Global labour faces key challenges that could, paradoxically, present opportunities for the organization of labour and social change. Labour migration dominates political discourse across the North, as workers seek better conditions in a globalized economy and are willing to take big risks to move to jobs and new lives in foreign countries. Although they are traditionally opposed to the importation of workers, in terms of the making of a global working class trade unions may play a unifying and democratic role in integrating international migrants socially.

I also turn to the story of labour and its “others” – that is, those social movements that have sometimes been in competition with it, such as the environmental movement, but that would make up together a powerful force for sustainable democratic development. Too often opposed to the workers’ movements, the “new” social movements based on identity politics may well play an invigorating role in terms of reviving and reinventing trade unions. Finally, I examine the little-known story of workers and labour internationalism, which is, at one and the same time, an old story and part of the making of the working class but which, today, is a key issue if labour is to offer a global alternative to global capitalism. If we are moving towards a globalized setting for workers’ struggles, the need for a new internationalism is a pressing task, not only for trade unions but also for social movements more generally.

Menger is generally seen as the founder of the Austrian school of economics, which emerged in the second half of the nineteenth century. Most of the present adherents of this school are, however, to be found in the United States.

The Austrian school is a “non-mainstream” or “heterodox” approach in economic theory that differs fundamentally from the mainstream approach of economics. The mainstream approach to economics developed from the writings of authors such as Jevons and Walras. Both Jevons and Walras approach the economy from a static point of view, which means that they are interested in the equilibrium conditions that prevail after all processes of exchange have ceased. According to Jevons, the process of exchange of two goods between two trading bodies will cease as soon as the ratio of exchange becomes equal to the relative valuations of the goods, for both trading bodies. According to Walras, a general equilibrium is achieved when the equilibrium prices of all goods and services are established in such a way that no further gains in exchange are possible. These equilibrium conditions are themselves the subject for examination, rather than the more complicated dynamical processes that lead to the equilibrium.

The Austrian school took a different route. In their view, the world is in a constant state of flux, and there is no state of equilibrium at any point. Competition should be regarded as an ongoing process, in which one competitor tries to outsmart the others by providing better products, at a lower price, and by applying a wide variety of marketing tactics. Whereas Jevons and Walras use marginalism as a principle to determine equilibrium conditions, Menger investigates the role of marginalism within the process of decision-making. Furthermore, the Austrian approach can be characterized as “subjective” and “individualistic”: all economic actions must be explained by the rational behaviour of an individual agent, who approaches the world from his/her own subjective point of view. These points of view may differ substantially between individuals, and consequently Austrian economists do not typically presuppose perfect information (which implies the unrealistic assumption that everybody knows everything).

Cambridge scholar Alfred Marshall is recognized as the most important British economist of the late nineteenth and early twentieth century. Not only was he versed in the works of classical economists such as Smith and Ricardo, he was also familiar with the writings of lesser-known Continental European writers such as Thünen and Cournot. Furthermore, he also knew the works of the marginalist authors Jevons, Walras and Menger. His extensive knowledge of the existing economics literature enabled him to provide a unified view on economic theory, to which he added the important notion of “consumer surplus” and, with his period analysis, the role of time in economic theory. Marshall’s Principles of Economics (1890) became the leading textbook in economic theory and in it he attempted “to present a modern version of the old doctrines with the aid of the new work” (Marshall 1890: xi).

Marshall’s work can be seen as a synthesis of classical and mathematical economic theory, guided by the principle of marginalism. In this chapter, we will first consider Marshall’s views on wealth, value and utility and examine his period analysis. We will then explore his notion of “consumer surplus”, which paves the way for economic welfare theory (to be investigated in the next chapter). Marshall realized that there is a strong similarity between the theory of rent and consumer surplus, which he originally named “consumer’s rent”. This idea was taken up by the American economist John Bates Clark, who extends the theory of rent to become a general economic theory of income distribution. We will describe his static view of the economic system, in which the distribution of income is determined by the theory of rent and by the principles of marginalism.

Capitalism as a stable and seemingly sustainable mode of production came into its own in the aftermath of the Second World War. After this terrible, destructive period in human history, which began really in 1914, then continued with the 1929 crash and the slump of the 1930s, leading into the Second World War, a new vista of stable capital accumulation and harmonious labour relations opened up in the West. When the British prime minister, Harold Macmillan, in 1957 told people that “most of our people have never had it so good” he was not just politicking and he was not just speaking of Britain. We need only to recall that, between 1950 and 1973, output per capita in the industrialized countries rose three times more rapidly than the average of the previous 130 years. This new model capitalism created a new model of social regulation, which included Fordist production methods and the welfare state, at least for the advanced industrial societies. The first two sections of this chapter examine the basis of this unpredicted expansion of capitalism and its implications for the workers of the West. This was the heyday of national capitalism and corporatism, of the increased role of the state in economic affairs and in regulating relations between labour and capital. But, as the third section shows, the Third World, or developing countries, did not partake of the synergy and prosperity of the golden era. A new international division of labour, or NIDL, incorporated these countries into a global capitalist economy, but in a subordinate and uneven manner. The final section of this chapter examines the various versions accounting for the end of the golden era at some point in the early 1970s. My interpretation of the making and unmaking of the golden era, in both the North and the South, is specifically in terms of its implications for workers and the labour movement.

New model capitalism

The great crash of 1929, and the long depression of the 1930s that followed, provided a salutary shock to the economic and political leaders of capitalism.

As the workers and labour movement of the Global North began to suffer under neoliberalism, the emerging new era of globalization reduced Fordism to an almost mythical status. Under the guise of “flexible specialization”, new work practices almost completely transformed the world of work. This chapter begins by examining the new model of flexible capitalist development. I also survey the newly important dimension of regionalization, both in North America and in Western Europe, which seems to go hand in hand with globalization. The key issue this chapter raises is whether in the North we now have a stable post-Fordist social regime of accumulation. Is there likely to be a new virtuous circle of capitalist growth and worker prosperity emerging in the capitalist heartlands? What have been the implications of bringing the workers of the once communist East into the capitalist orbit? Finally, what has been the trade union reaction to the new capitalism? We show how, after an era of disorientation, disorganization and demoralization during the 1980s, some new patterns of worker resistance emerged towards the end of the last century.

Flexible financial capitalism

The new growth regime that followed the collapse of the Fordist golden era was to be characterized, above all, by the dominance of finance capital. Whereas under the Fordist regulation model (see Chapter 2), in which national governments to a large extent determined financial matters, now the financial domain seemed to acquire a life of its own. The deregulation and opening up of financial markets across the West in the 1980s set up a contradiction between an unregulated global financial system and the fiscal role of the Keynesian welfare state. The booming stock markets and credit systems in the 1990s created a widespread mood of optimism about the future of capitalism. The “new economy”, as it became known, would sweep away all before it, including trade unions, and generate a new knowledge-based society. That trade unions might be seen to be part of the “old economy” based on manufacturing is testified to by the fact that in Britain in 2000, while the average age of all workers was 34 years, the average age of trade union members was 46 years.

This concludes our brief survey of the history of marginalism. I hope that this short exploration contributes to a more intuitive understanding of economic theory, which may complement the analytical understanding that is fostered by textbooks in (any subfield of) economics.

Thinking about the margin emerges on the supply side, where the scarcity of certain resources, particularly fertile land, implies diminishing marginal returns. Thinking about the margin also emerges on the demand side, where continued consumption implies diminishing marginal utility. These lines of thought examine the forces that underlie supply and demand, and lead up to a theory of exchange. This theory gave rise to a model of general equilibrium, which represents the interdependency between all markets, assuming that perfectly competitive conditions prevail. But marginalism is also relevant for the study of imperfect competition, which examines the consequences of substantial market power, usually exercised by a small number of large firms.

Marginalism can also be seen as a theory of economic decision-making, with a “process-oriented” and “subjective” approach. Marginalism is everywhere in modern economic theory, especially in microeconomics. But it is also relevant for macroeconomics, for welfare economics, for environmental economics – indeed, it would be hard, if not impossible, to imagine the field of economics without the central notions about the “margin”.

Marginalism should probably not be seen as an economic “theory” as such, but rather as a “tool” that is visible in all fields and subfields of modern economics. And it should be seen as a “positive” tool, used to examine conditions of efficiency, and not as a “normative” tool, used to argue in favour of or against a certain distribution of income.

This chapter explores the theory behind the resource curse thesis. It will show how the discovery of natural resources, or an increase in the demand or price of existing resources, can lead to increased rents or revenues that effectively crowd out other productive activities in the economy. A natural-resource-based revenue boom for an economy is akin to a gift, or “manna from heaven”. This naturally leads to a spending boom, but also to a resource reallocation effect, in which the economy’s output switches from traded goods to non-traded goods and services such as housing. This phenomenon has come to be known as the “Dutch disease”.

To show how this occurs, I first present a model – which is a simplified version of the Findlay and Lundahl (1994) historical “Christopher Columbus” model – inspired by the experiences of the regions of recent settlement between c.1870 and 1914, where increases in demand for natural-resource-based products, agricultural and mineral, did not necessarily preclude growth in manufacturing. I then present my own open economy multisectoral model of the “Dutch disease” (Murshed 2001), mainly in connection with mineral and fuel price spikes, in which the syndrome can be avoided by judicious policy choices. Finally, we come to the long-term aspect of prolonged Dutch disease, namely a loss of competitiveness in manufactures, which – if not “treated” – causes permanent and premature deindustrialization.

A resource boom tends to crowd out the other leading sector of the economy. So, in countries that previously exported manufactured goods, that sector contracts (as was the case in the United Kingdom after the discovery of North Sea oil in the 1970s, for example); in developing countries, it could be the agricultural sector. In an open economy a substantial current account surplus emerges, leading to currency appreciation under a regime of flexible exchange rates. This makes existing (non-resource-boom) exports uncompetitive in world markets. This has been argued to have contributed to the deindustrialization of the United Kingdom in the 1980s and later. It can also produce episodes of unemployment despite the oil revenue bounty, as in the United Kingdom during the early 1980s, if the exchange rate appreciates excessively (overshoots its long-run equilibrium level); see the models analysed in Murshed (1997: chap. 6).

The massive expansion and acceleration of capital accumulation and the almost universal real subsumption of labour in the one-time non-capitalist and radical nationalist areas of the globe are generating a new global working class, coming under the sway of capital on a global scale for the first time and subject to similar pressures and reacting in similar ways. In the North the precarious and insecure nature of most work, especially in the wake of the 2007–9 global capitalist recession, has increased dramatically. Some have suggested that a new social subject has emerged: a “precariat”, which now constitutes a “dangerous class” akin to the urban poor in Victorian Britain (Standing 2011). For the millions of workers and urban poor in the global South, precariousness has always been a characteristic of work. What we see now, however, is the emergence of a truly global precariat with different forms and degrees of exploitation but sharing features and, above all, a common interest in the democratization of the global economy and the establishment of social control over the rule of blind market forces.

In recent years there has been an intense debate around the concept of the “precariat”. We saw, for example, The Economist, on the 200th anniversary of Marx’s birth, telling its readership among the international financial elite:

Undoubtedly, this has been beneficial in focusing attention on the workers of the world and how their condition has been impacted by globalization. The term has been questioned by many experienced researchers and analysts (e.g. Breman 2013; Palmer 2013) and has even generated a special issue of the Global Labour Journal (May 2016, entitled “Politics of Precarity – Critical Engagements with Guy Standing”).

The model below is closely based on Murshed (2010: chap. 2). The innovative feature of the model is that the macroeconomic collapse that comes from a reduction of the capital stock, hence productivity, has microfoundations in rent- seeking contests. We begin with a competitive game of rent-seeking in the spirit of Tullock (1967). In this framework, several agents compete for a prize equivalent to a pot of rents in each period that resource revenues are available. The competition to capture this prize, which is akin to a tournament, entails a cost, be that bribery, lobbying expenditure, or whatever. Let P represent the winner-take-all prize that each rent-seeking agent is attempting to seize. This prize corresponds to the contestable or appropriable revenue from resource rents. This does not preclude collusive group behaviour, as long as groups compete with each other. Each agent’s probability of success will depend on his own rent-seeking expenditure relative to all others. The expected utility (E) of an agent (i) in a symmetrical setting can take the form

where π is the probability of winning, based upon the contest success function, and c represents lobbying costs or expenditures. The contest success function is given by

In this example above there are only two agents, i = 1, 2. The crucial parameter s represents the “efficiency or productivity” of lobbying expenditure or bribery; if s > 1, there are increasing returns to scale in such expenditure. If that is so, under weak institutions of governance, when the law is honoured more in the breach than in the keeping, lobbying expenditure is even more productive as far as rent-seekers are concerned. In many ways, s can be characterized to be negatively related to good governance and institutional quality, with s > 1 being a sign of a very poor institutional environment. Wick and Bulte (2006) also incorporate increasing returns to scale in connection with resource rents when the agent’s choice is between rent-seeking and conflict. My set-up is different: the increasing returns to scale emanate from poor institutional quality and not the mere “pointiness” (concentrated) or capturability of resources.

To be able to understand the workers of the world today, we need an understanding of how the current state of affairs developed. This section of the book sets out the evolution of the capital/wage labour relationship and how the Industrial Revolution spawned a transformation in societal structures from which the working class sought to protect itself through resistance and collaborative organization, namely through trade unions, co-operatives and social movements. The postwar boom that dominated the Western industrialized economies until the mid-1970s was bolstered by the Cold War and underpinned by the social settlement wrought from Fordism and welfarism. Workers in the developed world enjoyed a brief period of stability and prosperity, albeit based on the exploitation of colonial or dominated territories and workers of the developing world. The collapse of that settlement ushered in a period of transition from which emerged the neoliberal dogma of the market that has held sway ever since. The strong unions of the North were defanged and declawed throughout the 1980s and 1990s, and their decline contributed to the ascendance of a new model of capitalism that reached beyond national borders. The age of globalization drew most of the world into its market for goods, workers and production as communism collapsed in eastern Europe in the 1990s. Since then a global working class has emerged that is characterized by increasing numbers of women joining the workforce and the insecurity of that work, brought about by capital’s push for flexible labour. Organized labour’s response has lagged these developments, but there are signs of a resurgence of grass-roots labour movements worldwide that aim to counter the dominance of the market and fight for workers’ rights and welfare on a global scale.

At its inception the labour movement was almost instinctively internationalist in its outlook. In the twentieth century, however, there was a steady drift towards a more “nation-statist” perspective by most Northern unions and labour movements, examined in the section on the national era below. Conventionally, the First World War is seen as the point at which labour internationalism died. Following the Second World War the international labour movement was split by the Cold War between the West and “communism”. This gave rise to the nefarious practice of “trade union imperialism”, through which Western unions sought to influence their counterparts in the South. The international trade unions also began to counter the multinationals in the 1970s, however, in what we can call a transition period, by trying to build countervailing power on the labour side of the capital/wage labour relation. There is now, across the political spectrum and across the world, a feeling that we are entering a new period of labour internationalism. The global era demands a global labour response now that the divisions of the Cold War are a distant memory. In a way, this “new” internationalism is renewing a very “old” tradition of the labour movement, reaching back to the First International of Marx’s day. We examine how labour internationalism has developed in the era of globalization as we, supposedly, move beyond the nation state. I suggest that this new internationalism has not always surpassed the traditional conception of transnational collective bargaining. It needs to embrace a more “social movement” type of unionism in order to remain relevant and to represent the emerging global working class.

The national era

It is remarkable how relevant the debates of nineteenth-century internationalism are for us now in the era of globalization. The second half of the nineteenth century also saw a move towards globalization, with world trade increasing sixfold between 1850 and 1890. Van der Linden, writing about the period of Western state formation, could be referring to the present when he writes: “[A]n improved transport and communication network led to a heightened mobility of labour power and capital, and in its wake a weakening of unions organised solely at a local level” (van der Linden 1988: 324).

How do resource-rich countries end up with lower growth compared to resource-poor economies? How does the presence of significant resource rents impact negatively on political institutions (democracy) and the quality of governance? This chapter presents the theory and ideas behind the negative economic effects of the resource curse on economic growth, democracy and governance quality, such as the impact on corruption, as well as the impact of resource rents on public education spending, savings and fiscal dependence on royalties from natural resources.

We have considered the Dutch disease mechanisms that can harm the economy in the previous chapter, and it is worth noting that economies dependent on natural resource revenue rents are subject to sharp volatilities in these rents as they progress through the global boom and bust cycles in commodity prices. The best example is the case of the fluctuating price of oil in the last half a century. This volatility, in the context of an undiversified economic structure, can be a source of lower growth, as van der Ploeg and Poelhekke (2009) point out. Their finding has similarities to the implications of the celebrated Prebisch (1950) and Singer (1950) hypothesis about the secular decline in commodity prices relative to manufactured goods prices. In recent years the volatility effect may have been exacerbated by procyclical borrowing by resource-rich countries, which leaves them in a debt trap after a crash in commodity prices.

In this chapter, I begin with a sketch of the theories of economic growth, with a special focus on the long-run determinants of growth, which relies mainly on institutional explanations. The negative effects of resource rents from a political economy perspective arise when it leads to rent- seeking and corruption, which lower growth via their destructive effect on normal productive investment and hence growth. This line of reasoning is considered in the next section. Alternatively, resource rents may have a direct impact on political institutions, as well as governance; we may refer to this mechanism as the “political resource curse”, discussed in the section that follows.

The development of marginalism on the supply side (namely, the production of goods) is often associated with the theory of rent, which is paid to landlords for the use of their fertile land. In the last chapter, we mentioned that the theory of rent is a cornerstone of classical political economy. While several authors (such as Anderson, Torrens, West and Malthus) have been named as founders of this theory, the best-known version is associated with David Ricardo. In what follows, first we describe Ricardo’s theory of rent, in which the idea of diminishing returns appears. There are diminishing returns in agriculture, because fertile land is not available in an unlimited quantity. We then go on to investigate Samuel Mountifort Longfield’s Lectures on Political Economy Delivered in Trinity and Michaelmas Terms, in which he elaborates on diminishing returns in agriculture and extends the theory to diminishing returns in manufacturing. Finally, we will investigate the Isolated State of Johann Heinrich von Thünen, who applies mathematics, and in particular differential calculus, to discuss the notion of diminishing returns.

Ricardo’s principles of political economy

In Ricardo’s society, landlords, who own fertile land, are an important social class. Their land is rented by farmers, who use their own labour (and the labour of their families) to farm the land to produce agricultural goods. According to Ricardo (1817: 45), “rent is that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil”. Let us suppose that a farmer can produce 100 kilogrammes of corn on a given piece of land (within a year), and that he has to pay 20 kilogrammes of corn to the owner of the land as rent. In this case the farmer would pay a rent of 20 per cent, taken from his output (or “produce”), to the landlord.

Rent does not emerge as a phenomenon in very early stages of a society’s economic development, when fertile land is available in abundance. At this early stage of development, land would be similar to air and water, which is available in unlimited quantity and can therefore be appropriated without giving anything in exchange.

We live in interesting times, yet sometimes our thinking is framed in terms from an older era. The world has changed dramatically over the last quarter of a century yet many paradigms for understanding it lack complexity and are constrained by a narrow nation-state optic. This book proposes to rethink global labour and boldly proclaim a new era of renewal and reinvention for the labour movement. What we call “globalization” or “neoliberalism” has meant, in practice, a huge expansion of market forces and a seeming reduction of space for alternative ways of organizing society. But this unparalleled expansion of capitalism has also led to an equally unprecedented emergence of a global working class, predicted by Karl Marx back in the 1880s, but usually dismissed as wishful thinking. Today the workers of the world are indeed unified under the same capitalist order even if their experiences of it are not the same and they do not yet act in concert.

In contrast to the dominant left-wing or progressive worldview that denounced globalization when it emerged as the dominant trope in the 1990s, I will argue that it opens as many doors for labour as it has closed for national governments: there are always alternatives. The processes of internationalization happen from above but also emanate from below: workers, women, peasants and students are beginning to unite across national frontiers in pursuit of global justice. Today there may yet be an opportunity to recreate the ethos of the early labour movement in the middle of the nineteenth century and to forge a new global labour movement that improves the lives of everyone wherever they are.

The world today is very different from the one in which the proletariat – free both of alternative means of sustenance and of extra-economic coercion – emerged. The world of work has been transformed for many and yet the capital/wage labour relation persists. Much work and many repressive social contexts are the same as they were in the first part of the nineteenth century.

Workers, as we have seen, are central to capitalism’s development and are always an antagonistic element at its heart. This is important for the workers of the world, of course, but also for the wider society, in so far as they – and their organizations – may play a role in the creation of a progressive, sustainable global development strategy.

I begin this conclusion with an analysis that seeks to take us beyond the impasse that I detect in most current research in labour and globalization. The field is dominated by debilitating binary oppositions, such as that between old and new social movements, or between a mobilizing strategy based on recognition versus one oriented towards redistribution. There is a need, I argue, for a more dialectical understanding of the dilemmas and choices faced by workers and others in the contemporary era. This analysis understands capitalism as always being subject to and shaped by workers’ struggles, while of course itself setting the context for these.

I then move on to develop a complexity framework that is, I would argue, necessary for understanding the role of labour both as a driver of capitalist development and as a possible agent for its undoing. Complexity allows us to move beyond binary oppositions and is also cognizant of contradictions and the dialectical nature of development. It is also, at least in the way in which I deploy it here, compatible with thinking about possible futures that are not simply utopian but based on real alternatives before us in many parts of the world, and that often prefigure a future that might be ours.

Finally, returning to the world of labour today, I consider whether another world might be possible, which is a slogan popularized by the World Social Forum that is in need of some concrete action if it is to be more than wishful thinking. I examine what might be termed reformist labour futures, such as the “Decent work” campaign of the ILO and others. I also assess the more radical social movement unionism, which has sought to take labour beyond the reformist economic and political unionism of the past.