Geography Reference
In-Depth Information
level, and this ensured that the state in European countries retained a very
different role in the economy compared to that in the US.
6.4
THE THIRD INDUSTRIAL REVOLUTION OF
THE 1970s‒80s
During the late 1960s, the stability of the international trading and finan-
cial system provided by Bretton-Woods started for the first time to be
undermined. The US dollar came under continuing downward pressure,
due to increasing domestic inflation caused by the public expenditures
associated with simultaneously funding the Vietnam War and increased
welfare state measures. This downward pressure meant that the dollar
could not continue to act as the world's reserve currency at existing pari-
ties. The result was that the Bretton Woods system collapsed in 1971 when
the US dollar was floated. Shortly afterwards, the 1973 oil embargo by
the Organization of the Petroleum Exporting Countries (OPEC) and the
Soviet wheat deal led to worldwide commodity-price inflation (Piore and
Sabel 1984). The combination of rapid inflation and floating exchange
rates meant that commodity prices became both uncertain and independ-
ent of the performance of domestic markets. During the 1970s the infla-
tionary effects of the oil crisis combined with the increased international
competition thereby rendered much of the post-war forms of labour
organization obsolete in many sectors. This was because the asymmetric
effects of differential price rises between sectors meant that national pay
bargaining across industries and regions became impossible for both
unions and management. Moreover, nationally organized labour activi-
ties exacerbated the confrontations between unions and management.
Therefore, the stable environment of industrial relations, corporate gov-
ernance and domestic market demand which had been characteristic of the
Bretton Woods era was ultimately shattered.
These changes in the global economy and the increasing influence of
monetarist thinking in macroeconomics brought forth a new emphasis on
deregulation and competition in both the real and the financial economy
(Keegan 1993). This increased emphasis on deregulation and competi-
tion also encouraged firms and organizations, irrespective of their sector
or nationality, to search for new management, production, and human
resource practices. In manufacturing in particular, in order to adapt to
the new competitive environment, firms had to find ways to increase the
productivity of their workforce. However, this was not at all a straight-
forward matter. The reason was that in the previously dominant modes
of mass production, corporate profits within the expanding markets
