• The Greatest Potential Structural Leverage: Talking to Joshua Murray and Michael Schwartz

    When did industrial policy really start failing large numbers of workers in the upper Midwest (states that tipped our most recent presidential election to Donald Trump)? When did car manufacturers abroad start to outperform US counterparts by importing laborempowering Detroit-based business models? When I want to ask such questions, I pose them to Joshua Murray and Michael Schwartz. This present conversation focuses on Murray and Schwartz’s book Wrecked: How the American Automobile Industry Destroyed Its Capacity to Compete. Murray teaches in the Sociology department at Vanderbilt University, and Schwartz is Distinguished Teaching Professor Emeritus at Stony Brook University.

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    ANDY FITCH: First, in a perfect world (at least from management’s perspective), why might firms (especially industries producing large, expensive, multi-part, maintenance-intensive goods like cars) find a flexible-production system that prioritizes geographical clustering, just-in-time delivery, machine flexibility, and long-term sole suppliers so appealing? How might a flexible-production model help to facilitate continuous technological innovations, organizational efficiencies, and product-quality and worker-productivity gains?

    JOSHUA MURRAY AND MICHAEL SCHWARTZ: Management benefits in two main ways from flexible production, through increased efficiency and innovation. Increased product quality and worker productivity flow from technological innovation.

    Efficiency increases emerge primarily through the just-in-time (JIT) delivery of parts. With JIT delivery, management seeks to order the exact amount of each part needed to build the exact amount of automobiles scheduled for assembly at a given plant, and to have those parts delivered right as the plant needs them. But with non-JIT auto assembly, you need to ensure you’ll have enough parts by ordering them further ahead of time. Since a parts shortage would shut down production, you also need to overestimate how many parts you should have. You then need to stockpile this large order of parts in warehouses until you can use the parts. Inevitably, some of these parts never get used, though you still pay a lot to warehouse these unused parts, which just become wasted capital. Here JIT delivery would cut waste and save money, making the whole process more efficient.

    Of course while JIT delivery makes production more efficient, it poses a major challenge to get parts delivered precisely when you need them. Without stockpiles, any delay in delivery shuts down production and costs the company money. So a working JIT system requires the other elements of flexible production. For example, the further parts have to travel for delivery, the greater the likelihood of a delay. The geographic concentration of suppliers and assemblers minimizes parts shortages under JIT. In order to fill these JIT orders, auto suppliers likewise find it useful to implement their own JIT systems. But suppliers might not find it worthwhile to invest in restructuring components manufacturing this way if they can expect only short-term contracts. Thus, long-term sole suppliers become a solution.

    The key to reaping benefits of innovation also requires having all aspects of this flexible system in place. Innovation happens on a trial-and-error basis: someone comes up with a new idea, the relevant actors try to implement the idea, and if it doesn’t work those actors tweak things and try again. Flexible production aids in this process. First, geographic concentration of production means all the relevant actors (engineers, designers, rank-and-file workers, managers for both suppliers and assemblers) remain close enough for face-to-face meetings. Studies of innovation consistently show that more distanced actors have more difficulty innovating together. Second, JIT delivery, by eliminating inventory stockpiles, reduces the cost of changing the design of parts in response to innovation. Long-term sole-supplier contracts incentivize components-makers to partner with car companies during the implementation process (which includes redesigning parts on demand), because these suppliers know they’ll reap the long-term rewards of innovation along with the assemblers. Finally, flexible machinery allows lines to keep producing even as workers figure out how to implement an innovation.

    These innovations in product and process, facilitated by the flexible-production system, improve product quality (for example with aluminum engines reducing a car’s weight and increasing its gas efficiency, or with automated cars as a future innovation that would increase product quality), and/or they increase worker productivity by improving production methods.

    For management, all of this increases profits. JIT improves organizational efficiency by reducing sunk costs in stockpiled parts. Product innovation improves quality and results in capturing a larger market share. Process innovation allows workers to contribute the same value in less time. Since workers get paid hourly, company profits rise.

    Now from an industrial worker’s perspective, how might this flexible-production system intensify on-the-job immiseration, intensify one’s economic exploitation, and/or provide opportunities for ongoing skills training, for creative thinking, for increased decision-making power — all depending on how structures of production (labor relations certainly among them) play out?

    By definition, when flexible production and its technological innovations help firms get more out of workers for the same wage, it helps them to exploit these workers economically. Process innovations allow workers to create more value with their labor in the same amount of time. Profits only increase this way when companies do not pay workers correspondingly higher wages for the increased value. And workers also face other downsides. Producing more, faster, certainly enhances a company’s bottom line, but it places enormous stress on workers to perform at great speeds, straining their physical and emotional capacities. JIT delivery likewise puts pressure on workers at supplier firms to quickly fill demand for parts, with no mistakes.

    On the bright side, flexible machinery means workers do not always perform the same rote movements. Workers can switch stations, and retool machines for different tasks. Of course the new tasks themselves can be very simple and repetitive, but a variety of repetitive tasks still seems better than a single repetitive task in terms of developing skills and using creative thinking. Constant innovation brings shop-floor workers into the trial-and-error implementation of new ideas, providing workers with immense opportunity for creative problem-solving. At the same time, adding more tasks to master and pushing workers into the innovation process also increases stress on workers. When these extra tasks again bring no additional remuneration, labor’s economic exploitation increases.

    Your question also notes, however, that this all depends “on how structures of production (labor relations certainly among them) play out.” We consider this key, because flexible production also enhances worker leverage. All workers, as a group (no matter the industry), have innate leverage over their employers. Production and profit depend 100 percent on labor. The question isn’t whether labor has leverage in a given situation, but how much leverage. How many workers need to withhold their labor to disrupt production and profits, and for how long must they withhold said labor in order to make the disruption large enough to force compromise by capitalists? Under flexible production, the importance of worker involvement in the innovative process, coupled with the lack of stockpiles in JIT delivery and the geographic concentration of production, means that a small number of workers can disrupt production for a relatively short amount of time and still prompt capitalist compromise. So while flexible production increases physical and emotional stress, and heightens economic exploitation, workers can use this enhanced structural leverage to reduce stress and/or increase the remuneration they receive for their greater productivity.

    So in a world of reasonable compromise, if a flexible-production system offers striking possibilities for firms to gain a competitive edge, even as it places increased demands on individual employees (and even as it offers potentially dissatisfied employees enhanced structural leverage to disrupt the overall process), what kind of effort bargain, and what of moral economy, might emerge — ensuring that assemblers, suppliers, and workers all can commit to a dynamic means of interdependent production? What kinds of risks do these different sides have to take, and why might they each find it worthwhile do so?

    First, we want to foreground that, from the company perspective, the ideal effort bargain would mean minimum compromise in terms of wages, benefits, and decision-making power yielded to labor, in order to prevent workers using their structural leverage to disrupt the system. How little a company needs to yield depends on the history of labor relations within a given industry.

    But in terms of moral economy, the ideal would have workers, assemblers, and suppliers all share in the sacrifices needed to unlock the innovative and productive potential of flexible production — with, in turn, all also sharing in this system’s rewards. For management, again, the ideal would mean workers share in as little of the reward as possible. Any real shared sacrifice and shared reward comes out of workers actually posing a threat to activate their structural leverage. Management at assembly and supplier plants adopting flexible-production methods needs to prevent their labor force from growing militant, because the structural leverage inherent in this type of production suggests that workers will win direct conflicts. Labor needs to trust that management will abide by the effort bargain and moral economy, without requiring constant enforcement through direct worker action.

    Then in the ad-hoc world of early-20th-century American industrial production (an era in which, when novel economic crises emerged, participants had no recourse to the abstracted conceptual model we’ve just sketched), how did on-the-ground decisions depart from the type of mythic, or nostalgic, or anachronistic historical narratives we might projectively impose today? Where might we mislead ourselves by framing Henry Ford’s 1914 establishment of a five-dollar workday as an early form of enlightened capitalism, or by presuming that FDR’s National Labor Relations Board continually pushed for workers’ rights, or by picturing US labor’s most potent hour as one of union-led mass-mobilization campaigns? Where especially do wildcats (and reactions to wildcats) come into play?

    Structural leverage created by flexible production is vital to understanding both why Henry Ford established the five-dollar day, and the role that wildcat strikes played during World War Two. Mythical accounts of the five-dollar day’s establishment present Ford as an enlightened capitalist who could see how his own fortune remained tied to that of his workers. According to these accounts, Ford recognized that if he paid his workers more, then they could afford to buy his product and make him rich. In such enlightened capitalism (as contrasted to more modern capitalism, with corporations maximizing immediate profits even at the expense of impoverishing the working class and crashing the entire economy), everyone supposedly wins. But these nostalgic narratives leave out Ford’s on-the-ground decision making in response to worker disruptions of his system. And in those early cases, the disruption came about not through organized direct action (like we may see from a union), but through unorganized absenteeism. A job at Ford back then had such terrible conditions and pay that workers often just stopped showing up. In this nascent flexible system, high turnover resulted in major disruptions to production. These disruptions ultimately motivated Ford to increase wages and benefits, to foster commitment to his company. Lacking the threat of disruption, Ford seems unlikely to have implemented anything close to a five-dollar day.

    Similarly, an emphasis on plant disruptions challenges dominant narratives surrounding FDR’s National Labor Relations Board. During the 1936 Flint strike, workers deployed sit-down tactics (using the factory and its equipment to shield them from company-sponsored violence)

    to maximize structural leverage. One of the first NLRB rulings actually confirmed sit-down strikes as illegal. So with the threat of disruption key to concessions, the NLRB here replaced direct class conflict with negotiations mediated through a governmental and legal system giving large corporations much greater leverage compared to organized labor.

    Finally, nostalgia around the labor movement often envisions labor’s greatest power taking the form of mass strikes led by famous national union leaders. But the labor movement’s most powerful moment (at least in terms of membership numbers) didn’t result in significant wage or benefit increases — whereas the wildcat strikes that auto workers engaged in during and immediately after WWII not only helped to increase wages and benefits, but so scared management that the Big Three (Ford, GM, and Chrysler) committed to completely overhauling their production systems in order to reduce workers’ structural power. These wildcat strikes, by definition, took place without the sanctioning of national leadership. They represented instances of what we call “union democracy,” with local rank-and-file workers in full control of the decision to strategically withhold their labor. When union democracy flourishes, strike actions have the greatest potential structural leverage, because rank-and-file workers have the greatest knowledge of local production structure.

    Continuing then on a historical timeline that now approaches more familiar public narratives of Japanese auto firms starting to outperform what had been, for half a century, the most profitable industry in world history’s most powerful economy, could you outline some of the most crucial distinctions between the flexible-production model that emerges in Japan, and the dispersed-parallel-production model that emerges in the US? And along the way, could you point to where standard explanatory accounts of the US auto industry’s comparative diminishment (accounts prioritizing product life-cycle theories, or distinct cultures of management, or distinct cultures of workers) begin to break down?

    Flexible production (FP) and dispersed-parallel production (DPP) differ in several fundamental ways we described earlier, in terms of inventory sizes, concentrated regional clustering or deliberate diffusion of production, partnerships with sole suppliers or short-term contracts, and flexible machinery or a more redundant system with many single-purpose machines.

    The first three differences stem from US management seeking to reduce worker structural leverage — whereas the lack of flexible machinery comes about as an unintended consequence of these other changes. All four differences in production contribute, though, to these very different outcomes in the US and Japan. FP results in higher rates of successfully implemented product and process innovation. DPP reduces worker power, but unintentionally erects barriers to innovation. Here product life-cycle explanations (based on claims that maturity comes when innovation gets exhausted, leading to geographic expansion and competition based on cost reduction, leading to production outsourcing to countries with cheaper labor) break down. Clearly, Japanese companies using FP today have demonstrated that innovation has not exhausted itself in the auto industry. Likewise, the historical timeline on which Big Three innovation declined following geographic dispersal (rather than a decline leading to dispersal) challenges product life-cycle theory’s ability to account for details of this decline.

    Other explanations have emphasized culture — either of workers or of management. These accounts also don’t hold up to detailed examination. Some analysts might see Japanese management as more open to innovation risks than US management. But it turns out that US management actually pioneered FP. And all analysts do recognize that for a long time US auto companies remained very open to risk, and prioritized innovation. Only after switching to DPP did Big Three management “eschew” innovation. Similarly, though many commentators still like to blame greedy US unions and unionized workers for pricing themselves out of viability, an analysis of comparative advantages shows that roughly 75 percent of the cost difference between Japanese and US automobiles comes about through product and process innovation, with the labor-cost differential much less important.

    By extension, could you sketch a starkly different trajectory of production in which Japan’s ever-innovative economy does not end up deindustrializing the way that ours does, does not replace its older domestic-production complexes even as it builds new overseas production centers with cheaper labor costs?

    Right. One of the most central differences in the trajectories of Japanese and US auto comes from how they have undertaken globalization. Toyota City, the location of Toyota’s original plant, first got developed in 1938. Like Detroit in the US, Toyota City became the center of Japanese auto production. Unlike Detroit, however, Toyota City did not face deindustrialization in the 1970s and 80s — even as Toyota globalized its production, including to the United States. Unlike the Big Three, Toyota did not replace more expensive domestic workers with cheaper foreign workers. Toyota did not close down factories in Toyota City and replace these with factories in cheaper areas. Instead, Toyota built production complexes (including assembly and supplier plants) overseas, while also maintaining and updating its existing FP centers in Japan. Toyota did select the locations for new overseas complexes partially based on labor costs (for instance, locating US plants in the non-unionized South), but its ongoing FP system never created the misery of massive domestic deindustrialization. Japanese firms treated globalization primarily as a means to expand their market, not to reduce their labor costs.

    Why this difference? The US automakers already had invested in the construction of a DPP system, which limited their ability to compete via innovation. Their primary mode of increasing profits comes from reducing labor and supplier costs (in both cases, intensifying the exploitation of workers). Japanese firms like Toyota, on the other hand, primarily profit through constant innovation, and understand that this innovation depends on maintaining all aspects of FP.

    For an interesting counterfactual, we could imagine the Japanese economy experiencing a Great Depression now. Would Japanese automakers, like Depression-era US automakers before them, break their effort bargain, and shatter the moral economy of the industry — in order to keep profiting? If Japanese firms did adopt this strategy, would workers activate their structural leverage? Would management then choose to dismantle the system, or would they still choose innovation over leverage? We don’t know the answer, but here we at least can start to trace the lingering question of how much US management’s late-20th-century decisions hinged on the path to which they had bound themselves in previous decades.

    Here could you further flesh out that historical case for how the costs and complications of restructuring disincentivized US firms from discarding this suboptimal dispersed-parallel production model (itself designed to dissipate workers’ structural leverage), even as these firm succeeded in designing a leaner, more competitive model for their European plants — and even as top executives claimed to want to do the same back home?

    It would take an incredible investment of capital (closing dispersed plants, shedding stockpiles, opening new plants clustered together, buying new machinery) to restart an FP system right now, and all as US firms struggle to compete. And the final, most challenging step would have to involve repairing the sense of broken trust with workers. Big Three firms would have to admit that, in the past, management competed on the backs of workers by pushing lower labor costs instead of company innovations. They would have to offer workers a real voice in the production process, and real veto power over decisions. They would have to signal to workers that management was serious about recommitting itself to sharing in both the necessary sacrifice and the rewards of an FP system. And on top of all that, the US auto industry would have to weather the storm until its greater capacity for innovation began to pay off.

    So here the question becomes: why did US executives, unlike their foreign counterparts, fail to see this all coming? Why do Japanese producers grasp much more firmly, for example, the long-term dangers of breaking trust with their workers? Again, how much does it matter that early-20th-century US firms, unlike mid-20th-century Japanese firms, had no case study to emulate, no extracted and abstracted formulation for why it might be crucial to maintain workers’ commitment — even to the point of offering wages, benefits, and clout beyond any management’s comfort zone?

    These different trajectories definitely may come out of the Japanese having a case study to emulate, and more fully understanding the structural sources of innovation within the FP system, whereas the US stumbled upon inventing this system, but never fully understood it. For another possibility, however, US management might in fact have understood what it was giving up — but when forced to choose between power over workers or the ability to innovate, it may have deliberately chosen power. We can only guess at the answer until Japanese automakers get forced to make the same choice.

    Similarly, what agency might US auto workers still have within a more dispersed production system? Or given your book’s closing assertion that “The latent power of the auto industry remains intact, waiting to be activated by resourceful workers finding the needed unity and targeting the pressure points of the production system,” could you describe some of the most crucial, most vulnerable pressure points you might see right now?

    Let us first reiterate that all workers have power. So how many workers need to withhold their labor, and for how long do they need to withhold it, in order to disrupt the present system enough to make concessions worthwhile to capitalists? Flexible production, which once concentrated the production of many US car models into just one or two plants, minimized both the number of workers needed, and the time these workers needed, to stop production in order to force maximum concessions. For instance, the famous Flint strike took place at just a few plants, with just a few hundred workers shutting down 75 percent of GM’s production.

    Today’s dispersed-parallel production, by contrast, maximizes the number of workers needed and the time needed to disrupt production. Yet workers still can disrupt production if, through class solidarity and union democracy, they can realize the group’s latent power. One tactic management takes, when faced with a strike by workers possessing high structural leverage, involves meeting all demands for just those workers. If the workers accept such terms and end their strike, management then immediately reorganizes production so that less militant workers now will occupy the high-leverage position. So high-leverage workers have to withhold their labor for the good of the laboring class as a whole, and not just for their own immediate interests. During the Flint strike, GM offered to meet striking workers’ demands, but workers refused to end their strike unless the proposed concessions applied company-wide.

    Union democracy also played a crucial role in the Flint strike. National union leadership had planned a strike action for a month later, but local Flint workers got notice that GM planned to move some of its machinery to an area with less militant workers, so Flint workers called the sit-down strike. That kind of actionable local knowledge about timing and about the plant’s operations could only come from rank-and-file workers free to exert their agency deciding when and where to withhold their labor.

    At the same time, the UAW has to display more willingness to use strikes to organize plants and build class solidarity, rather than solely to secure immediate benefits for its limited membership.

    And class solidarity today also needs a strong international component, with Big Three production chains spread across multiple countries. Union democracy likewise needs to extend beyond US borders. If workers in Mexico possess high structural leverage, US workers must stand in solidarity with them, and support their decisions about when and where to strike.

    To close then on how your case study of the US auto industry might point to broader economic patterns and prospects, the recent rise of big-tech firms raises related questions regarding possibilities for labor to assert its power amid these latest modes of production. So to pick up on Wrecked’s intro-paragraph W.E.B. Du Bois-inspired claim that “All social structures… even those most invulnerably oppressive… are constructed by people and therefore can be deconstructed by those on the wrong side of privilege,” if we think of hyper-lean logistical firms like Amazon, or minimally staffed entities like Instagram, as taking just-in-time production/distribution models (and their ever-intensifying exploitation of labor) to unprecedented extremes, again what pressure points might you see surfacing?

    Great question. We do have to preface our answer with a plea to ignorance. We have no expertise on the details of production at Amazon or Instagram, or equivalent entities. But that said, we have some idea of how these organizations work generally, and can make some guesses at applying the insights of Wrecked.

    For a firm like Amazon, their efficiencies lie in supply chains and in delivery of goods to customers. In fact, these represent such key components of Amazon’s business model that Amazon has taken over delivery with its own drivers, rather than using USPS or FedEx. We could imagine, then, that if product delivery to the warehouses (or from warehouses to the customers) got delayed, especially during a high-volume holiday season, this would exert maximal pressure on the company in a minimal amount of time. We’ve actually seen some wonderful application of insights from Wrecked specifically to Amazon, by NYU sociology doctoral candidate Nantina Vgontzas. We would encourage anyone interested in a detailed understanding of pressure points at Amazon to check out her work.

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