Daily Archives: February 16, 2010

TEFL and the Economic Crisis Revisited

In January 2009 we made an assessment of the nature of the economic crises and how it would affect the TEFL industry.  Whilst we see no reason, in the light of events over the past year, to ammend our perspectives on the actual causes of the crises or the consequences of the speculative boom in higher and further education, it would be useful though to reassess the current “economic recovery” and its effect on the EFL industry.

The Inventory Bounce?

Most major Industrial countries now report that they have actually climbed out of technical recession (such a recession is defined by a contraction over two successive financial quarters in the total volume of goods produced). This emergence from technical recession, however, does not equate with substantial growth rates or rises in income and spending. One reason for this could be what economists term an inventory bounce. The inventory bounce is well-described by Krugman below:

Imagine a company that produces widgets (companies in these examples always produce widgets), normally selling 100 each month. The company tries to keep one month’s sales, 100 widgets, in inventory. But for some reason sales drop off, to 90 per month. And it takes a month before the company realizes what has happened.

At the end of that month the company, having produced 100 widgets but sold only 90, finds itself with 110 in inventory, but wants to hold only 90. To eliminate the excess inventory quickly, it might slash production to 70 for the next month, then bump production back up to 90. But unless sales increase again, that’s where it ends: production never recovers to its original level.

As go the widget-makers, so goeth the economy. When demand drops, inventories build up, then production drops sharply as businesses work off the overhang. Finally, there’s an “inventory bounce” when the overhang is gone. But the bounce doesn’t necessarily presage a true recovery. To get that, you need increased sales to final buyers.

This inventory bounce would be further complicated by the availability of credit. As is well recognised, the last “economic boom” was premised on considerable and unsustainable credit levels. Now it is clear that banks have cut back on loans and were enormously cautious on issuing loans they would have otherwise issued prior to the start of the last economic boom, but the availability of credit can clearly not restore growth rates. Moreover, the massive injections of capital to rescue the banking system have left the US and the UK with spiralling national debt which must itself be repaid and they are not in a position to launch massive public programmes to stimulate demand. While it is true that Germany, Japan and China are not so encumbered with debt it is unlikely that they will risk their economies by creating massive export possibilities for the more indebted nations. Indeed, the massive stimulus package in China has not been to create more home demand (better pension schemes, more hospitals and schools) but rather to create more infrastructure for export led growth.

Whether what we are seeing is merely an inventory bounce or not, what we know for sure is that most governments throughout the world are looking to cut back on public expenditure in an attempt to balance the books. Should they cut back too rapidly, however, causing rising unemployment and falling demand, they risk exacerbating the crises.  This is the background to the convulsive struggles that are currently shaking Greece and well-documented by Sara Hannam over at Critical Mass. They are also the background to the fightback at Leeds University in the UK, where staff are attempting to repel a management onslaught to deliver 35 million pounds worth of cuts.

And Tefl?

Well, we believe the industry best exemplifies the current economic situation. It is like a war of attrition. Some companies are cutting back and some individuals are preferring to spend extra hours in the office rather than do English classes. Other companies, however, are restructuring their classes to achieve savings or asking their staff to contribute more in terms of money and time. However, in an increasingly competitive job market students and workers still see the benefit in achieving a high quality of English. It is like Japan after the economic crises of the 90’s, there is not a technical recession but neither is there a feeling of significant growth. Numbers are staying more or less steady, but teachers and students are feeling under increasing pressure.

In place of a conclusion

We imagine this situation will continue for some time unless some department of international capital makes a significant move, this could be a move to the right (as witnessed by the rise of far right parties) and protectionist policies or a concerted effort to drive down wage costs even further while attempting expansion in another department (say further expansion of military Keynesianism). What is clear is that capitalism is riddled with contradictions, and every attempt to rid itself of its own contradictions brings further problems. Our future lies with the examples of air traffic controllers in Greece and university staff in Leeds. It is not only our jobs which are at stake but the very future of the planet as we know it.

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It’s not only English UK who stand to lose from the “return” of economic nationalism.

 

The Speech

We are continually working to improve the management of the system but we believe it is above all the flexibility of the points system which has allowed us to help British workers through difficult times, when it is right to be more selective about the skills levels we need from migrants. In March this year we raised the minimum salary level and the qualification level for tier one. We required Jobcentre Plus to apply the resident labour market test for tier two, so that no job can go to a migrant unless it has first been advertised to jobseekers in the UK for two weeks. The changes we have made mean that, from this autumn ,local workers will get a better chance, with jobs advertised now for four weeks in local Jobcentres before they are offered more widely.

 ……….

I am announcing today a review of student visas – to be conducted jointly by the Home Office and the Department for Business. It will involve key stakeholders, and will report in December. We will look at the case for raising the minimum level of course for which foreign students can get a visa. The review will also examine the case for introducing mandatory English language testing for student visas other than for English courses (Editor’s note: the eventual proposals included English courses). And it will review the rules under which students on lower qualification courses work part-time, especially those on short courses, to look at whether temporary students are filling jobs that would be better filled by young British workers.

Gordon Brown 12th November 2009

A Change of Direction

Brown’s November speech heralded a significant reversal in previous Government approaches to immigration and sought to harmonize government policy with the electoral calendar. In short, faced with an impending general election, Brown was keen to show to the electorate that he was going to be tough on immigration. Whilst previously, government policy had been largely driven by simple economic concerns (“leaders in the international education marke”t, “flexibility in the labour market”) Brown was suddenly professing a new found enthusiasm for the EU concept of “managed migration”. In an attempt to demonstrate this new approach (or at least an approach which was in contrast to the opposition’s quota system) Brown introduced tough new guidelines on entry into the UK, for those wishing to work , wishing to study and work or simply wanting to study (there were also greater restrictions placed on partners wanting to join those workers/students ). It would be wrong to argue, however, that the points system was a policy departure in itself (a points system existed before), but rather that these tight new immigration controls were both contradictory and self-harming and, together with the rhetoric, spelled a significant lurch further to the right on immigration issues. Most significantly, the economic benefits of immigration were being played down and the threats to British jobs and the British way of life (whatever that is) were being emphasised.

A large part of this self-harming is now being experienced in the domestic EFL market, where the industry faces considerable economic difficulties as a direct result of these ill-considered policies. Students from around the world (apart from the EU) are now denied access to studying English in the UK because they can’t speak it to GCSE standard. This is rather like restricting “learner drivers”, wishing to enroll with driving schools, to only those learner drivers who have passed their driving test. Of course, there are those who want to obtain an HGVL (Heavy goods Vehicle License) but this will hardly prepare the next generation of car drivers or provide sufficient work for the driving schools. We would also agree with Sandy McManus, that the very use of GCSE standard (meaningless in EFL terms)reveals the complete disregard UK Borders held for the EFL industry when drawing up these plans ( and we thought David Graddol and the Labour Party were friends).

There are also other issues about the new system, requiring students to prove they have considerable savings in the bank before allowing entry and asking “host organisations” to participate directly in the function of “supervising” visitors during their stay, which not only effect those wishing to study here but also effect the arts and visiting academics. Overall there will be a huge economic, academic and cultural loss to the UK.

Before progressing further, however, it is necessary when discussing neo-liberal or managerial approaches to immigration, to stress that as Marxists we are opposed to all immigration controls. It is perverse to us that wealth can flow unhindered from country to country but that workers are not given the same opportunity. For Marxists, immigration controls are racist and abhorrent. There is no such thing for us as British jobs, there are jobs in the UK and there is unemployment but these jobs (or unemployment) do not enjoy a national character, they are merely temporary points In worldwide capital accumulation (or dislocation). The resurrection of the rhetoric of “British Jobs” is a response to the collapse of neo-liberalism, and an attempt to scapegoat the problems of unemployment onto migrant workers and visiting students. We resist 100% such crude racist attempts to obscure the real causes for the ills of the capitalist system.

The new points system is in such stark contrast to New Labour’s neo-liberal approach in 2004. In 2004 the government welcomed all workers from the eight new EU countries (known as A8 countries) well before they had any obligation of doing so. Full integration does not take place until 2012. At that moment there was little or no talk from the government about the “British family”. Indeed as the Migration Policy Institute (MIP) point out:

Europeans account for half of the UK foreign workforce, somewhat more than their share of the foreign population (46 percent). The Irish used to predominate but their share of all foreign workers has fallen from 22.6 percent in 1995 to 7.2 percent in 2008. The numbers of A8 Europeans in the labour force have grown rapidly, reaching just under half a million, or 21.8 percent, of all foreign workers in 2008.

In just two years A8 workers overtook Ireland to become the largest group of workers in the United Kingdom. There were 358,000 Polish workers in 2008, up from 151,000 two years earlier; compared to 165,000 Irish workers in 2008, up from 152,000 in 2006. Polish workers accounted for 15.7 percent of all UK foreign workers in 2008. Before 2008, the booming UK economy proved an attractive destination for many citizens of the new EU Member States. Together with restrictions elsewhere in Europe, high unemployment at home, favourable exchange rates, and pent-up demand, a wave of immigration from the accession countries was unleashed. About 1.4 million people from the A8 arrived in the United Kingdom between May 2004 and March 2009.

In 2007, A8 workers made up almost half of the United Kingdom’s labour immigration flow. …………The sheer size of the inflow has meant that Polish nationals, despite the high churn over, jumped from being the United Kingdom’s 13th-largest foreign-national group at the end of 2003 to number one by the end of 2008.

We would also stress here that people should not assume that these A8 workers represented a skilled workforce alternative to non-EU unskilled workforce (as New Labour wants to suggest): 

Over time, the share of the foreign-born workforce engaged in highly skilled occupations has declined (in 2004, 43.6 percent of foreign nationals were classified as highly skilled; in 2008, the proportion stood at 38.3 percent). This shift in skill balance has been brought about by the inflow of workers from the A8 countries, only 12 percent (15.8 percent in 2006) of whom were in highly skilled occupations, while over half (57 percent) were in low-skilled occupations, compared to 20 percent of other immigrants and 18 percent of natives.

In short, UK authorities generally agreed with numerous economic studies suggesting that immigration was positive for the economy, that rather than cause unemployment and lower wages, a new source of cheap labour (let us not swallow the skilled workforce ideology for one moment) would stimulate the economy and create extra jobs and wealth. Indeed, a leading think tank close to the government were suggesting, in 2004, that an amnesty be given to illegal workers which would generate 6 billion pounds for the economy (as opposed to the 4 billion it would cost to find such workers and deport them). Moreover, the MPI report, mentioned earlier, points out that between 2004 and 2009, 6 out of every 7 new jobs were taken by foreign nationals. The new restrictions on A8 workers (which will be rendered inapplicable in 2012) and the tightening of controls on visitors from outside the EU, therefore, represent a significant sea change in government policy.

The “Return” of Economic Nationalism.

There are those, like David Graddol, who suggest the nation-state is declining and the flow of capital between nations (globalisation) has flattened the earth. These thinkers portray a world where poor countries have risen or are rising (most notably China and India) from poverty and are competing equally in the market place. They see the rise in unemployment in Europe and the US as a natural consequence of this new market pressure. Moreover, as the laws of the market do not respect national boundaries, there is decreasing power available to national governments to effect change. Protectionism, they conclude, is no longer a viable option for national governments and rather than fight against this inevitability, governments should pursue niches in the world market. Not surprisingly, such thinkers see a widening in the gap between rich and poor inside a country (end of the redistributive state) but a narrowing between countries (the power of the market).

Regardless of the simple fact that mass unemployment arrived in the OECD countries in the 1970’s (well before the great flattening), we can see that the nation state has, in fact, grown rather than declined over the last 30to 40 years. The percentage of state expenditure per GDP of  the UK  serves to demonstrate this: State expenditure for the UK currently stands at 46.4% (the highest since 1976) and showing consistent growth since 2001 (to put matters in perspective, the  state only spent 35.11% on GDP when the Second World War started and 47.51% in the final year of the first world war.   

A similar picture can be seen (left) with respect to state expenditure in the United States. It would appear in these two bastions of neo-liberalism, that not only is the state not shrinking but it is rapidly reaching the size of a war economy.  Rather than shrink, however, the state has become much more closley linked to wealth production and less linked to social welfare and social justice. We might conclude the state is still in the business of redistributing wealth but redistributing it o the rich rather than the poor.

Moreover, Graddol and his co-thinkers are empirically off the planet when they suggest the gap between rich and poor countries has diminished. As Learner and Schott have demonstrated, quite emphatically (see here for an impressive graphic), what we have seen is a redistribution of low-end manufacturing from countries such as Poland and Mexico to countries such as India and China. It is true that millions have been taken from absolute poverty, but it is is equally true that this has been at the expense of “middling-income” countries rather than the OECD countries. 

This is not, however, a major redistribution of economic power. The US still dwarfs the developing world in terms of income per capita. Indeed, looking at any index of income per capita, China will be lucky to reach the position of Turkey within the next 50 years let alone takeover the US (as Graddol suggests). This is not to dismiss the rise of China, the rise in immigration to the US from Mexico and Poland to the UK respectively is inexplicable without the shift in manufacturing output from one country to another (as is the fall in unemployment in Brazil as it exports raw materials to China). No, the point here is that the nation state is far from dead and the threat of a retreat into protectionist policies is ever present (irrespective of how self-harming it may be to the long-term interests of capital). The reader may believe we are being too pessimistic in our assessment and we fail to see the “mushrooming” levels of international co-operation (especially with regard to the current economic and environmental crisis). On our part, however, whilst we are not predicting an immediate rerun to those terrible times spanning 1929 to 1946, we are warning of the obvious dangers of a rise in the rhetoric of economic nationalism when arms expenditure, as a percentage per GDP, is enjoying record growth:

We have travelled a long way, of course, from the lurch rightwards of the UK government and its effects on its domestic EFL industry to the threat of protectionism and nuclear holocaust. But it is journey well underway. In reality, this journey was started in 1970 when the golden age of capitalism came to an abrupt halt. It is true that the journey has taken us in new directions (the fall of the Soviet Bloc/ a massive increase in global trade/the rise of China) but we return to that all powerful capitalist compass point, the need for “creative destruction”. The term is Schumpeter’s, but Marxists recognise it well. Put simply, before a truly dynamic new round of capital expansion can occur, old capital must be destroyed. Wealth and power will become increasingly concentrated as the weaker capitals are subsumed under these new concentrations of capital. Unfortunately, the ransacking of the Eastern Europe or the shifting of textile production from Mexico to China will not be enough to stimulate this new round of capital accumulation; it will postpone the problem but not resolve it. No, the journey must lead to a process of creative destruction just as “creative” as that which occurred before the last round of massive capital accumulation (two world wars, Auschwitz, Hiroshima). Gordon Brown’s speech, like the rise of the BNP and the assistance they get from the BBC, merely returns us to that compass point.

The introduction of the new immigration points system was indeed a sad day for the  domestic UK TEFL industry but sadder days are ahead unless we resist the journey under which we are embarked.

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