Chapter 2
The three theses discussed by John Godard in Chapter 2 of “Industrial
Relations the Economy and Society” are (a) The Capitalism Thesis; (b) The
Industrialism Thesis; and (c) The Industrial Capitalism Thesis. I shall outline
the three theses, then discuss the contribution each makes to an
understanding of historic, and contemporary labour relations. Such
discussion is important in setting the stage for an assessment of the
respective roles that unions, corporations and other employers, governments,
and civil society may play in the social and economic activities of Canadian
(1) The Capitalism Thesis – a Summary
(i) Definition
Karl Marx first expounded the critique of Capitalism as an economic and
social system. Marx’s thesis is expounded most fully in his work “Capital”.
It should be noted that, while there continue to be contemporary Marxist
critiques of Capitalism, non-Marxists, such as Harvard professor David
Korten, advance criticism of modern corporate capitalism. See David
Korten, “The Post-Corporate World”.
For Marx, Capitalism is defined as the relationship between those who own
the means of production (the capitalist class) and those who do not (the
working class).The latter must sell their labour to capitalists in order to earn
a living.
Though the capitalist and the working classes presuppose each other, their
interests are, for Marx, in fundamental conflict. The capitalist’s interest is
always to extract maximum labour for a minimum wage, while workers seek
the converse.
(ii) Exploitation
In this fundamental conflict, workers are at a serious disadvantage, because
the economic forces of Capitalism create chronic unemployment, and an
“industrial reserve army” of workers. This enables capitalists to bid wages
down to the minimum acceptable level, thereby paying workers less than the
productive value of their labour. This “surplus value” is not distributed in
wages to the workers who earned it, but to the capitalist, in the form of
profit. Marx refers to this phenomenon as exploitation. Note that, in
contemporary Canada, the “industrial reserve army” can take the form of
immigrants, young children, contracting out work abroad, and creating
technology that replaces workers and makes them available to the “industrial
reserve army.” More recently, the “reserve army” is foreign workers
including children. See, for example Firestone rubber plantation workers in
Liberia, cocoa workers in Ivory Coast, workers in cotton and banana
plantations. Frequently there is forced child labour, from ages 8 to 12.
(iii) Alienation
Marx also views worker alienation as an inevitable outcome of Capitalism.
When workers sell their capacity to labour to a capitalist, such labour is
owned and controlled by someone else (the capitalist). It is thus alienated
from the worker.
The second aspect of alienation occurs when capitalists “intensify” the
labour process. Work becomes increasingly stressful, and devoid of meaning
or fulfillment. While the means of their consumption of goods and services,
workers are unable to realize in their work their creative capacities as human
beings. Pope John Paul II discusses the creative, or “subjective”, dimension
of work, in his Encyclical Laborem Exercens (1985). See also the human
relations writers such as Maslow who identify the importance of selfactualization for individuals through work. See also Heather Menzies (article
on class website).
(iv) Ineffectiveness of unions and governments
Many Marxists see unions as relatively ineffective as defenders of workers
within Capitalism. While unions may reduce, to some extent, wage
competition among some workers, the exploitative relationship between
capitalists and workers remains, whereby the latter transfer control of their
labour power to the capitalist.
For Marxists, governments cannot be relied upon to promote the
interests of the working class, because they are essentially instruments of
the capitalist class. Marxists also see the media as instruments of Capitalism
that control the ideas and intellectual debate on economic, social and cultural
matters. See reliance of government and media on capitalists. The media are
hooked on advertising money and must take care not to offend large
advertisers (see “Desperate Housewives”). Also governments in Canada and
beyond depend substantially on donations particularly large corporate
donations. It is likely that corporate interests will be reflected in law and
government policy.
(v) Problems of capitalism
Capitalist domination leads to increased polarization between the capitalist
and the working classes, as control of capital becomes increasingly
concentrated within the capitalist class, and workers find themselves
performing increasingly unskilled work. Note the increased concentration of
power through mergers and acquisitions.
A further difficulty with Capitalism is that, because workers are paid less
than the full value for their labour, it becomes increasingly difficult for
capitalists to stimulate the demand necessary to take up output and
productive capacity. The result is increasing economic and social crises in
the form of recessions, or wars that rescue the economy from recessions,
setting the stage for the demise of Capitalism.
A further manifestation of the difficulties facing Capitalism is the successful
lobbying by corporations for privatization of public services (health,
housing, education, social security etc.) to increase opportunities for
acquiring more business and more capital.
(2) The Industrialism Thesis
(i) Transitory nature of problems of industrialization
Emile Durkheim explains “class” conflict not in terms of Capitalism but as
reflecting the transition from a pre-industrial society characterized by
“mechanical solidarity” to an industrial society, characterized by “organic
solidarity”. Organic solidarity highlights peoples' dependence upon rewards
gained from bureaucratic work organizations.
Durkheim saw industrial society as producing a variety of interdependencies
due to a complex division of labour and a concomitant decline in “external
inequalities”, that is, inequalities of opportunity arising from socioeconomic background. Durkheim saw external inequalities as the cause of a
“forced division of labour”, and largely responsible for the “anomie” or
sense of normlessness that underlies conflict.
Durkheim’s “industrialization” explanation of class and conflict forms the
basis of the “industrialism thesis” developed in the post-World War II era
by such writers as , Kerr, Harbison, Dunlop, and Myers. Such authors
rejected Marx’s prognosis for Capitalism on the bases that:
due to the emergence of a professional managerial class and
the diffusion of ownership of capital, corporations are no
longer managed exclusively in the interests of the owners;
(see A. Berle and G. Means, “The Modern Corporation
and Private Property”
increasing affluence and the growth of white
collar/managerial work results in a blurring of class
distinctions, and a more pluralistic society; and
unions and collective bargaining both delimit and
institutionalize conflict within the economic sphere.
(ii) Development of post-industrialism
The result of the foregoing phenomena is a more egalitarian and stable
society than Marx predicted. Also, in industrial relations and political
activity, class conflict ceases to play a role. Meanwhile, unions, and
collective bargaining, mature.
Godard also discusses the “post-industrial society” variant of the
“industrialization” thesis. That is expounded in the work of Daniel Bell
(The Coming of the Post-Industrial Society, 1973, New York, Basic
Books), who sees the emergence of a service/information economy as giving
rise to the virtual disappearance of conflict and alienation. Related to Bell’s
thesis are those of J. Woodward (Industrial Organization, 1965, Oxford,
Oxford University Press) and R. Blauner (Alienation and Freedom,
1964, Chicago, Chicago University Press). Those authors postulate that, as
mass production is replaced by process production, alienation and conflict
will virtually disappear. Is there evidence to support this?
(iii) An end to conflict?
The difference between the post-industrial society variant and the
industrialization model is that the latter contemplates legitimate conflicts of
interest between and among groups. The post-industrial variant of Bell et al.
suggests an end to industrial interest conflicts altogether. These analysts
suggest that most of the problems of industrialization have been conquered,
ending the need for “adversariness”.
There has emerged, they suggest, a new era, characterized by much more
“positive-sum”, harmonious, or “win-win” relations between labour and
management. The emergence of “team” production, job enrichment,
profit sharing, etc. are viewed as evidence of the new era of industrial
harmony instead if traditional conflict.
Is there evidence of an end to industrial conflict? Specify?
(3) The Industrial Capitalism Thesis
(i) Management as legitimate domination
This thesis is founded on the work of Max Weber and Godard sees it as a
“middle ground” between the extremes of the Marxist Capitalism and the
Industrialization theses.
Weber recognizes the disadvantaged position occupied by workers as a
result of the existence of a “free labour market”. Weber recognizes the
“whip of hunger” associated with coercive market forces. In accordance with
Marx, Weber further recognizes that basic conflicts exist between workers
and investors.
Yet Weber argues that the effective exercise of managerial control or
domination requires not only coercion, but consent, or legitimacy. Weber
defines authority as “legitimate domination”.
Weber notes that industrial conflict, such as strikes, is not class conflict,
rather labour/management conflict, as it is management, not capitalists, that
exercise authority. He observes that, as industrial capitalism develops,
workers enjoy favourable living standards, largely because of the superior
efficiency of bureaucratic organizations.
The “problem” with “industrial capitalism”, as Weber sees it, is a “paradox
of consequences” produced by the rationalization and bureaucratization
processes of modern capitalism. Accordingly, along with the world of
greater material affluence for workers has come their sense of being trapped
(inside and outside work) by the “iron cage of bureaucracy”. The result is
that the material gains of modern capitalism are offset by widespread
“cultural disenchantment”. Such culture is cold, depersonalized, and
devoid of meaning or moral purpose. It results from the growth of
calculative rationality as a predominant ethos. The use of rational
calculation as to the best means of pursuing a given end. Lack of
(4) Comparison and Discussion of the Theses
(i) Introduction
It would be simplistic to view the theses as mutually exclusive versions of
reality from which we are obliged to choose one. Preferable is the approach
that each thesis sheds important light on the past, and contemporary, forces
shaping social and economic relationships in Canadian and other Western
societies. Our discussion will examine the empirical support that appears to
exist for aspects of the three theses. First, we shall compare the respective
empirical support for the Capitalism and the Industrialism theses. Thereafter,
we shall comment on the “Industrial Capitalism” thesis of Weber.
(ii) Empirical inadequacies of Marxism
The Marxist thesis appears to be deficient in empirical verification in
Western societies on several fronts. Post World War II affluence in the
West, and in some Asian countries, appears to discredit Marx’s prediction
that Capitalism would collapse under the weight of its own internal
contradictions. By and large, labour, at least until the mid-1980s, seemed to
share in the benefits of economic prosperity in many capitalist states. Indeed,
it was in the communist states of Poland, East Germany, Hungary,
Czechoslovakia, and the Soviet Union that social, political, and economic
difficulties brought radical changes.
Also, Marx’s portrayal of a polarized class war has arguably not
materialized in most Western societies. Indeed, there seems to be a distinct
lack of solidarity among workers within Canada, the U.S.A., and many
Western European countries. Scarcely 12% of US workers are unionized, the
old British Labour Party has been reborn into New Labour, a right-of-centre
party with relatively little influence by organized labour.
In Canada, the traditional union-supported NDP has all but disappeared
federally and remains a force of any kind in only three provinces. Even then,
most social activists in Canada have rejected the NDP as an essentially
mainstream party. Indeed, workers across Canada typically elect into
government political parties that are heavily financed by the capitalists that
Marxists would have us believe have interests that are in conflict with the
substantial majority of voters who elect them.
Few people in Canada would identify themselves as “working class”, never
mind act in solidarity on “working class” issues. Workers with pension plans
and RRSPs have a stake as investors in the stock markets, and some have
stocks in the companies that employ them. See however Latin America,
Middle East where there is substantial opposition to Capitalism.
(iii) Support for Durkheim's industrialization thesis?
The foregoing may provide prima facie evidence that the Industrialism
thesis, based on Durkheim’s theory, seems to reflect more accurately than
Marx’s Capitalist thesis the social and economic stratification in Canada.
While societal conflicts do exist within Canada, they are arguably not
between two polarized classes, but across a plurality of interests not related
to class. The media and politicians talk of “western alienation” in Canada.
Quebec separatists have for several decades sought new political relations
with “Canada”. Aboriginal peoples continue their struggles to persuade the
Federal and provincial governments to honour treaty rights, recognize
aboriginal rights to self-governance and to redress wrongs perpetrated
against aboriginal children in state-sponsored, churches-administered
boarding schools. Feminist organizations seek pay and employment equity,
while gays and lesbians seek an end to systemic discrimination in family and
employment law.
Proponents of the Industrialism thesis will point to public social programs
such as the Canada Pension Plan, Employment Insurance, progressive
income tax, and publicly funded health-care and education as symbols and
agents of social “equalization” in contemporary Canada. Legally sanctioned
collective bargaining, and employment standards legislation arguably serve
to adjust the adverse effects of unequal "market forces" in the realm of
employment, preventing the emergence of an exploited under class, as
envisaged by Marx.
(iv) Bell's post-industrialism thesis – some support?
There is also some empirical support for the “post-industrial” variant of the
Industrialism thesis, inspired by Daniel Bell. “Flatter” organizations, with
workers operating in teams, total quality management programs, job
enrichment schemes, less physically grueling work due to labour saving
technology, and the creation of “knowledge-based” jobs seem to be evidence
of a “unitarist” consensus in many workplaces.
On the basis of the post-industrial variant of the "industrialism thesis", one
would expect unions to be generally unnecessary to workplace decision
making, due to the presumed harmony of interests among workers, investors,
and management. Arguably, this view is supported by the fact that, while
most Canadian workers have the legal right to form, and retain membership
in, unions, the majority do not belong to a union.
Furthermore, the unions that do represent around thirty percent or so of the
Canadian workforce typically do so through collective bargaining, usually
without a strike or a lockout, and virtually never with the street and picket
line violence that accompanied many industrial disputes from Marx’s era to
the early post-World War II years.
Proponents of the "industrialism thesis" will point to the social programs,
and government-sanctioned and supervised collective bargaining and
employment standards of the post-World War II era as the successful
instruments of the social and industrial consensus that did not exist during
the transitional phase of industrialization. Indeed, such commentators will
observe that, historically, in the United States and Canada, the very raison
d’etre of such social programs and institutions was to shield workers from
the transitional problems of industrialization, and to pre-empt the threatened
substitution of state communism in North America, in lieu of market
None of this is to suggest that proponents of the "industrialism thesis" deny
that problems attend our social, economic, and industrial systems in Canada
and other Western societies. The key to their thinking is that such problems
are not “class” based, and can be resolved successfully within the
institutions and processes of political democracy, and of relatively free
markets, the non-egalitarian and potentially de-stabilizing forces of which
can be adjusted appropriately, through government intervention.
While the Marxist Capitalism thesis appears to have significant flaws, it
would be misguided to reject out of hand some of the concerns that it raises.
Indeed, there is arguably substantial contemporary empirical evidence to
support the Marxist analysis of Capitalism, and its inherent conflicts.
Unfortunately, there tends to be a predisposition to discount Marxist analysis
as lacking authority, apparently on the grounds that its recognition may
precipitate the end of democracy, private property, a market driven
economy, and pluralism and their replacement by a despotic communist
state, corrupt, oppressive, and economically inefficient.
See the underclass of working poor. Also abroad.
(v) Useful elements of Marxism
In spite of the apparent flaws in Marx’s "class analysis", and in his
prognosis of the nature and timing of capitalism’s demise, there are
important elements of Marx’s Capitalism thesis that must be examined
seriously within faculties of management, governments, corporate
boardrooms, and trade union meetings and conventions.
A key assumption of the "industrialism thesis" is that chronic or
excessive imbalances of power within society can be prevented by the
intervention of free market forces, government regulation, or economic
activity, and by action by the diverse, organizations, individuals, and
interest groups that make up civil society, or the “civic sector”. Included
in the civic sector are non-government organizations such as trade unions,
professional associations, the media, colleges and universities (including
their students), churches, environmental protection groups, consumers,
voters, political lobby groups, and so on.
Social programs
Arguably, this occurred in the three or four decades after World War II, at
least within the so-called “developed” world. In Canada and other
industrialized countries, something approaching universally accessible,
public health care was established. Public education was universally
available, indeed mandated, at elementary and secondary levels. Postsecondary education became available to all who qualified for it, without
exclusion on grounds of personal or family income. Publicly funded social
safety nets were established, such as Canada Pension Plan, for seniors and
the disabled, social welfare for those without the means of assistance, child
allowance for those with children, subsidized school meals for the children
of low income families, unemployment insurance, workers compensation,
and so on. In Europe rather more than North America, governments invested
in affordable housing for low-income individuals and families.
Governments created, regulated, and in some cases financed, programs such
as Unemployment Insurance, Workers’ Compensation, Health and Safety at
Work, monitoring, minimum wages and employment standards, human
rights protection, and so on. Such programs were funded by a combination
of public borrowing, and a progressive income taxation system that obtained
the significant majority of its revenue from large corporations.
For their part, trade unions in the private and the public sectors negotiated
higher wages and benefits, such as pensions, job security, etc. directly for
their members, and indirectly for the non-unionized workers in the same
labour market as the unionized ones.
Throughout the 1980s and ‘90s, corporate influence on global economic
activity and on the public policy of governments in industrialized and
developing societies has escalated.
Corporate tax
In Canada, the share of tax revenue paid by corporations has fallen from a
high of around 70% in the 1960s to around 20% at present. Accordingly,
governments seeking to fund the social programs viewed to be part of the
Industrialism formula for a stable, egalitarian society are faced with three
options. One is to cut the social programs, another is to borrow to finance
such programs, and a third is to increase the burden of taxation on wage
Heavily influenced by national and international business lobbies, including
the World Bank and the International Monetary Fund, Canadian, and
virtually all other Western governments, have chosen to keep corporate
taxation relatively low, cut public programs, such as social safety nets,
public health care, public education, and regulatory bodies such as
occupational health and safety, human rights commissions etc. A specific
example of a hidden cut in a public program for the benefit of workers has
occurred in the Canada Employment Insurance program (governments do
not like the term “Unemployment Insurance”). Qualifying periods of work
have been set at a point where eligible claims have been slashed, and huge
surpluses built up in the program. A further example of corporate inspired
cuts to public programs occurred in Canada in 1995, when Finance
Minister Paul Martin received a letter from the World Bank, informing
him that benefits for seniors in Canada were too generous. The Federal
Government cut seniors benefits.
Corporate-influenced public policy has also focused on public deficit and
debt reduction, contributing to the lesser ability of governments to fund the
social programs outlined above. While such a policy may have economic
advantages, it should be noted that, while public deficits and debt may have
been tumbling recently, private debt of individuals and small businesses has
been soaring. Students who must borrow to meet the costs of substantial
tuition fees know first hand about the escalation of private debt, which must
be repaid of course out of future anticipated earnings from work.
Corporate economic policy implemented by most Western governments has
also keyed in on tax reductions financed by surpluses earned in large
measure by the huge cuts in public services and safety nets. Typically, as in
Canada, such tax breaks, and schemes such as a flat tax, favour higher
income earners.
As we contemplate the significant cuts to public programs and safety nets,
we must recall that these were introduced in the first place as a response to
the inability of unbridled capitalism and market forces to deliver to
significant sectors of the population minimum standards of nutrition,
housing, job security, health care, and education, etc. We must ask why it is
that, in a time of unprecedented material wealth, and capacity to produce,
and destroy through war material wealth, it is appropriate or necessary to
dismantle the very programs and institutions that arguably rescued
capitalism from disrepute and dismantling in 1935 in the United States and
post-World War II in Canada. Is it because we have completed the transition
to industrialization, contemplated by the Industrialism thesis? Has Canadian
society now developed to a point where acceptable levels of economic
equality and social integration can be delivered by Capitalism without resort
to such programs?
Alternatively, are such programs being sacrificed solely to preserve the
Capitalist system, and the perceived self-interest of capitalists, neither of
which can ultimately survive without the exploitation and alienation of
Finally, inequality of wealth under capitalism has increased not only within
countries such as the USA and Canada, but between the developed countries
of the Northern hemisphere and the so-called "developing" countries of the
southern hemisphere. Marx predicted that capitalism would produce
exploitation of workers abroad. The sweatshop conditions in many
"developing" countries such as Pakistan, Thailand, China, and the collapse
of economies such as Argentina continue to raise questions posed by
Marxism. Indeed, Harvard professor David Korten argues in "The PostCorporate World" that corporate capitalism is out of the control even of
those who purport to be in control.
The foregoing questions are important because they focus on, among
other things, the appropriate responses of trade unions in both
workplace negotiations, and political and social action. The questions
also bring into focus the matter of whether contemporary trade
unionism is sufficiently well-equipped to meet effectively the needs of
Corporate influence on governments is not confined to fiscal and internal
economic policy. The Free Trade Agreement (FTA), and the North
American Free Trade Agreement (NAFTA), are less about trade than
allowing corporations to escape the “burden” of high wages in the USA and
Canada. In the Mexican Maquiladora, corporations can engage labour at a
dollar an hour or less, with little fear of independent unions to bid the wages
higher, and insist on higher standards of workplace health and safety. Such
operations do nothing to develop the Mexican economy and have
contributed to unemployment in Canada and the United States. They are
designed to reduce wage costs, and to put downward market pressure on
wages in the United States and Canada.
Similar activities are commonplace across the globe, as corporations move
their operations from Mexico, to Pakistan, to Indonesia, in search of lower
wage rates for manufacturing products that the workers in those countries
cannot afford. President Clinton’s deal with the People’s Republic of China
was hailed as a trade deal, but, once more, it is a “labour racketeering”
exercise, in which Chinese labour works for bare or below subsistence
wages, in dangerous unregulated workplaces. Once more, a spin-off is
downward pressure on wages in the United States, Canada etc.
Marx spoke of the inherent need of Capitalism to force down labour costs,
even to the extent of moving operations abroad to exploit cheaper labour
than at home. The new globalization so romantically portrayed in
Management texts may be no more than what Marx saw as the inevitable
forces confronting Capitalism as it tries to rescue itself from the constant
need to force down labour costs, in the face of conflict and resistance from
workers. Accordingly, by relocating from Canada to Indonesia, a
corporation can escape (at least temporarily, the inherent conflict of
Finally, each thesis contains truths. As Weber argues, while bureaucracy has
efficiencies it contributes to cultural disenchantment. Individualism is a
strong societal value but bureaucracy tends to conflict with the needs of
individuals. Workers’ experiences in bureaucratic unions epitomize the
problems of bureaucracy. Kathy Ferguson (see internet under her name) puts
forward a powerful feminist critique of bureaucracy.
Marx’s class analysis does not seem to fit developed countries at least as far
as popular consciousness is concerned. Arguably society is stratified across
many bands of interest perhaps because the institutionalization of conflict
through collective bargaining, minimum workplace standards, social
programs has prevented the polarization that existed in Marx’s time.
Nevertheless, the CBC documentary on sweatshops in Canada gave us a
glimpse of an underclass in Canada beyond the pale of social programs and
employment standards. Also economic data confirm that the gap between
rich and poor in developed countries is widening. The middle class appears
to be shrinking. Also if we factor in the under-classes of “developing”
countries, we see clear signs of Marx’s concerns. These are real concerns to
world aid organizations who attach economic aid to the capitalist economic
and political model.
Durkheim’s industrialism thesis seems to be reflected in the apparent
success of post-WWII economic policies of government intervention,
collective bargaining and enlightened management. The whip of hunger,
access to education and health care, minimum work standards all appear to
have helped move developed economies from the polarization caused by
early capitalism into the consensus of the welfare state. Yet, the pressures of
globalization and free trade may be unraveling the consensus.