What's the "just-in-time" economy?
I'm
using the phrase to evoke an economy defined by a lean — and at times
mean — philosophy and approach to everything from production to
employment, and a financial system enmeshed with it.
The term "just in time" was popularised in the 1980s and 1990s to describe a system of production and a management philosophy which aimed to cut costs and eliminate waste by procuring and delivering everything just when it's needed — or "just in time".
Toyota
was a leading proponent of "just-in-time production" — its factories
and supply chains engineered from the 1970s so that components arrived
just as they were needed for assembly.
Avoiding the costs of holding inventories and warehousing was a key part of the strategy.
This required the development of sophisticated logistics to manage often global supply chains to ensure "just-in-time delivery".
All good … until supply chains are disrupted, as they have been in the pandemic that has hit myriad businesses from tech giants such as Microsoft, Apple and Samsung, through to the makers of critical medical supplies.
That's
prompted a reassessment by some of the Federal Government's leading
right-wing 'hawks' such as the chair of the parliamentary joint
committee on intelligence and security, Andrew Hastie, who find
themselves in unlikely alliance with the protectionist left — all
advocating more resilient supply chains insulated from the prospect of
global disruption and a rebuilding of domestic manufacturing capacity
for critical goods.
Just-in-time workforce
There's
less attention from these MPs to the "just-in-time workforce" — which
the economic fallout of the virus has exposed as another vulnerability.
Casualisation, labour hire, self-employment in the so-called "gig economy" and zero hours contracts
are all manifestations of a "just-in-time workforce", where the worker
becomes an economic buffer, absorbing the risk of variations in demand.
As with just-in-time or "lean" production, the trend towards a just-in-time labour force accelerated in the 1990s.
In
response to recessions around the world in the early years of that
decade, employers who'd been stuck with fixed labour costs when demand
and revenue fell responded by cutting back their ongoing workforces.
A
core of ongoing employees was surrounded by an expanded periphery of
part-time, casual and contract labour who could be upsized and downsized
as required.
For business, there is an obvious cost advantage in being able to tailor work hours by the day and by the hour to meet demand.
Like widgets on the assembly line, workers are sourced and delivered "just in time".
The
just-in-time workforce also shifts power from labour to capital: people
in insecure jobs are less inclined to speak out, push back or unionise.
Business
groups like to argue that the flexibility is a two-way street — and it
is the case that some workers do enjoy the freedom that gig work or temp
work offers — but there's no denying that in aggregate it represents a
massive shifting of risk from capital to labour.
In
effect, the risk of variations in demand has been shunted on to working
people, who in turn face increased financial risk as they try to
navigate bills and mortgages without security of employment or income.
Just-in-time household budgets
It's contributed to the rise of "just-in-time" household budgets where people live hand to mouth, with more than a quarter of Australians households reporting they have less than a thousand dollars in cash savings.
In
good times, this is a risk to individuals and their families. In bad
times, as the COVID-19 pandemic demonstrates, it can quickly become a
systemic risk.
"Those people who are absorbing the
risks of business now become in their large numbers a systemic risk for
the overall economy," says Dick Bryan, an emeritus professor of
political economy and co-author of Risking Together: How finance is
dominating everyday life in Australia.
Official estimates showing that nearly 800,000 Australians lost their jobs in the space of a week or so
as the crisis hit were a stark illustration of how quickly the
"flexible" workforce can become collateral damage, with their loss of
earnings threatening to unravel the economy and financial system.
The
lack of a buffer for many businesses in the just-in-time economy has
also been brought into stark relief, with so many enterprises utterly
reliant on short-term cash flow, with few resources to fall back on.
Although
its motivations may have been humane as well as economic, the
Government really had little choice but to drop its opposition to
increasing the dole and instead double it in response to the COVID-19
jobs shock.
Likewise, its reluctant decision to subsidise wages (even though many casual workers have no access to this safety net).
Just-in-time finance
Without
that intervention and similar measures from governments around the
world, there is no doubt we would have seen a catastrophic financial
system meltdown, because alongside the just-in-time workforce, we also
have a just-in-time financial system.
Just
about every payment, from mortgages to utility bills, has been bundled
up into financial securities that are sold and traded around the world.
Securities
backed by utility bills have come to be seen as a near risk-free
investment — more secure, according to some, than Treasury bonds — but
if the steady stream of secure repayments were to dry up, these
securities would plummet in value with disastrous consequences.
Quite
literally, if every household were to stop paying its utility bills,
the financial system would collapse, says Mike Rafferty of RMIT,
co-author of Risking Together — and it would only take an unexpectedly
high share of households to renege on payments to push the system to the
brink.
No surprise then that, in the United States, banks are reportedly preparing to garnishee peoples' economic stimulus payments from the Trump administration to pay debts.
Despite
this, so far, the systemic risk from precarious work in a financialised
world is barely featuring in the political debate.
On
the contrary, business is demanding more labour market deregulation and
"flexibility" on the other side of the crisis to build productivity and
revive the economy.
There's a saying in economic
circles that we learn the lessons of the last crisis just in time for
the next one. Or too late, as the case may be.
No comments:
Post a Comment