Fordist and post-Fordist economies: what differences?

Remi Dormois, March 2013

What are the characteristics of the Fordist economy?

The system of Fordist accumulation is based on a double compromise.

The first is established between wage earners and capital owners. The owners of capital accepted an increase in wages because the productivity gains linked to the mechanization of production tools and the sustained nature of demand guaranteed them increased returns and financial margins. The period 1945-1975 was characterized by an effort to equip households, with a relative absence of a search for social demarcation in consumption practices, which was also an advantage for the diffusion of Taylorism in production techniques. Wage increases were agreed to because capital owners saw them as a means of guaranteeing full order books, given the very low level of internationalization of consumer markets. Even if raw materials are traded internationally, most production of consumer goods takes place in the country, or in a nearby geographical area when states have limited territories, where they are consumed.

The second compromise is established between the company and the public authorities (States or public institutions according to European countries). The firm takes charge of the production of goods and services and pays wages, while the state or public institutions take charge of the reproduction of labor power. The Fordist period is the period of the implementation of equipment policies but also of solidarity policies. The State financed ambitious programs for the construction of social housing, schools, colleges, high schools, universities, socio-cultural facilities, hospitals, roads and highways, ports and airports, etc. In addition to this equipment component, the European States set up social protection systems that shared common principles, such as financing through contributions paid by employers. Social security was one of the emblematic institutions of the Fordist regime in France. The public financing of infrastructure and solidarity policies is made possible by the increase in revenue linked to taxes (income, companies, assets/property) in a context of growth. Depending on the European country, it will be the States, the local authorities and especially the cities that will be the main actors in the production of goods and services for the inhabitants and users.

The development of large-scale integrated industry characterizes the Fordist period. The scientific organization of production and the vertical integration of all the tasks of the production process within a single group were the organizational methods chosen to increase productivity and meet a demand that was certainly sustained but relatively standardized. In this productivist model, the spatial problem is mainly that of the availability of land. Land is needed for the development of industrial complexes served by large infrastructures for the supply of raw materials and energy. Heavy industries, such as automobile manufacturing, heavy chemicals and shipbuilding, tend to be concentrated in certain European regions, which thus become highly specialized in certain sectors with a national or even supra-national influence. This mono-activity is thus at the origin of the economic growth of these regions but will later also be the cause of their decline: the absence of a diversified economic base accentuating the economic and social repercussions of sectoral crises. Other industrial sectors, such as the production of consumer goods, are more widely distributed throughout the national territory because they are less dependent on raw materials and energy resources, but also because the States are voluntarily organizing the installation of factories in regions that were previously not very industrial. The action of the DATAR¹ in France is emblematic of this policy of economic development of the territory with the relocation of research centers from the Paris region, of industrial establishments representing a total of more than 400,000 jobs between 1955 and 1975 with the aim of spreading industrial production throughout the national territory (national center for space studies in Toulouse, atomic energy commission in Grenoble, national center for telecommunications studies in Lannion,…)

Why did the Fordist economy go into crisis?

The crisis of the Fordist regime occurred in the second half of the seventies. It is the result of several factors. As household equipment had been developed over the period 1945-1965, several consumer markets went from a development phase to a mature phase. Demand is slowing down, which puts companies in a situation of production overcapacity. For the first time, short-time working and lay-offs were envisaged. Prices are rising as a response to falling sales in order to maintain the financial margins of the owners of the capital. This slowdown in sales and the resulting pressure on wages is reducing government revenue from taxes. As infrastructure and solidarity policies are in full maturity, public investments are important and cannot be stopped overnight: governments initially resort to borrowing, considering that the drop in their revenues is only cyclical (a bad moment to pass…). But a group of economic experts denounce this strategy of governmental headlong rush. Trained in the great Anglo-Saxon universities - notably the University of Chicago - these experts adhere to neo-liberal theses that give absolute priority to controlling public spending and to fighting against any measure that hinders the expression of market mechanisms considered to be the optimal way of allocating resources (criticism of an alternative model based on regulatory planning of public origin, for example). This new generation of neo-liberal experts reached decision-making positions in banks, universities, companies and also in the administrations set up in the United States and Great Britain after the victory of Republican (R. Reagan elected in 1981) and Conservative (M. Thatcher appointed Prime Minister in 1979) candidates. The neo-liberal doxa spread among the economic and political elites, leading to major changes in the content of public policies in the Anglo-Saxon countries from the beginning of the 1980s, and then, as the 1980s progressed, in most OECD countries.

What are the characteristics of the post-Fordist economy?

The post-Fordist regime is characterized by an international division of labor in the production process. Internationalization takes place at three levels: capital, consumption and production. The internationalization of finance leads, on the one hand, to the structuring of an economic sector in its own right (with its own market, its own actors, its own rules), but also to profound changes in the functioning of enterprises (public or private) in other sectors. Companies can more quickly raise the capital necessary for their development, but these investors are mainly looking for short-term returns and are not guided by a medium-term patrimonial logic, as were investors from the bourgeoisie and local banks in the previous period (a characteristic maintained in the case of Rhenish capitalism). As for the internationalization of consumer markets, this needs to be clarified. Most markets are not really global, but are constructed by operators on international subgroups: Asia, North America associated with Europe, Africa, South America or Russia, etc. In all cases, their limits exceed those of the nation-states that were the framework for the markets of the Fordist period. Finally, internationalization concerns production processes, with an international division between regions specialized in research and development, marketing, finance, logistics/distribution, other regions specialized in manufacturing, maintenance, etc., and finally regions that concentrate the main consumer markets. Of course, it must be kept in mind that this international specialization of tasks is in constant evolution. R&D activities have thus developed considerably in regions that used to specialize in production activities (China, Brazil and India, for example).

The characteristics of post-Fordist economic organization that we have just described are at the heart of the process of economic polarization on the cities, and mainly the very large cities.

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