The construction industry

and a few other industries too

To Jimmy Quarbo, the best craft worker I know.

A few posts back I quoted Ranko Bon, who described the interconnected set of sectoral relationships that are necessary in the process of constructing a building:

“the materials and components are supplied by a variety of industries in the manufacturing sector; they are delivered to the site by the transportation and trade sectors; the assembly proceeds in accordance with plans, designs, and management procedures supplied mainly by the business services industry in the service sector; most of the funds required for construction are supplied by the financial services industry in the service sector; and a significant part of the output supplied by the construction sector is delivered to the real estate industry in the service sector”.

I then followed this statement with the claim that “a definition of the construction sector is crucial to developing an accurate understanding of the rate of profit within the sector as a whole at the national level, and thus making sense of absolute rent”. This is true, and you can read that post for more if you’d like. But what was not properly addressed is the actual nature of the relationships of these varied sectors, that is, the circuit capital must flow along in order for a certain owner of capital to see his investment returned as a serviceable building.

As you may imagine, Bon’s statement is correct but incomplete from the perspective of the transit of capital in the broader construction process. To begin, construction is, as Robin Murray has it, a “transforming industry”, along with agriculture and mining. What this means is that, accepting a parcel of land as landed property, it falls to capitals within the construction industry to supervise the transformation of that land into another form – that of a structure. In this process the land is destroyed as a commodity, but not as a property (though this process can be reversed via demolition or total dereliction). Prior to the point of completion of the production process, that is, while the land remains a mote of modern landed property, it follows specific rules: chiefly, that it is not on its own productive of value. That said, it does of course accrue capital in the form of money when exchanged. The reason why is actually a first, intermediary sectoral transit: when land is exchanged, rather contradictorily, it is not actually exchanged – of course, the land cannot be moved, but property rights can be. However, this is not a feature of land, but of real estate finance, which packages the right to property enforced by the state into an exchangeable asset which is then passed from seller to buyer. Historically, this becomes a possibility because of the insistence on the divorce of labor from the land, where early capitalists recognized the requirement to fashion a labor force dependent on wages for subsistence. This retreat of land into its own shadowy sphere represents an originary financialization, if you like: what was land is replaced by two things – first, a deed of property that commands a certain price in exchange, and secondly a container for fixed capital investment. But throwing labor from its means of subsistence also retains land not as an atavistic feature of a previous mode of production as capitalism advances, rather it secludes land in itself beyond the law of value. Remember that land on its own is not productive of value. When it becomes an entity beyond the reach of value it is, as Marx calls it in the Grundrisse, a “negation of capital”, an unnecessary “excrescence”. It has no direct bearing on production, but the magicking of property deeds bequeath its owner/proprietor the chance to capture a certain share of value produced by social labor (surplus value) in sale. Thus, the landlord-capitalist makes his money in distribution, in circulation. Prior to the commencement of the construction process, a land’s title may be exchanged any number of times, netting many segments of social value in sale, but it will never be productive of value in its own right.

If a landlord-capitalist chooses to build upon this land and thus remove it, semi-permanently, from the land market, we now enter the province of the construction sector. To be specific, the construction sector is limited narrowly by workers engaged in the direct act of production upon the land, a workforce of “dual worlds” as Peter Phillips notes in his essay in the collection Building Chaos: on one hand, there are the well-trained craft workers, usually attached to craft unions within the industry; on the other, a swath of untrained workers, generally racialized and migrant-heavy. This industrial sector is characterized by both extreme turbulence (dependent as it is not only on non-reproducible sites of varying difficulty to build on but also on favorable weather conditions) and also the existence of an enormous amount of subcontractors and specialists which are hired by the ‘main’ contracting firm (that is, the one with direct liason to the landlord-capitalist client). “The ultimate 'buyer' in the industry is the client, the commissioner, and owner, of the plant being built”, Korczynski writes. “The ‘suppliers’ are the contractors and subcontractors who tender for, and then construct, discrete pieces of the plant”. The ILO’s “Migrant Work and Employment in the Construction Sector” reports that subcontracting, in addition to breaking up the actual construction process, effectively forecloses on organization within the unskilled labor segment on site by making it difficult to even understand who the “employer” is and creating an environment in which “profoundly different wages, protections, benefits, and conditions of employment” – not unlike the conditions which predominate in “open shop” manufacturing.

What is not included in the construction sector is the vast majority of construction management, curiously enough, and in fact the difference in their strategies of surplus value pursuit means they are in another sector entirely. Architects and engineers are not construction workers, but workers in specific industries in different sectors altogether. Construction is then a curious sector in that its management (and make no mistake, architects are just managers) is spun off into another sector of the economy altogether. Construction management does not actually produce a building, but contracts with the client separately to furnish a strategy for construction, to acquire and disseminate technical data on the site and appropriate technological applications, to acquire capital input commodities from the production sector (lumber, concrete, sheathing systems, etc.), and to direct their use. They function as technical advisors for the administration of the landlord-capitalist’s capital investment and as such offer a different product. The fact that the sphere of management services may direct activities within the construction sector is partially an outcome of their technical knowledge but also their being vouchsafed for by the capitalist client – put another way, they may direct the construction process because they are a personification, representing a combination of the capitalist client’s money and the expertise of the general intellect in the process of construction. This is also why most successful attempts at increasing surplus value in construction via the elimination of time wasted focus on changes within the construction management industry via the streamlining of the design and document delivery processes while the actual ground work remains relatively under-capitalized and even ad hoc; construction management firms, with a tighter control of their labor force and much higher ratio of capital to labor are constantly in pursuit of technological innovations to offset falling profits over time and to introduce management by stress principles to speed up the process of production.

The isolated nature of the construction sector imbues the construction firm with a number of advantages. The actual contract between firm and capitalist client is arrived at, usually, after a period of direct competition between suitable firms offering bids based almost entirely on price. After this contract is signed, however, this initial contract then transforms into a “bilateral treaty” in which the client party has imperfect information and is as such at the relative mercy of the firm and its subcontractors who exploit their position as sole tenders of capital’s flow onto the land. This takes a multitude of forms, often based on the contractor simply underbidding in the initial contracting competition to get the job, but more or less, the contractor may actually use site and weather slowdowns to their advantage to bargain for new equipment, money for wages for increased manpower, or outright asks for contract changes which the capitalist client is mostly powerless to combat, having already paid a sum up front which would be utterly lost were he to break the contract. These additional payments we may categorize as examples of absolute rent as a form of surplus profit in action insofar as the construction capital, adopting an adversarial stance towards the owner capital, fights dirty for a greater share of the social product from the high ground (quite literally).

If and when the construction process is actually completed, the land is more or less submerged (physically and legally) under the new structure. This structure is tethered to a new property deed which answers more or less to the same rules of trade and exchange that governed the deed to the land, but is in most cases much more profitable than before as the landlord-capitalist owner may sell at a more marked up price due to the increased rate of capitalization. That is, the landlord-capitalist is no longer selling the right to dispose of a simple commodity but one which promises future revenues in the form of rents to other capitalists. The construction sector makes a business of gifting, by way of the real estate sector, the capacity of greater portions of social value to capitalists in other sectors.