). In itself this is nothing exceptional. The crisis of the 1930s saw large scale devaluations of capital in some of the same sectors as today. What is exceptional is that in those sectors experiencing deindustrialization today, devaluation preceded crisis by as much as a decade, and has been accelerated, not simply sustained, since 1973. Whereas this outmovement of capital was reversed after the 1930s, few people today, reconstructionists not- withstanding, expect the U.S. auto industry to recover its market position. Deindustrialization is therefore a secular, uncompensated devaluation.

It is worth noting here that this characteristic of deindustrialization has led an array of disparate authors to speculate that we are on the verge of "post- industrial society" (Bell 1973). This is a large question and to some extent speculative, but despite the relative decline of manufacturing in the U.S. economy and the rise of services, producer services and information processing, there is little empirical justification so far for the post-industrial thesis. As a percentage of total U.S. employment in 1977, manufacturing accounted for 24 .1~ having declined from 32.3% in 1947 and 27.7% in 1966. As a percentage of GNP, however, manufacturing has remained steady. In 1977 manufacturing contributed 24.2% of GNP, while in 1947 it was 24.5% and in 1969 25.6% (Noyelle 1983). At best this suggests that deindustrialization is as much a sectoral and spatial transformation as it is an absolute loss of industry.

Deindustrialization is also an inherently spatial concept. No one, after all,


is suggesting that the entire world economy is simply abandoning industry. Rather, as Harvey points out, devaluation is "place-specific" (1982, pp. 425-31). The uneven impact of devaluation by sectors is repeated in the spatial context. For as particular factions of capital, or "hostile brothers", attempt to defend their capital against devaluation, they must also defend that portion of fixed capital which is immobilized in the landscape. The defense of value translates into the economic defense of space. The responsibilities for this fall overwhelm- ingly on the state, which resorts obligingly to tax breaks and tanks, tariffs and attacks on the working class. To the extent that certain sectors of the economy are concentrated in given regions according to the old territorial division of labour, intensified devaluation of capital takes an increasingly acute spatial expression. At the national level as well as the regional level, then, there are clear spatial patterns to deindustrialization within the world economy.

But in the same way that crises of devaluation set the economic terrain for future expansion, deindustrialization sets the spatial terrain. In the same way that devaluation prepares the ground for an economic restructuring of society according to a new set of economic relations, deindustrialization prepares the ground for a restructuring of regional geography and the production of new sets of spatial relations more or less commensurate with the new economic relations. Nigel Harris, in Of Bread and Guns (1983), has begun to examine this process at the international scale. I want here to focus specifically on the regional scale within the territory of the U.S. nation state.

4. REGIONALIZATION - - THE CONSTITUTION AND RESTRUCTURING OF SCALE We commonly take as conceptual givens the division of geographical space

into four distinct scales (or some variation thereof): urban, regional, national, international. As much as the spatial configurations organized at these scales, however, these spatial scales are the product of social processes (Taylor 1982; Smith 1984). Regional differentiation originated as a spatial division of labour within the nation state; the concentration of capital in certain divisions of the economy led to a spatial centralization in certain regions. This is what we refer to as the traditional territorial division of labour, and it results in the crystallization of distinct geographical regions within the nation state. These regions both inherit and develop a social, political and cultural coherence that goes well beyond their economic rationale.

In part, regional differentiation represents a spatial compromise to a contradiction lying at the heart of capital. On the one hand, capital strives toward the equalization of conditions and levels of production; it is, as Marx said, a leveller, and it attempts to level everything in its path. On the other hand, there is a strong tendency toward differentiation based on the basic political differentiation according to class, and on the division of capitals and labour. As much as it strives toward a one-dimensional geography of sameness, capital strives to separate different places and activities from each other. This contradiction is forever being played out in practice, resulting in a dynamic process of uneven development, and the constitution of different regions represents an uneasy and always temporary compromise between the two poles of this contradiction. Within the region, conditions are equalized, as far as possible, giving it its internal coherence; between regions, differences are maximized, thus sharpening the competitive urge and consequent mobility of capital.

Thus Castells (1977) catches something real when he treats the region as the "space of production"; yet his particular contrast o f urban and regional scale


results from a confusion of, on the one side, the processes that constitute scale, and on the other, the geographical limits to a particular scale. Nonetheless, the treatment of regional space as the sphere of production (in contrast to the urban as the sphere of reproduction) is neither as simplistic nor as formalistic as it might appear at first glance. At least until the last two decades, it was at the regional scale that specialization of production activities took place. And thus not surprisingly it is at the regional scale that devaluation is most acutely felt and deindustrialization experienced.

Natural differentiation and geographical variations in the availability of key raw materials formed the territorial basis for the early capitalist pattern of regional differentiation. With the reduction of transport costs and the globalization of industrial production, however, the coherence of a region is determined less by constraints of transport costs around raw material sources or ready markets and more by prevailing wage rates, or more accurately, labour costs. Previously insulated from foreign competition by high transport costs, many regionally concentrated (albeit international) capitals suddenly find themselves thrust into world competition on the basis of labour costs. The largest of these multinationals, which have been accustomed to dividing the world into separate regional production platforms with highly differentiated labour costs, are finding themselves squeezed out of those regions, often in their own national "home", where labour costs are highest. The cacophonous response from "national" capital has been a demand that dissolved transport barriers be replaced by politically defended protectionist barriers at the national scale.

Defined increasingly by differential labour costs rather than transport costs, the regional mosaic has been dramatically transformed. In the first place, the scale of regional differentiation has expanded. To take an obvious case, New England was once a mosaic of small specialized regions producing shoes, leather goods, woollens, cotton goods~ machinery, lumber, fishing products, etc. Today, far from producing across the range of industrial goods, it specializes in only a few and has become part of a larger single coherent region rather than a patchwork of regions. In the case of New England, the transformation to a new regional structure came early, beginning with the movement of textile production to the South in the 1930s, then again after World War II. The primary motivation was lower wage costs.

Second, alongside their geographical expansion, regions developed as functional units of the international rather than the national economy. In a territorial sense this is less obvious in the U.S. where the new regions are still wholly encompassed within the national territory, but in Europe the emersion of key industrial sectors into the world market has had the geographical effect of germinating supranational regions. Especially within the EEC, the spatial integration of industrial production has led to the emergence of functionally coherent regions spanning several national territories (Carney, Hudson and Lewis 1980). Finally, it seems likely that in an economic sense, regional differences have been intensified insofar as, through the mediation of labour costs and thus the value of labour power, the regional structure is a more direct expression of the constitution of social value.

Deindustrialization plays a crucial role in the development of this new regional structure. It is the process whereby previously different regions, measured according to production specialties, are equalized beneath the burden of devalued capital, measured according to labour costs. Figure 1 provides graphic evidence of the coherence of the new regional structure. For each state, and for each of the nine major regions, it plots the ratio of total jobs destroyed to total jobs

124 PAPERS OF THE REGIONAL SCIENCE ASSOCIATION, VOL 54, 1984

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OVERALL N ET EMPLOYMENT CHANGE. 1969-1976 JOBS DESTROYED per JOBS CREATED

F I G U R E 1. Reg iona l i z a t i on and E m p l o y m e n t Change

I would like to thank Miklos Pinther for drafting this graph.

1.2 I


created, against the destroyed/created ratio for plant closures, openings, relocations, expansions and contractions. To the extent that the states in a given region cluster tightly around a regional average for job loss and gain, the graph suggests an experience of job change, measured at the state scale, but generalized throughout the region. The closer the cluster, the more coherent is the region. It is no accident that the most coherent regions, that is, those with the least internal differentiation and the greatest differentiation from other regions, are New England and the Mid-Atlantic, which together make up the Northeast. The East North Central States of the Midwest also demonstrate substantial internal coherence, if a lesser degree of external differentiation from other regions. On the basis of this measure it would seem reasonable to attribute much of the coherence of this regional structure to the downward equalizing effect of deindustrialization.

5. CLASS ALLIANCE AND CLASS STRUGGLE Thus far we have treated deindustrialization and reglonalization as the

conjunctural creations of the logic of capital accumulation and circulation. Questions of class struggle and the direct political determination of events have been side-stepped. This is defensible for two reasons. First, at the most basic level it is the logic of capital accumulation and circulation that sets the spatial agenda for deindustrialization. But second, and this is recognised all too seldomly, the logic of capital accumulation is not a purely economic issue to be placed on one side and contrasted with political questions on the other. The way in which the capitalist class invests capital - - the level and intensity of investment, its sector and location - - is its primary political weapon. Capital investment not police repression is the cutting edge of its class strategy. This means that in periods when the working class is relatively quiescent, the investment of capital can follow with little compromise the logic of accumulation suggested above. The political logic of capital, while not unopposed, is not seriously threatened here by working class revolt.

Despite periodic surges of labour militancy, this is a realistic picture of working class struggle in post-war America. In the period from 1946 to 1957 as many as 5 million workers, involving as many as 20% of unionized workers, participated in work stoppages each year. The number fell steadily until 1963, when fewer than 1 million workers were so involved. After 1963, the level of strikes rose again, involving over 3 million workers in 1971 and again in 1972 (Seltzer 1978; Bowles, Gordon and Weisskopf 1983, p. 90). From then, till the present day, there has been a punctuated decline in militancy until, in 1982, before Reagan stopped the collection of the statistics, the level of strikes was lower than at any period since 1942. Thus despite the rise of workers' militancy from 1963 to 1971, I disagree with the desperate optimism of the proponents of radical reindustrialization, who largely attribute the current crisis of U.S. capitalism to some heroic challenge by American workers. (It is important to note that these are generally radicalized economists, who in their critique of orthodox economics attempted to identify the political as opposed to technical economic explanations underlying economic phenomena. They have however thrown the baby out with the bathwater in that they adhere to a sharp distinction between the economic and political and proceed to interpret the ups and downs of capitalism as the direct, even mechanical, product of class struggle. It is not the falling rate of profit that explains crisis for them, but the profit s q u e e z e - the squeeze effected by rising workers' demands upon corporate profits.) The


rise in militancy was real if relatively brief, but was not the decisive factor in provoking crisis.

If part of the strategy of capital, confronted with economic crisis, is the regionalization of devaluation, this also implies the regionalization of class struggle. Whereas some factions of capital are relatively free to move and in this way escape the rigours of devaluation, others are more tied by their particular investments to the region despite the devaluation of the regional capital. Multinational capital invested in a steel plant is generally more mobile in the long run than bank capital, say, which holds mortgages on investments of all different sorts - - industrial, residential, commercial as well as government loans and consumer c r e d i t - throughout the state. Along with land and property owners, local developers and state bureaucrats, financial capitalists can be found at the forefront of numerous civic groups and movements striving to form defensive regional alliances which have the sole function of warding off devaluation and displacing it geographically. The working class is pressured, usually through labour union bureaucrats, to join a class alliance with favourable factions of the local capitalist class. The ideological language of class alliance becomes increasingly geographical calling for the defense, advertising and enhancement of the "community", region or nation (Harvey 1982, pp. 419-21).

This kind of defensive class alliance is a response to the regionalization of devaluation in general, and deindustrialization in particular. But it was a history of class alliance in the first place, on the part of organized labour leaders, which gave the different factions of capital a free hand to pursue the logic of accumulation and thus pave the way for deindustrialization. The capital-labour accord of the post-war period began informally with the unions themselves voluntarily purging revolutionaries and other militants during the Red Scare. The accord was canonized as union bosses agreed to police their own union members and give employers a free hand in the field of technological innovation, in return for guaranteed annual wage increments. The accord held for nearly twenty years, but as the first signs of crisis emerged in the late 1960s and wage increases no longer kept pace with inflation, employers began resisting workers' demands over wages and work conditions. This led to a brief rise in militancy and a number of important industrial struggles in which workers made real gains, coinciding with real gains made by the civil rights and women's movements.

But the success of these struggles was shortlived and too narrow in focus to forestall the process of deindustrialization that was already unfolding. The decline of militancy after 1972 both led to and resulted from an employers' offensive beginning in 1974, which has resulted in a sustained series of defeats for the working class. The attacks on working class wages and work conditions entered a new phase in the winter of 1981-1982 when companies from virtually every sector of the economy followed Chrysler's earlier lead and demanded givebacks - - reduced wages, a reduction in benefits, fewer holidays, the abolition of certain work rules. So general have these attacks become that by the first quarter of 1983, new labour contracts negotiated a record low wage increase, averaging only nine-tenths of one percent in the first year of the contract (New York Times, July 29, 1983). As with devaluation in general, these defeats and the consequent reduction in wage and labour costs are place-specific. Like the old class alliance of the capital-labour accords, the new class alliance that has begun to emerge in response to deindustrialization represents an attempt by privileged layers of the working class to buy security. But the security of steady wage increases has given way to demands for job security, paid for by wage reductions. At least the first class alliance lasted nearly twenty years; the contemporary agreements have been


alliances in words only. Despite job security clauses in the pacesetting auto and steel contracts, renegotiated in 1982, these sectors have continued to shed jobs at a rate only moderated by the temporary economic upturn of 1983 and 1984.

There is a certain crispness to regional differentiation in the U.S. that is not always manifest as one travels the interstates from region to region. As Figure 1 suggests, the new regional division is becoming more clearcut, not less so. In all likelihood this results from the well lubricated and comparatively unfettered flow of capital throughout the landscape. With the globalization of industry, the spatial differentiation of the economy, at the regional as well as the international scale, came to express more directly the essential logic of the capitalist system. Far from becoming obsolete, the assumption of the "perfect free market" became increasingly real, and deindustrialization is the partial proof. To see deindustrialization as the product simply of a "hypermobility" of capital (Bluestone and Harrison 1982, p. 231) is too simplistic, however, because the emerging pattern of regional development and underdevelopment depends not just on capital mobility but on the more complex and contradictory relationship between the mobility and spatial fixity of capital (Harvey 1982). "Hypermobility" translates into actual mobility only when capital has a place to go, that is, a place where profit rates are higher, and one of the effects of deindustrialization is to begin to create precisely those conditions for a future wave of inmigrating capital. Meanwhile, as the persistence of uneven development and the continuance of deindustrialization in Europe would seem to suggest, the attempt to limit the mobility of capital or to provide counter-incentives in special state-designated development areas, are a puny and unrealistic response to the problem.

The solution to deindustrialization does not lie in any new class alliance, not even a "progressive" alliance with liberal factions of capital as envisaged in a workers' bill of rights, or a radical reindustrialization along social democratic lines. An alliance lasts only so long as both partners participate, and as the history of past alliances should suggest, capital (of whatever stripe) will only participate so long as it is profitable to do so. The answer to deindustrialization, rather - - and the miseries of the unemployment and poverty it creates - - lies in the independent power of workers over capital, a power which comes from class struggle not class alliance. Further, this has to be a struggle which aims not just for higher wages, although that may be a step on the way, but for control over capital itself. The reason is obvious: to the extent that class struggle succeeds only in increasing wages and labour costs in general, while gaining no direct control over capital as such, the flight of capital and deindustrialization will simply be accelerated. Yet without working class upsurge, this flight of capital is guaranteed.

The new phase of attacks on the working class, announced by generalized demands for givebacks, was in reality initiated with Reagan's campaign against PATCO beginning in August 1981. From then on there was no doubt that the struggle was political and not merely economic, and so the wave of takeback demands that followed became more and more explicitly a union-busting strategy aimed at destroying working class organizations. The working class response, to succeed, must be equally political. Thus workers' control categorically does not mean that workers, in order to save their jobs in Youngstown or Weirton, buy an old steel mill from their old bosses, cut their own wages by 25% or 50%, and then try to compete in the same market which defeated their old employers. Workers' buyout schemes of this sort result either in self-exploitation or competitive failure or both. Rather, the demand has to be that first the government underwrite the modernization of old plants with the newest technology, and then


the p lan t ' s workforce will m a n a g e a renaissance. To win that d e m a n d migh t involve " sus t a ined popu l a r m o b i l i z a t i o n " (Bowles, G o r d o n a n d Weisskopf 1983, p. 4), b u t it will cer ta in ly require i n d e p e n d e n t , poli t ical workers ' organizat ion. This a lone can poten t ia l ly suspend the e c o n o m i c logic of capital a n d open the way toward an equa l i za t ion of regional differences.

R E F E R E N C E S

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Journal of Urban and Regional Research 2, 1: 101-31. Harvey, D. 1982. The limits to capital. Oxford: Basil Blackwell. Harvey, D. 1983. The geopolitics of capitalism. Baltimore: Johns Hopkins University, unpublished. Junkerman, J. 1983. The Japanese model. The Progressive, May: 21-27. Luria, D., and Russell, J. 1981. Rational reindustrialization. Detroit: Widgetripper Press. Marx, IC 1967 edn. Capital New York: International Publishers. Massey, D. 1978. The U.K. electrical engineering and electronics industry. Review of Radical

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ed. The Union for Radical Political Economics, pp. 35-45. New York: The Union for Radical Political Economics.

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British Geographers 7:15-34. Thurow, L. 1980a. Reindustrialization and jobs. Working Papers 7, 6. Thurow, L. 1980b. The zero sum society. New York: Basic Books. Vogel, E. 1979. Japan as number 1. New York: Harper and Row. Weisskopf, T. E. 1979. Marxian crisis theory and the rate of profit in the post war U.S. economy.

Cambridge Journal of Economics 3: 341-78.

Documents

Deindustrialization and regionalization: Class alliance and class struggle