Flexible Capitalism in Crisis

Richard Sennett founded the New York Institute of the Humanities and is currently a professor of sociology at New York University and the London School of Economics. His latest book, a study of the evolution of human cooperation, is titled Together: The Rituals, Pleasures, and Politics of Cooperation. The following is an edited transcript of our conversation. 

Thanks for joining us today, Professor Sennett. Once upon a time you would only hear the term “crisis in global capitalism” within the radical left.  But now you hear some very mainstream economists and journalists speaking of a generalized crisis in capitalism. The problem, of course, is that different things are meant by the term. Having devoted much time to understanding the new political economy of capitalism, how do you interpret the current crisis?

I think what we’re living with are the consequences of a shift to making finance capitalism the primary feature of economic activity. And one way to think about this is that in the last 30 years, economic activity has become more like monoculture. There are reasons why this happened. Globalization, of course, is one of them.

After the breakdown of Bretton Woods in 1973, globalization meant that you had an enormous amount of global capital released for investment, and it tended to want to invest in equities and in bonds rather than actually owning businesses. It wanted to be more flexible to move from sector to sector, business to business, and so on. One of the effects of that has been that firms have oriented themselves to “making their numbers,” as they say, to short-term rather than long-term profits. Short selling convinced many people that money was to be made by firms that were declining, not just growing. So you had a shift in focus from the profitability of firms to short-term share price. This has meant that firms have tended to focus on the markets rather than on core businesses.

Those economic changes in the last 30 years have radically altered the way people work, and that’s where the story I’ve pursued in my research begins, which is how ordinary workers deal with this shift in global capitalism. And for them, that shift is a crisis, and not in ways we usually think of.

The idea of a long-term career has diminished, but for the majority of workers one of the unforeseen consequences of this shift to flexible capitalism has been that their capacity to flourish in the economy has diminished. And the sign of that is the decline of the wealth share of middle-class and lower middle-class workers. So flexibility has brought profits at the top, but it has brought instability and inequality to those who are below. When I think of the crisis in global capitalism, then, what I’m thinking about are those profound structural changes in the labor force rather than whether markets are up or down.

Like you said, the middle class has been experiencing a steady decline in its share of national income during the last 30 years. Many commentators have attributed at least part of this to the decline of trade unions. But then we’re left with the question of why workers have continually voted for political parties opposed to the trade union project. So I’d be interested to hear how you assess the political consciousness of the middle and working classes in light of their recent political attitudes.

To answer that question, you have to move beyond economics into psychology and sociology. I’ll talk a little to you about the sociological part of it, which I understand well. The problem has been that these structural changes in firms, and also in government, have meant that workers no longer inhabit structured environments in which their skills and incomes increase incrementally.

Much of the skill base that people have when they graduate from a two-year college or even from a university is going to be obsolete by the time they’re 50. That’s a product of technological changes. Very few office workers in their 50s are really adept at using computers as they could be used. So the narrative of skill-building within a fixed institution has weakened. The exporting of jobs to the developing countries has further increased the sense that at any moment the rug could be yanked out from under you.

I’ll give you an example of this. When I first began studying workers going through this process, people would reassure me that while it might be possible to offshore things like back office accountancy, when you want to get a divorce you always want to have face-to-face relations with someone. Now that’s turning out not to be true. Not only in law, but also in technical fields like medicine, the offshoring process is proceeding apace. For instance, if you have a cardiogram in a small town in Iowa, somebody in Bangalore, India, can reinterpret the cardiogram and actually prescribe the next steps to a GP. [. . .] There was in the West, I think, a kind of complacent contempt that the bad jobs would leave and the good jobs would remain. And that simply is not what has happened.

Now the reason I tell you this is its psychological impact. The sense of deep, ontological insecurity has radically increased in this generation, particularly for people from the ages of 25 to 35, because they are coming face to face with the fact of the spectre of uselessness. And there’s no necessity that what they have to offer is what the job market is going to take up with them. That’s where the psychology of this comes in, and it has a profoundly conservatizing effect. People want to go back in time to an era in which they could expect to be rewarded by the system if they worked hard and developed skills. That expectation is gone, and the more doubtful that expectation becomes, the more in my view it drives people backward toward a very conservative kind of nostalgia—a longing for smaller government, small business, and local community. All of those things, in my view, are driven in this cohort of young workers by the fact that they don’t have a necessary place in the world. And colleagues of mine who are psychologists have begun to study this in great depth.

So that gives you a rather roundabout answer to your question, but it winds up explaining why we shouldn’t be looking at the weakness of trade unions as the explanation for why we have this resurgence of right-wing, neoliberal desire on the part of people who are not going to benefit from it.

So if the weakness of trade unions is not the key variable here, would you say that the real issue is the decline of the bureaucratic institution in which people have that security and that sense of narrative identity? If so, you would have to contend with the management literature which argues that the bureaucratic organization is dead and that flexible “Management 2.0” is the only way forward.

You really asked me three questions there. The first is whether unions could do something about what’s going on, that is, if there could be large institutions that could help workers in this crisis. The second one is your positing of the fact that bureaucracy of the old sort is dead. And the third is the assumption that the death is a good thing and that what’s replacing it is an inescapable fate.

With regard to the third issue you raised, what I would say to you about a lot of this management literature is that bureaucracies come in many, many forms. What [the management literature] is celebrating is something that is quite blinkered, which is flexibility in the operations of bureaucracy. The blindness derives from the fact that we’re seeing more and more combinations, so that we’re getting larger and larger bureaucracies—indeed monopolies—that are beginning to make use of Bureaucracy 2.0.

The high-tech sector, which is the one I know the best, is now following the same path that we’ve seen in financial services, where a very few large firms become dominant. That’s a bureaucratic phenomenon. Monopoly is a form of bureaucratic growth. So there’s something self-serving about saying that the institutions have become freer by not accounting the fact that we’re entering a new age of monopolistic practice in the innovation sector. I’m just dealing with the third issue you presented.

About the fact of whether “Management 2.0” is really as flexible as is claimed, what’s left out of that is the increasing use now of standardized management systems. SAP is the leading producer of such systems. It’s a German firm that devises standardized models based on input-output calculations for how organizations are performing at any hour, or indeed minute, of the day. SAP is, for instance, used to monitor sales work and people who are working from home. And what these management systems tend to do is measure very crude productive outputs and rarely the actual process of dealing with a problem. So [these standardized management systems] produce a new kind of Fordism, in the sense that they manage almost to the second the actual labors that people are performing within the flexible firm.

Harvard Business School, I think, has been the great sinner in all this because it took on the notion that changing corporate structure is a form of freedom. But it only looks that way to people at the top. For people down below, high-tech management tools like SAP increase regulation. And as I said, I think we’re entering a new Fordist era rather than a post-Fordist age.

You raised the question of whether unions could do something to help workers in this crisis. What’s your assessment of the present labor movement?

Well, I’m interested in why unions failed to adapt to this new work world. I think there are several aspects to it. One of them is that in the United States and in Europe, unions focused on the phenomenon of seniority. They were obsessed with protecting rights over long periods of time, and it meant that they tended to be hostile to workers who were, as it were, at the tail-end of the process. They didn’t focus on younger workers, and they didn’t focus well on job immigrants.

Within the European Union, just as much as in the US, there has been an enormous amount of job migration. The Poles, for instance, massively migrated to Britain to find work after the European Union expanded in 1989, but the unions ignored these migrants. Just as in the US, the unions tended to be quite hostile to immigrants who they saw as taking away the jobs of native workers. And that proved a disaster for them. It meant that renewal in their age base and expansion by including migrants were closed off. Unions became very sclerotic and very defensive vis-à-vis those employees. That’s a recipe for decay

There’s a second factor that comes into it, which is less a problem in the US than it is in Europe. And that is that some of the craft basis for union organizing has remained strong. That is, a metal workers’ union only has metal workers in it; an auto union in Europe only has autoworkers in it and so on. One of the effects of the changes I’ve been describing to you is that people move from craft to craft, skill base to skill base, and the unions need to adapt with them. The US has been fairly good at that. The UAW and the SIEU, for instance, have really embraced workers who are changing jobs and skill sets constantly. But that’s not true of the majority of American unions, and it’s true of very few European unions.

So, for me, what I’ve been thinking about is a corrective to this. How can unions reformat themselves? Instead of focusing exclusively on combat with or protection against employers, how can unions serve more as communal sources for the workers who join them? In practical terms, how can they serve as employment agencies for their members, letting them know where jobs are? How can they deal with family work issues by providing daycare centers, crèches, medical services, and so on?

In my view, what has to happen with unions is that they need to become intermediary institutions that provide people community and stability in a flexible economy. And that means a different mindset about what unions are for. The combat with employers over welfare cannot be a kind of dominant passion, in my view, for making unions.

There’s nothing very original about [what I’m proposing]. This is how cooperative associations worked in the nineteenth century. But we rather lost sight of the union as a kind of social and communal instrument, and I think we need to recover it to restore the strength of unions. So that’s sort of where I am politically in all this.

You mentioned the fact that many unions remain craft-oriented and that this is an obstacle to their relevance. Some progressive thinkers—and I’m thinking in particular of social theorist Roberto Unger—have toyed with the idea of one big, national union with automatic membership as a means to getting all workers involved in the process of creating stability and security for themselves. What do you think of this?

It’s quite an interesting idea, isn’t it? It’s not mine, though. I’m more locally minded than Roberto. I think it would work well in Brazil—as you know, that’s where Roberto is from—where there’s more of a sense of national cohesion than there is in the US.

But it’s not one or the other. What I’m focusing on is how, in a very fragmented society like the US, we get people to feel, and act on the feeling, that they can get security by belonging to an intermediate communal institution. This could happen, in principle, via church groups. You know, there was in the nineteenth century the Catholic Workers’ Movement in France that did a lot of these things. But the social side of this kind of intermediate institution has not been something that many churches in Europe have focused on recently.

What’s good about unions vis-à-vis churches is that they are good at recognizing the bonds that should exist between strangers. And as places become more urbanized, the experience of living with and dealing with strangers is a social skill that we need to develop. The kinds of communities we’re creating for people have to be ones in which people expect to meet others who are unlike themselves. And that’s a benefit of unions. Now, they deal with work, which is much more impersonal than religious belief, but I’m open to anything that works.

Is it realistic to expect that workers will come together to form these communal institutions?

I’ll tell you about a study I just concluded. I’ve just written a book on complex cooperation, and in that book I did an ethnography of long-term, unemployed, low-level workers on Wall Street. And I did it because these people are in the eye of the storm; they work in financial services. One of the effects of the recession of 2008 is that Wall Street has contracted, as has the City of London—it’s shrunk by about 15 to 18%. And these workers—they’re back office workers, accountants, people who reconcile giant trades at the end of the day, and so on—many of these people have lost their jobs for good, and their bonuses proved not to be worth anything. We studied some people at Lehman Brothers who basically have been devastated by this collapse. I’ve been studying how these people have adapted.

And I bring this up to you because when I proposed forming a union or cooperative of some sort, they said, “Oh no, that’s just for manual laborers.” They are real nostalgics. Almost all of them want to start their own businesses or work as consultants. And when confronted with the reality that only about 8 to 9% of new businesses in the US last for more than three years, they recognize the reality, but they still hold onto the notion is that if they could only go back to being their own bosses they would be more secure. And many of these people are Tea Party people. They’re not ignorant; they’re not Michelle Bachmann. They’re people who know the score. But yet this dream of somehow finding autonomy as protection is overwhelming to them.

Psychologically, it’s a very dangerous fantasy, because what happens to people after they’re unemployed for about four to six months is that the money runs out and the boredom factor sets in. After they’ve emailed a thousand resumes and heard back from no one, the fact of long-term unemployment begins to rebound on their personal lives. Alcoholism rises, divorce rates shoot up, and psychological problems like depression set in. Many of the people I’ve interviewed are getting through the day basically on medication.

These people disappear from view in that we treat workers in the US who have been unemployed for more than six months as having left the labor force. They don’t appear in statistics. Similarly, many part-time workers are people driven form full-time work into part-time, temporary jobs, and they, too, disappear from the calculation of unemployment. The real unemployment or underemployment rate in the US is 16 to 17%, not 8%. And among people who are 25 to 35 it edges up over 21%.

So we’re dealing with an incredibly serious problem where people fall into invisibility, where their economic lives begin to have profound psychological impacts on them as individuals, disabling them further from looking for work. Much of that is a kind of cruel rejoinder to the fact that they’ve lost months and months trying to strike out on their own as consultants, independent contractors, and small business people only to see those plans fail.

For me, doing this study has been a real wake-up call that this crisis is much bigger than fixing the stock market. What it all comes down to, in a word, is how we can wean ourselves off the ideology and practices that produced what we think of as flexible capitalism.

And if I can prod a bit further: how does one do that, exactly? Because you paint a rather stark picture of workers who are unable to release themselves from a fantasy of freedom through autonomy. So it’s really a matter of changing consciousness, and I wonder how you believe that should be done.

It is. Well, one of the thoughts I’ve had about this is that the government should be funding more cooperatives.

I’ll give you an example of what I mean. The US owns Citibank—it owns most of its capital. In Britain, the British people own the Royal Bank of Scotland Group. These are banks that have promised to lend to small businesses, but the promise wasn’t worth the paper it was written on. I’d like to see the government, rather than start asking them to lend to small businesses, force them, since we own them, to lend to businesses that are organized in the form of cooperatives where there is profit sharing, distribution of resources, and so on. And I think it can work. It’s worked in Brazil, and we can learn something from what the Brazilians did.

Whether that will change the mindset of middle-class people, who knows. But at least it offers up the resources to say that if you’re going to do something cooperative rather than autonomous, the government is there to help you. And that’s what I think a democratic socialist government in our time should do.

The chances of it happening in the US are slight. The chances of it happening in Britain are not too bad. And probably in Italy the prospects will improve. It’s really taking the Brazilian model as something that’s not just for people who are emerging into wealth but for people who are in a declining capitalist economy.

Could you describe, briefly, the Brazilian model you’re referring to?

Basically, what [Brazilian President] Lula da Silva did is recreate community banks, and the community banks lend money to communal organizations. If they’ve got a plan that looks like it is sustainable, they get help from these community banks.

These banks have got a long profit horizon, and the profit margins are small. The government wants to get back essentially the same amount of money it would get by investing in government bonds, which are at about 2.5 to 2.7% right now. And it’s worked a treat.

I’m curious that you mentioned Britain as a place where this model could work in some form. What makes you confident that something like this will happen in Britain? Many contend that in the wake of New Labour there’s no longer a true left in Britain.

Not true. This conservative government is a one-parliament affair. It certainly will be voted out in the next election. Now, there is an old-fashioned British left—you know, miners, auto workers, construction workers—that came into conflict with the New Left, which was more middle class. But what’s shared in the left, among all these people, is a belief that government should step in wherever it can to further enterprise. And when we return to power in three or four years, one of the discussions we’ve been having is how we can relaunch what was in Britain for generations: cooperative movements and cooperative businesses. It’s in the British DNA.