Environment and Planning A 1995, volume 27, pages 193-209
Flexibility in production through subcontracting: the case of the poultry meat industry in Greece L Labrianidis Department of Economic Sciences, University of Macedonia, 156 Egnatia Street, PO Box 1591, Thessaloniki 54006, Greece Received 5 June 1993; in revised form 21 February 1994
Abstract. The author focuses on the issue of flexibility in production using a particular historical example: that of the poultry meat industry in Greece. The case study material is presented as an example of the advantages of theoretically informed empirical research and realist methodology for studying uneven capitalist development and the enormous range of contrasting configurations of capitalist production and its spatial distribution. The poultry meat industry in Greece, although showing the characteristics of an extreme flexibility in production (which is primarily the result of an extensive subcontracting system), shows developments that cannot be interpreted within the theoretical framework of the school of flexible specialization. This allows the author to suggest that the eagerness of flexible specialization theorists (Piore and Sabel, Freeman and Perez, et al) to prescribe new technoeconomic futures hinders their appreciation of sociospatial complexity in capitalist development and encourages them to persist with models of industrial transformation of limited relevance. The points that are raised must also be seen as a reply to those in Greece—researchers and politicians—who argue in favour of a flexible specialization strategy as a means of modernizing the structure of Greek industry. Introduction This paper is an analysis of the poultry meat industry in Greece, which has become dominated by subcontracting relations. A s a result of this, the industry shows extreme flexibility in production and in spatial terms exhibits very important agglomeration tendencies. T h e paper also raises some points in the debate on flexible specialization. In particular, there is a widespread belief that from the mid1970s Fordism has been in crisis and that we are passing through a transitional phase, in which something new is being born, though precisely what is not yet clear. This view is supported by researchers of various persuasions. In this paper I concentrate on responding to some of the theories held by the school of flexible specialization. After reviewing the main tenets of flexible specialization theory, I will examine a particular example of flexibility in production: that which occurs in the poultry meat industry in Greece. T h e main argument advanced is that poultry meat production, although displaying the characteristics of extreme flexibility in production, lacks most of the basic characteristics advocated by the theoretical framework of the school of flexible specialization (such as dense specialization and innovation, transaction relations among independent small firms, and spatial agglomeration in industrial districts). T h e flexibility shown by the poultry industry is primarily the result of an extensive subcontracting system. With regard to spatial characteristics, the poultry industry, though it does not show the agglomeration around industrial districts which is one of the main characteristics of the flexible specialization school, does have a spatial concentration of a kind. T h e major spatial implication of the economic restructuring that occurred after the 1970s (that is, the b o o m in subcontracting relationships) was that because spatial proximity is a sine qua non for the development of subcontracting relationships,
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ships, poultry farmers located around major companies (themselves situated around the main centres of consumption) were in a sense 'driven' to become subcontractors of such companies. I am sceptical of flexible specialization theory, and seek to use the findings of my study of the poultry industry to support those who have voiced scepticism over the general applicability of the flexibility thesis. However, two qualifications must be made. First, although there are clearly problems with the flexible specialization thesis, not least its tendency towards inclusivity and overgeneralization, we should recognize and acknowledge that the key proponents (Sabel, Scott, Storper, etc) of this theory did not argue that the whole capitalist system has adopted a more flexible mode of organization. Nor did they argue that a more flexible mode of organization was certain to become hegemonic in the future. This was merely a tendency they claimed to have identified in certain industries in certain places, which may in time become more generalized. Second, the case study material is presented as an example of theoretically informed empirical research. The intention of the paper is not to use 'hard evidence' from the Greek poultry industry to indicate that 'grand theories' such as flexible specialization are in trouble. Existing critiques have already cast doubt on flexible specialization as a 'school' and I am aware that selective evidence, in this case of a relatively 'minor' industry, is not enough to establish general statements about the validity of a theory. The fact that one branch of industry in one country (the poultry industry in Greece) has failed to conform to the specifications of the flexible specialization model is not sufficient grounds to refute the theory. Clearly there are many problems with the theory of flexible specialization (such as its limited range of sectoral and spatial examples), but a full critique must surely focus on its theoretical inadequacies. Although these may be illustrated by particular empirical cases, the mere existence of contradictory phenomena does not in itself necessarily constitute the basis for a theoretical critique. These points apply all the more strongly when a single national or sectoral case study is used to dispute the theory. The empirical focus of the paper extends the limited range of sectoral and spatial examples used in the literature on flexible specialization to an unexamined industrial sector in a peripheral country. My intention is to give a thorough analysis of a particular branch, in a particular industry, in a particular period in the context of the above debate because, as has already been pointed out (by Milne, 1991, among others), much of the literature on this matter lacks hard evidence to support many of its claims. Flexible specialization: an answer to the crisis in Fordism? Many researchers have claimed that the Fordist model of accumulation after flowering in the postwar period has been in crisis since the late 1970s, and have attempted to predict the new model which will succeed it. Their viewpoints and their conclusions vary widely. Schematically, they can be divided into three different schools: regulation, post-Fordism, and flexible specialization (Hirst and Zeitlin, 1991). After briefly mentioning the principal arguments of the three schools, I shall be concentrating here on a more detailed presentation of the school of flexible specialization. The regulation school maintains that in the history of capitalism there have existed four main accumulation regimes: extensive accumulation, intensive accumulation without mass consumption (Taylorism), intensive accumulation with mass consumption (Fordism), and a post-Fordist accumulation regime which is now developing. The changes taking place should be seen as an adaptation of Fordism
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to new conditions (neo-Fordism), which has ceased to be competitive in the light of technological developments. The introduction of flexible automation leads to the improvement of the semiautomated production line. This is certainly the case for researchers such as Aglietta (1979) and Palloix (1976). However, since the mid1980s researchers in this school have spoken of a restructuring of the regime of accumulation and have attempted to envisage the new regime that is going to be created (Boyer, 1988; Boyer and Coriat, 1986; Dunford, 1988; Leborgne and Lipietz, 1987; Lipietz, 1990). The post-Fordist school claims that the development of the new central technologies must be associated with the constraints of Fordism. However, this does not lead to a renewal of Fordism but to its further disturbance and the creation of a new regime. Three approaches can be distinguished, according to Hirst and Zeitlin (1991), within the framework of this school. First, there is the approach chiefly expressed in the journal Marxism Today [by Hall (1988) and R Murray (1985; 1987) among others]. This asserts that we live in 'new times', which mark a decisive departure from the economic and social patterns of this century and which call for the development of a new political response from the left. Modern society is dominated by the change from collectivity to individualism, from production to consumption and the service sector, from substance to style. Second, there is the approach put forward by Lash and Urry (1987), which claims that the organized capitalism dominant up to the 1960s or 1970s, depending on the country, has been replaced by a new phase and new forms of 'institutionalization' by 'disorganized capitalism'. It sees flexible specialization as deriving from changes in technology, changes in consumer preferences that fragment demand from mass markets, and competition from producers in the Third World. Third, the approach suggested by Freeman and Perez (Freeman, 1984; Freeman and Perez, 1986; 1988; Perez, 1983) and followed by others such as Roobeek (1987) asserts that because of radical innovations there has been a shift in the technoeconomic paradigm towards an information-intensive industrial organization that signals a new age, a new technological regime. The school of flexible specialization maintains that the present period constitutes a radical break with the past. Flexible specialization is a strategy for the reorganization both of labour processes and of capitalism as a whole. We are passing through a new phase of capitalist production characterized by the saturation of mass markets for standardized products and by the creation of small-scale production units that can produce small quantities of customized products, with multipurpose machinery using the latest information technology. Skilled workers using flexible machinery produce specialized products (Piore and Sabel, 1984; Sabel and Zeitlin, 1985). This school claims that the new regime of flexible accumulation means adaptability with emphasis on quality, design, and innovation, and not on the lowest possible price; that it leads to the upgrading of the work force; that is leads to intensification of transactions between firms (Nielsen, 1991) and flexibility in the labour market; and that technologies of production and divisions of labour in production are not dictated by a movement towards a globally optimal, foreseeable 'best practice' for each sector in which flexibility and specialization are fundamental alternatives to mass production. The flexible specialization thesis has some flaws. It rests on a very narrow empirical basis (that is, Third Italy and Southern Germany). Production systems dominated by exceptionally small firms, like those of the Third Italy, are not widespread around the world. There is a limited sectoral contribution from the Italian and German examples: traditional nondurables, specialized supplier industries,
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luxury versions of mass production (for example, German cars). There are deep historical roots to the Italian and German examples. Mass producers were occupying the central terrain of the market but they were giving way to flexible specialization, niche producers. Flexible specialization (promulgated by Piore, Sabel, Hirst, Zeitlin, etc) arose as an answer to the mass production crisis and is an effort both to describe and to explain this development in scientific terms. The concept is also a point of departure for normative and even distinct political claims for an idealized type of production organization. It is a model of industrial organization rather than a grand theory. Flexible specialization does not derive from or require a particular ontology; indeed, if anything it is very much a theory that brings together ideas from a range of theories and traditions (Piore and Sabel, the economic geography of Scott and Storper, regulation theory, etc). The term 'flexibility' is used with various meanings, such as flexibility of volume of output, product mix, labour, production, organization, employment and output numbers, functions (production of a wide range of products without a loss of overall efficiency), work processes, time needed, and wages (see Pollert, 1988, page 43; Sayer, 1989, page 671). Thus, 'flexibility' may refer to one or a combination of the following. (1) An overall firm strategy—a technological paradigm or ideal model of industrial efficiency in which specialized products are produced by flexible machines and skilled personnel, in contrast with the mass production of standardized goods by specialized machinery and unskilled labour. (2) Production systems in which firms are aware both that they do not know exactly what they should be producing, and that they must rely on the cooperation of the work force and the subcontractors with whom they do business in order to be able to meet promptly the final demand in the marketplace (Hirst and Zeitlin, 1989, page 3). Hence, a transactions-intensive regime develops among the firms. (3) Manufacturing systems—the complex system of practices of a particular firm combined with its relations with other firms and trade and local institutions (unions) that support, strengthen, and maintain the system of production (Hirst and Zeitlin, 1989, page 6). (4) The operations of a single large company (Atkinson, 1984). There exists a new polarization between core and peripheral workers. The core workers offer operational flexibility in the work process by going beyond job demarcation limits and time flexibility through adapting better to the demands of the market. The peripheral workers offer numerical flexibility and can be employed for irregular periods of time or without having direct contact with the firm (for example, employees of subcontractors), besides the fact that they cost the firm much less. (5) Automation processes. Emphasis is placed on flexibility (and not specialization) of production techniques and product mix, as well as of the work force, in moving between tasks and jobs. It tends to increase automation of production and to decrease the amount of labour needed (F Murray, 1987, page 95). There have been many attempts to codify the principal characteristics of flexible specialization as compared with mass production (for example, Moulaert and Swyngedouw, 1989, page 337; Oberhauser, 1990, page 216). The framework of flexible specialization has been said to consist of four levels: work processes, organization of production, spatial division of work, and the institutional framework. In terms of the spatial division of labour, the theory maintains that separate but interrelated tendencies connect the spatial division of organization, of work, and of production. The result is contradictory. On the one hand, 'flexibility' leads to a
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spatial scattering of production—which runs parallel with a deepening in the division of labour in which conception and execution of production are differentiated on a global scale. Hence, whole countries in this system depend more and more on other countries—puppets in a hierarchical system (for example, the organization of Benetton on a world scale). On the other hand, it leads to a spatial reconvergence of production—a concentration of many levels of production and corresponding work processes in industrial districts. Spatial differentiation of the labour market (l) brings labour into the limelight at a time when the tendency towards greater flexibility demands a range of labour markets for the various functions of capital (Vaiou and Hadjimichalis, 1990, page 18). There are many who criticize the approach of this school on the grounds that it presents a crude dualism between mass production and flexible specialization for which there is no empirical support. Flexible machines and most forms of advanced automation will remain the privilege of the few large companies able to pay for them (Pollert, 1988; Williams et al, 1987). The terms adopted are very vague: for example, it is not clear at which point flexible production dominates mass production (Williams et al, 1987, page 415). The types of technology, the types of organization in different production systems, and the types of work processes cannot all be compressed into only one paradigm. There exist at least three different systems of production: short-run and one-off types production, long runs and mass production, and process production. Furthermore, the idea that the modern world is moving away from Fordism is met with scepticism by writers who doubt the world was ever Fordist or even whether Fordism is a useful concept (Pollert, 1988, page 57; Sayer, 1989; Williams et al, 1987, pages 421-423). Fordism was widespread in certain industries only, such as cars, electrical goods (washing machines, refrigerators, etc), and electronics. The majority of factories even in developed economies do not have assembly lines. For example, in Britain only 3 1 % of factories have assembly lines (Williams et al, 1987, page 421), and only 3.4% of its total work force work on such lines (Sayer, 1989, page 668) (similar numbers are quoted in Milne, 1991, page 242). It is even more debatable whether the underdeveloped countries have ever been Fordist and Greece is certainly such a case (Lipietz, 1990, page 18). The application of regulation theory to the analysis of particular countries led, as Hirst and Zeitlin (1991, page 21) argue, not only to the 'adjustment' of data to fit theoretical categories but also to arbitrary modifications of the categories themselves, to accommodate observed discrepancies. Thus, the discrepancies between observation and the Fordist 'model' were explained away with a series of new terms such as 'peripheral Fordism' (Lipietz, 1990), 'flexible Fordism', 'blocked Fordism', 'state Fordism', 'delayed Fordism', and 'primitive Taylorization'. Flexible production systems in poultry meat production Subcontracting in Greece
Subcontracting is a widespread phenomenon in manufacturing, both in Greece [in a remarkably high 10% of households one or more members did piecework at home (Chronaki et al, 1993; Vaiou et al, 1991)] and all over the world, and is not a new phenomenon, still less is it confined to flexible specialization. Various typologies of subcontracting exist; the typology used here is based on the relationship between the parent firm and the subcontractor (see table 1). (1)
The development process creates and then activates a geographically differentiated division of labour—the so-called 'local labour markets'.
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Subcontracting relationships constitute but one of the many relationships between firms often expressed in flows of material information and transactions between pairs of firms (Holmes, 1986, page 82). Subcontracting becomes a means of smoothing production for the parent firm in the sense that total demand for the product is broken down into a fixed component undertaken by the firm and a variable component given out to subcontractors (Holmes, 1986, page 89). Take, for example, the strategy followed by the car industry to secure the supply of parts (Friedman, 1977) and the case in poultry meat production described below. T h e r e are many reasons why subcontracting develops in manufacturing, such as the structure and geographical instability of markets in particular products; the tendency towards flexible production systems; the attempt to reduce investment in fixed capital, equipment, and accessories; and the greater possibilities offered for reducing labour costs, which resemble methods of extracting absolute surplus value. Table 1. A typology of subcontracting based on the relationship between the parent firm and the subcontractor (source: based on Holmes, 1986,pages 85-86). Classification according to
Characteristics
1. 2. 3. 4.
Permanent, regular, periodical, casual etc Single or multiple subcontractors Industrial, commercial Parent firm either lacks the necessary equipment or know-how (subcontracting of quality) or it has them (subcontracting of capacity) Within the business premises of the parent firm (internal subcontract) or elsewhere (external subcontract)
Duration Number of principles Use of product Skills and equipment required
5. Place where the subcontract is performed
T h e Greek manufacturing sector is very limited (170 000 establishments and 6 0 0 0 0 0 employees) and has a weak structure in the sense that it is based primarily on traditional industries and characterized by a plethora of small firms (in 1984 85.8% of the total number of establishments had up to 5 employees) and only a very small number of large firms (0.5%) have more than 100 employees* 2 ', whereas in developed countries such as the United Kingdom, Germany, and the United States 8 2 - 8 4 % of total employment in manufacturing is in firms with more than 100 employees. T h e principal reason for the development of subcontracting in Greek manufacturing is the attempt to reduce production costs, chiefly by reducing labour costs (Chronaki et al, 1993; Vaiou et al, 1991). Subcontracting in manufacturing is mainly of the capacity type. Subcontracting, whose strength lies in the comparative advantage of cheap nonunion labour, cannot be a way out of the economic crisis. N o r can it lead to the economic development of the country, because there are no technology transfers, through subcontracts awarded by foreign firms. Subcontracting increases flexibility in the labour market in the sense that it increases the amount of part-time work and casual work, and the number of self-employed (Nielsen, 1991). A fundamental condition for the existence of the phenomenon is the tolerance by the Greek state of a multitude of irregularities in labour relations, wages, and the <2)
In 1958 94.8% of manufacturing establishments in Greece had up to 19 employees and accounted for the 52.3% of total employment in manufacturing, in 1963 the respective percentages were 95.2 and 47.6; in 1969, 95.0 and 49.9; in 1973, 93.6 and 42.4; in 1978, 93.3 and 39.1; and in 1984, 93.9 and 42.4 (NSSG, various years).
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working conditions of parent firms, subcontractors, and employees; and in the administration of operating licences, state grants, and tax payments. The lack of control and the inadequate enforcement of the few existing regulations constitute the sine qua non for the perpetuation of subcontractual relations. This attitude of the state depends on, and is to some extent legitimized by, the social connivance which exists with regard to this phenomenon, particularly in areas where the phenomenon is pronounced. This attitude is of course not peculiar to Greece; it is the open secret of the development of similar production systems in Italy, Spain, and Portugal (Amin, 1989; Hadjimichalis and Vaiou, 1991; Mitter, 1986). Subcontracting in the poultry industry*3) There are numerous 'units' concerned with poultry breeding (739045 in 1950 and 760143 in 1971); however, the overwhelming majority are family units that raise their own chickens (cottage chicken breeding) while only around 4000 units raise more than 100 chicks each time. To be specific, in 1971 there were only 575 units with 4 0 0 0 - 1 0 0 0 0 , chicks per rearing period, 1061 with 10 0 0 0 - 4 0 0 0 0 ; 159 with 40 0 0 0 - 1 0 0 0 0 0 , 56 with 100 0 0 0 - 2 0 0 000, and 17 with 200 000 or more; in other words, there were only 1868 units with more than 4000 chicks per rearing period. After the Second World War, poultry farming was in many countries one of the sectors in which the contractual form of production flourished. This contractual relationship concerned the production of both poultry meat and eggs. Contract farming in Greece is used quite extensively in the production of several agricultural products, such as milk, tomatoes, sugar beet, and peas (Moisidis, 1988, page 92). In the Greek poultry industry subcontracting was quite widespread in the early to mid-1970s and gradually acquired great importance (Labrianidis, 1992; Moisidis, 1988, page 45). Subcontracting in poultry meat production occurs only at certain stages. The stages in the production of poultry meat are: the creation of breeds; the raising of breeding birds; the hatching of eggs to produce chicks; the preparation of feed (mixing and milling); poultry fattening; slaughter and plucking; packing; the manufacture of chicken products; refrigeration; the use of slaughter by-products; and distribution. Of all these stages it is primarily in the poultry-fattening stage and to some extent in the slaughter and plucking stage that subcontracting relations exist. There are firms in this sector that have vertically integrated most of their production. These firms give out part of the poultry-fattening stage of production to subcontractor poultry farmers, known as 'producers' or 'breeders'. The firms that do this are numerous and of medium to large size (see Kitsopanidis et al, 1979; Labrianidis, 1992), and not only the three largest firms in the sector, as claimed by Moisidis (1988, page 148) and Delis et al (1990). The percentage of birds given out is usually very high, and can reach 70% (Labrianidis, 1992; Moisidis, 1988). The procedure is as follows. The producers buy the chicks from the parent firm, on credit, when they are one-day old, and raise them in their own installations, at their own expense or not, depending on the particular agreement. When the birds are about 50 days old, the producer transports them to the parent firm's slaughterhouse, and sells them. The producers subtract all credit advances (for the purchase of the chicks and the cost of feed, medicines, bedding, etc). The poultry farms of the producers tend to be traditional family businesses with a high proportion of elderly personnel. The younger generation refuses to enter this kind of production, because it brings in a small income and requires work which, though limited in amount, is on a 24-hour basis and is also very stressful because of (3)
This section is based on field work by the author and the results were published in Labrianidis (1992).
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the extremely perishable nature of the product*4', unhealthy working conditions, dirt, etc. The contracts tend to be one-sided, at the expense of the producer. The contracting parties usually have a verbal contract, written contracts being reserved for very large firms. The fact that the contract is verbal does not of course mean that it can be broken in any way; those involved in this business form a small community, where everybody is known by their first name and is judged according to the unwritten rules of the community (see also Storper and Scott, 1988). Subcontracting is widespread in the poultry meat industry. In a sample of 260 firms from all over Greece taken in 1974-75, it was calculated that only 17.3% were independent, 9.6% worked with private companies, and 73.1% were cooperatives (Kitsopanidis et al, 1979, page 50). In addition, of the 30 large and mediumsized firms that responded to our questionnaires (Labrianidis, 1992), 28 (93%) gave out the raising of part of their production to producers. Subcontracting in the poultry industry appears in two basic forms. The commonest is that in which producers undertake to raise birds in their own installations (external subcontract) for a firm or cooperative which itself has the ability to raise birds (capacity subcontract). After raising the birds, producers transport them to the firm's slaughterhouse, where they are paid for having raised them. The birds are slaughtered and the firm or cooperative distributes them. The other form of subcontracting is that where retailers, who have no production of their own, buy birds from a producer, take them to the slaughterhouse of a third party (external subcontract) where they have them slaughtered at so much per bird (quality subcontract), and then distribute them. It is estimated that in 1974-75 they handled 30% of total production (Kitsopanidis et al, 1979, pages 78-79). The growing importance of production through subcontracting The main reasons for the increasing monopolization of the poultry industry which in turn has led to the development of subcontracting in this sector can be outlined as follows. First, the explosion in the number of poultry farms from the mid-1960s to the end of the 1970s—that is, the period in which poultry farming flourished—could only lead to increased bankruptcies in less favourable periods, such as that which followed. In other words, there was a crisis in the sector because of the earlier overinvestment (Moisidis, 1988, pages 146-147). A second consideration was a sudden increase in the space available for raising poultry. The mid-1970s saw the introduction into Greece of battery farming for egg production, which caused a sixfold increase in productivity. This technique, helped by loans to the producers [from the Agricultural Bank of Greece (ABG)](5), spread rapidly and by 1975 battery hens amounted to about 17% of the total number of laying hens, while the number raised on the ground fell steadily. This meant that there was an enormous increase in productivity among egg producers, and that poultry farms specializing in eggs had to import batteries or cease to be competitive. Thus many egg producers, in order to avoid new investment, switched to poultry meat farming, hence creating a sudden rise in the number of poultry meat installations. A third reason was the interventionist policy of the state. The state plays a decisive role here, as in most sectors of the Greek economy. The protectionist policies pursued by the state were the sine qua non for the development of poultry farming. (4)
Disease or even a sudden change in temperature can cause a great loss of birds in the batch. (5) ABG is state owned and is the financial institution through which the state exercized its policy in the agricultural economy.
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However, they also had an unfortunate effect in that they lulled investors into a false sense of security and thus undermined their long-term competitiveness. The state 'lavished' loans, subsidies, and grants on poultry farming, thus producing a boom in the number of firms, which was completely unplanned. Almost all buildings in poultry farms were built with long-term loans given by ABG (Evelpidis and Athanasatos, 1959, page 201; Kitsopanidis et al, 1979, page 8; Moscholeas, 1978, page 83). From 1972 these loans decreased dramatically until they ceased completely in 1983. This drop was caused by the fact that the sector had been characterized as 'sensitive' and ailing (Delis et al, 1990, page 67; Moscholeas, 1978, page 78). Also, short-term ABG loans (for the purchase and raising of breeding birds and chicks) increased in line with the development of the sector, up to 1975. The most important form of state intervention, however, was its policy concerning the slaughter of the birds. The customer's habit of buying live birds continued up to the early 1960s, at which time it started to lose ground because large restaurants and consumers in large cities preferred birds that had been prepared for cooking. In response to this demand, at the beginning of the 1960s some small poultry farms undertook the slaughter and gutting of the birds themselves, to supplement their income, and thus created primitive slaughterhouses. These slaughterhouses, which continued to exist until the mid-1970s, failed to meet the most elementary requirements of hygiene and, in most of them, all the work was done manually. The investment needed for such a slaughterhouse was negligible because very little equipment was required. There used to be a multitude of such slaughterhouses, but now their number has greatly diminished. The situation changed dramatically at the end of the 1970s, when parliament passed laws laying down stricter conditions for slaughterhouses. These laws imposed mechanical methods of slaughtering and preservation. They laid down strict specifications for hygienic slaughter and for appropriate places. They were a watershed in the operation of the slaughterhouses and put an end to the operation of the primitive ones. Building a slaughterhouse to the new specifications would require considerable investment. This favoured the large firms, which were the only ones with the necessary installations, or which were in a position to acquire them. For the small poultry farmers it meant going out of business or submitting to the big firms (which were the only places where they could slaughter their poultry), or joining a cooperative. An examination of the above laws suggests that they leave a great deal to the discretion of the executive (prefect or minister), something which is typical of all the legislation concerning regional incentives for industry (Labrianidis and Papamichos, 1990). The legislation leaves to the discretion of the executive the amount of the incentive (the law lays down only the maxima); the conditions under which assistance will be given; the documents which must be submitted; and, above all, the granting of the operating licence. Often licences have been refused with the excuse that the sector already has sufficient capacity, thus preventing the entry of new firms into the market. The considerable amount of discretion allowed to the particular official responsible for issuing the licence allows noneconomic criteria, such as bias for a particular investor or political pressure, to play an important role in the decision. Thus the connections that a firm has with the appropriate officials and advisers, and even the minister, permit it to gain economic advantage based on noneconomic criteria (Labrianidis and Papamichos, 1990). A fourth reason for the increasing monopolization of the poultry industry has been the pressure on the profits of the poultry farmers. Because the sector has a problem of overproduction, many firms are obliged to operate below capacity.
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The abundant supply of poultry meat pushes down prices, thus squeezing the profits of the poultry farmers. Often, however, only the price at the farm falls, and not the retail price. The difference is pocketed by the retailer, who thus increases profits by exploiting the overproduction and the savage competition between the producers. Thus the producers suffer a double blow, both in the short term, as the profits that should be theirs go to the retailer, and in the long term, because the reduction in the retail price would lead to an increase in consumption, and an increase in their output and hence profits. A fifth reason has been the need for mass, standardized production and distribution in the large domestic markets, mainly Athens (Moisidis, 1988, page 147). In particular, the concentration of the population in the cities, accompanied by changes in the eating habits of the urban population, has led to the need for standardization (Maniatea, 1985, page 98) and mass distribution to the urban centres, while increasing the distance between the site of production and that of consumption. In the 1970s this situation led to an intensification of competition between producers, who attempted to capture the largest possible share of what was by then a static market. Under these conditions the choices available to the poultry farmers were between modernizing and expanding into in-house slaughtering, which involved new investment and mainly concerned large and medium-sized firms; cooperating with commercial firms that would buy their live birds and sometimes supply them with chicks; working as a subcontractor for larger private firms; joining a cooperative; or closing the business. The great majority of firms chose one of the last three solutions. Benefits and drawbacks of subcontracting for the two contracting parties The subcontracting relationship provides a series of benefits for the producer. First, poultry meat production is almost totally controlled by a handful of firms, and thus there is practically no opportunity for a small poultry farmer to operate independently. The firms that hatch eggs and produce chicks for meat are few in number and as a result can name their terms. In addition, once the bird has been raised it must be slaughtered, work which, as has already been mentioned, since the end of the 1970s has been carried out in organized slaughterhouses, which are few in number (114 in 1978, 85 in 1984, and 83 in 1986) and whose construction requires considerable investment. Second, subcontracting minimizes the hazards entailed in operating in the 'free' market. Producers who can take the purchase of their product for granted do not run the risk of operating in the 'free' market, unable to predict demand. The distribution and sale of poultry are totally controlled by a handful of firms. Competition between firms is fierce, although there are some gentlemen's agreements on a certain degree of sharing out of the market (oligopolistic practices). Third, producers do not need working capital for the purchase of chickens and usually, depending on the agreement they have with the parent firm, do not need capital for the purchase of feed, veterinary services, medicines, injections, disinfectants, etc. Of course, there are also certain drawbacks for the producer, but these are unlikely to outweigh the above-mentioned benefits. Of necessity, a producer's profit margins are limited and largely under the influence of the parent firm. The producer suffers a loss in terms of the depreciation of buildings and machinery (Labrianidis, 1992; Moisidis, 1988, pages 237-250). But, at the same time, the parent firm has an interest in maintaining stable relations with the producers rather than driving them to the wall; if overexploited they might either shift to another parent firm or go bankrupt. Furthermore, the producer is the one who suffers from many fluctuations
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in demand for the product, because the parent firm gives more or less work to the producer according to the level of demand. For the parent firm there are a number of benefits in subcontracting arrangements. It avoids having to make the large investments in the fixed capital needed to raise large numbers of birds, such as buying land and installations and making improvements. Fixed investment has always been an important cost in poultry farming (3-7%—Evelpidis and Athanasatos, 1959, page 196), and became even more important after the restrictions placed on ABG loans after 1972. Thus, large and medium-sized firms either subcontract the raising of the birds to a producer or, more rarely, rent installations from a producer. Firms today exploit the existence of the infrastructure, mostly buildings and machinery, belonging to the producers. This infrastructure, however, was created under completely different conditions. But, given the fact that the poultry farmers who today work as subcontractors are making a loss, and considering the depreciation of their buildings and machinery'6*, we see that they are not in a position to renew their machinery or buildings. Hence we could suppose that the profile of producers in its present form will begin to disappear as soon as existing machinery ( 8 - 1 0 years) and buildings ( 2 5 - 3 0 years) wear out. Although in recent years many firms have closed [in 1981-87 alone 419 closed (ABG, 1982; 1987)], if we bear in mind that most small firms are making a loss, whether they cooperate with other firms or not, the question arises as to how they manage to survive. The answer to this question may perhaps be found in the operation of the extended family, and also in the fact that the producers see themselves as self-employed, and look to the business to provide them and their families with an income, rather than as an investment with profits in mind (maximization of revenue, not profits). In this sense the business provides them with a substantial wage. In addition, the experience of other countries shows that subcontracting relations are dominant in other societies too, for example Austria, Belgium, the USA, Italy, Holland, and Thailand (Lance, 1977). A second benefit for the parent firm is that it can give out that part of production which requires difficult work (that is work which is dirty and requires continuous supervision of 24 hours a day). The producers, because they usually have family businesses, tend to work long hours, which they rarely assess at their trade value. What ultimately counts for the producers is their income and not the number of working hours they have put into their business. The award of the subcontract is not based principally on the exploitation of a cheap labour force. This element is of course important, but the problem could be 'solved' by using cheap immigrant labour. There are many cases of such labour in poultry farming (Pakistanis, Greek refugees from socialist countries, etc). A third benefit is that it gives out that part of production which is vulnerable (because of losses due to disease, sudden changes in temperature and humidity, etc). Thus, by subcontracting this part of production, the parent firm reduces the risk arising from the perishability of the product by shifting it to the subcontractor, who by the agreement is usually forced to bear such losses. Fourth, the parent firm acquires a considerable degree of flexibility with regard to time. If the entire production process was kept in-house there would be, in addition to the investment cost, enormous operating costs (wages, maintenance of machinery, etc) which are inelastic and have to be paid regardless of the level of production. (6)
It is claimed by Kitsopanidis et al (1979, pages 40-41) and Delis et al (1990, pages 138-139) that all units with less than 1100 m2 floor space (that is other than the three largest) make a loss, as the producer price is below cost (see also Labrianidis, 1992).
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In other words, whereas with subcontracting a reduction in demand would mean a reduction in production by the producers, without it the firm itself would have to reduce production without being able to cut fixed costs. This would lead to a considerable increase in unit costs and reduction in the firm's profits. With subcontracting, however, the burden is shifted to the producers (production smoothing). For the producers this is a lesser evil both because the burden is shared among all the producers working for a particular parent firm, and also because of the family nature of their businesses which allows them to absorb such financial shocks (shock absorbers). The extended family, through the management of its time and budget, and the strategy of flexible working practices (in combination with job security in the public sector), ensures the maximization of its flexibility and its income (Tsoukalas, 1986, pages 147-169). Also, depending on demand, the parent firm requires the producer to deliver the fattened birds within the agreed time (for example, after 5 3 - 6 2 days) and collect the new chicks within a period that has also been agreed on (for example, 1 5 - 2 0 days). In this way the parent firm enjoys time flexibility (say, 14 days) with which to adjust production to expected demand at no cost to itself. Of course, there are some drawbacks for the parent firm, but these, as we shall see below, do not outweigh the advantages. First, planning and coordination are required to ensure that the firm and its producers raise just the right number of chicks to provide in the following month the quantity of poultry meat that the market will then be able to absorb. This planning is far from easy, because it involves coordinating all the producers, who may exceed 30 (Labrianidis, 1992), and forecasting sales. The slaughterhouse has a similar, and perhaps more serious, problem: daily decisions are needed as to which producers will deliver their birds for slaughter so as to match supply to expected demand! The problem of planning and coordination are particularly severe given the vagaries of consumption and the absence of refrigeration in most slaughterhouses. This planning is even more difficult because of the way Greek society operates, where the only certainty is uncertainty. For example, some producers may sell all or some of their birds to a rival company, or they may refuse to raise a particular batch of chicks, or fail to notify the firm of a disease that has affected birds ready to be delivered for slaughter, thus upsetting the parent firm's plan. Planning and coordination become even more important because it is impossible for the parent firm to respond immediately to changes in demand. For the firm to meet an unexpected rise in demand for poultry meat it must have eggs ready for hatching, which must be incubated for 21 days, after which the birds must be fattened for 50 days. It is obvious that during such a long period of time conditions in the market may well change! A second drawback is that the firm must continuously check up on the producers (as regards feed, diseases, etc) to ensure the required quantity and quality. This means that a representative of the firm must travel continuously between the producers' units, which are spread over a wide area. A lack of control could lead to one batch having many birds unfit for consumption, as a result of which the firm would be unable to meet demand. Indeed, frequent occurrences of this kind could lead to a loss of customers. However, even if all the birds were raised by the firm itself, some travelling would still be necessary because the poultry could not be all raised in one unit for fear of epidemics. Concluding remarks In this paper I have focused on an analysis of the poultry meat industry in Greece, with a particular emphasis on its spatial distribution. This industry shows extreme flexibility in production, primarily because of extensive subcontracting relations.
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The economic restructuring that marked the transition from cottage bird breeding to systematic bird breeding was accompanied by a spatial restructuring. Whereas, before the dominance of systematic bird breeding, production was widespread and each unit sold to its own, extremely narrow, local market, after the economic restructuring it came to be concentrated mainly around the large urban centres (Athens-Piraeus and Thessaloniki). The economic restructuring of the sector, which occurred in the 1970s (that is, the transition from the small independent farmers that raised birds for the market to farmers that either belong to a cooperative or produce under a subcontracting agreement for large companies) was not accompanied by a major spatial restructuring. The units that managed to survive competition, though they drastically changed their economic transactions, were not relocated. This subcontracting relationship, however, was more acute in areas around big firms (such as in Boeotia, Euboea, and Thessaloniki—figure 1). In such areas most independent producers either ceased their operations or became subcontractors to one of the big firms in their area. Hence, though there are areas which specialize in poultry farming (monocultural areas, such as Neohorouda in Thessaloniki, Nea Artaki and Pissonas in Euboea, and Megara in Boetia), the concentration of poultry
Figure 1. Spatial distribution of the large poultry meat breeding companies in Greece in 1987 (source: Labrianidis, 1992, page 125).
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farmers in these areas has been based on agglomeration economies and they are not industrial districts. There is no cooperation between firms, rather competition between them is fierce; there are no institutions to support them; and the areas are not characterized by a concentration of firms with high skills and innovations. Certain exogenous or endogenous market conditions have given rise to uncertainty (for example, shifts in market conditions, or movements along a technological trajectory). This uncertainty is dealt with by deepening the division of labour in order to minimize exposure to risks of overcapacity (in production, labour force, buildings, or machinery hoarding), to maximize the benefits of specialization and to minimize the danger of technological lock-in. In turn, disintegration of production raises the transaction costs of input-output relations. There are more transactions external to the firm, and these transactions are more frequent, less predictable, and more complex. This raises their costs in proportion to geographical distance and the feasibility of carrying out substantially complex transactions drops for certain kinds of complexity (especially where these are noncodifiable or where the product is perishable). So agglomeration tendencies must be seen as an outcome of the minimization of these transaction costs, where such minimization outweighs other geographically dependent production cost differentials. Furthermore, I suggest that the arguments of the school of flexible specialization cannot always explain phenomena even when the final outcome is a flexible system of production. The points that I raise are more an answer to those in Greece [researchers, such as Lyberaki (1991) and politicians such as Pepelasis (1986) and the Minister K Simitis] who argue in favour of a flexible specialization strategy as a means of modernizing the structure of Greek industry, and less a contribution to the critique of the flexible specialization thesis. More specifically, the flexibility in poultry meat production is not a result of the use of flexible machines. Not only are the machines used by the parent firms not flexible, but the slaughterhouses belong to the very few branches of industry in Greece that are dominated by the Fordist system of production (highly specialized machines, Fordist production lines, huge quantities, etc). Of course, this Fordist model coexists in the factory with the nonmechanized part of production (gutting) and above all with the non-Fordist organization of production. Poultry meat production is not adaptable, with emphasis on quality, design, etc. The final product is rarely sold under a brand name. The flexibility in production does not lead to an upgrading of the work force, nor to its division into skilled (core) and unskilled (peripheral) workers. Those working for the parent firm are essentially unskilled. Working conditions are bad (long hours of work, poor wages, cold, unpleasant smells, etc). The workers have no say in decisionmaking and there is no cooperation with them or any attempt to encourage creativeness (as, for example, in Nissan). All this leads to a high degree of worker turnover. Instead, the flexibility in production presents a transactions-intensive regime among clusters of firms (formed by parent firms and their producers), which is not from choice, but is rather a condition for survival. The parent firm faces tremendous problems in planning and coordination which it can only deal with on a day-byday basis. Flexibility in production in this example, does not lead to either of the two dominant scenarios mentioned in the literature on flexible specialization. It does not lead towards flexibility and 'control from above' (for example, subcontractors working for Benetton) in the sense of dependence on foreign companies, as happens with much subcontracting in other manufacturing sectors in Greece (Chronaki et al, 1993; Vaiou et al, 1991). Nor does it lead towards collective flexibility and control
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(for example, Prato in the Third Italy) with the creation of industrial districts. There are of course areas which specialize in poultry farming but these, as I have already mentioned, are not industrial districts. Flexibility in production is not created by a change in demand, though there is a differentiation of the market with the appearance of chicken products (such as fillet, leg, stuffed chicken, cutlets, chicken roll, kebab, stuffed breast kiev, and bite-sized pieces). The flexibility in production is not helped by any institutional framework which would encourage cooperation. The role played by the state is indeed decisive but is not of this kind. There is no cooperation between firms, except in the matter of restricting output during periods of overproduction. The production system used in this sector, the just-in-time system, is essentially used because of the perishable nature of the product. Raw materials (birds for slaughter) are delivered daily. There must always be a fine balance between output and consumption, mainly because of the lack of refrigeration, which would allow storage. The flexibility in production is not of the kind that would lead to the spatial diffusion of production. Such spatial diffusion as exists is caused not by the break-up of large units but by the nature of the production process, namely that very large units must be avoided to prevent epidemics. In closing, I wish to suggest that flexible specialization manifests a tendency to overgeneralization; as Sayer (1989) puts it, it is "overly flexible and insufficiently specialized". It is an umbrella term, a chaotic conception, which, while it may mean a lot, in the final analysis is unable to interpret even phenomena which have many of the characteristics it desribes (Pollert, 1988). It is an oversimplification to try to divide firms into categories of flexible or mass production. The result is that researchers tend to present the strategies of certain large companies (Toyota, Bosch, Ford, Renault, Xerox, Olivetti) or certain 'successful' areas (Third Italy, Silicon Valley, Route 128), or certain sectors, as being isolated, fetishized, and held up as generalized development prototypes. As Sayer argues (1989, page 666), "the literature on postfordism is confused in its arguments, long on speculation and hype, and based on selected examples whose limited sectoral, spatial and temporal range is rarely acknowledged". The system of production is not being transformed in its entirety, because few firms use flexible production systems. Not all products are avant-garde, and highly profitable firms are not the only ones that survive competition. There is a great deal of variety within each sector or firm. In addition, using the most modern technology does not necessarily guarantee an increase in productivity (if advanced machinery breaks down, considerable delays may be caused because the rest of the economy is not at the same level of development). Perhaps what is needed during this transitional phase is theoretically informed empirical research by individual firm (Donaghu and Barff, 1990) or by sector (for example, Storper, 1989) and this paper is just such a case, which takes into account the wealth of theoretical work that has been carried out on the transition process, not forgetting basic principles such as that the aim of all firms in a capitalist society is to make a profit and to gain advantage over their competitors. Acknowledgements. I would like to thank the two anonymous referees for their comments. References AGB, 1982 Census of Large Establishments in the Country, 1981 Agricultural Bank of Greece, 19 Eduardu Law Street, Athens AGB, 1987 Census of Large Establishments in the Country, 1987 Agricultural Bank of Greece, 19 Eduardu Law Street, Athens Aglietta M, 1979 A Theory of Capitalist Regulation (New Left Books, London)
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