Imperialism in the Twenty-First Century - John Smith

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reflecting the rapid expansion of international production in TNC-coordinated networks.”12 Mainstream and radical explanations of the root causes of the global crisis have focused almost exclusively on ballooning debt, the derivatives explosion, and the financial feeding frenzy that preceded its outbreak, but have given scant attention to the accompanying transformation and global shift of production. Kate Bronfenbrenner and Stephanie Luce estimate that each year from 1992 to 2001 between 70,000 and 100,000 production jobs “from ICT to high-end manufacturing of industrial machinery and electronics components to low-wage manufacturing in food processing and textiles” shifted from the United States to Mexico and China.13 This sharply accelerated at the start of the new millennium, when “the total number of jobs leaving the U.S. for countries in Asia and Latin America increased from 204,000 in 2001 to as much as 406,000 in 2004.”14 Epitomizing this epochal shift was the decision by the iconic “made in the U.S.” brand Levi Strauss, which in the 1960s operated sixty-three factories across the United States, to sack 800 workers at its last U.S. factory in 2004 and move production to Mexico and China.15

       Outsourcing and Migration

      Aviva Chomsky makes a crucial connection: “Most accounts treat immigration and capital flight separately. My approach insists that they are most fruitfully studied together, as aspects of the same phenomenon of economic restructuring.”16 She adds that “capital flight [which here means outsourcing] was one of the main reasons the textile industry remained one of the least organized in the early to mid-twentieth century, and it was one of the main reasons for the decline of unions in all industries at the end of the century.”17 At the beginning of the neoliberal era, Jeffrey Henderson and Robin Cohen made the same connection: “While some fractions of metropolitan capital have taken flight to low-wage areas, partly in response to the class struggles of metropolitan workers, less mobile sections of Western capital have enormously increased their reliance on imported migrant labor to cheapen the labor process and lower the costs of the reproduction of labor in the advanced countries.”18

       Note on Trade Statistics

      Conventional trade statistics double-count imported inputs—for example, Bangladesh’s earnings from garment exports include the cost of the imported textiles that Bangladeshi garment workers fashion into clothes. As the share of intermediate inputs in total trade increases this distortion has grown ever larger. Statisticians at WTO and the OECD have forged new analytical tools and datasets capable of measuring, sector by sector, how much of a given country’s exports were actually generated in that country. Results from this enormous labor are presented in UNCTAD’s 2013 World Investment Report, which estimates that “today, some 28 percent of gross exports consist of value added that is first imported by countries only to be incorporated in products or services that are then exported again. Some $5 trillion of the $19 trillion in global gross exports (in 2010 figures) is double counted.”8

      Illustrating this, China’s export performance is not quite so spectacular when full account is made of its export-processing regime, which allows imports for processing and re-export to enter duty-free. This trade accounts for more than half of China’s exports, and is mostly conducted by U.S., European, Taiwanese, and South Korean TNCs. Van Assche et al. found that in 2005 processed imports made up 90 percent of the value of China’s high-tech exports, compared to 50 percent in the mediumhigh-tech category and 30 percent in the low-tech category. In other words, the greater the sophistication of the goods being exported, the smaller the fraction of the export value actually added in China. Correcting for this distortion, China’s share of world trade in 2005 was 4.9 percent, more than a third lower than the 7.7 percent reported by World Bank and IMF data. Van Assche et al. comment, “China has turned into a global assembly platform that sources its processing inputs from its East Asian neighbors while sending its final goods to high-income countries. Since China is often only responsible for the final assembly of its export products, this puts into question China’s responsibility for the growing U.S. trade deficit.”9

      Bangladesh provides a vivid example of how, during the neoliberal era, outsourcing and migration have become two aspects of the same wage-differential–driven transformation of global production. Speaking of 1980s and 1990s Bangladesh, Tasneem Siddiqui reported that “the continuous outflow of people of working-age … has played a major role in keeping the unemployment rate stable.”19 It has also become a crucial source of income for poor households. According to the International Organization for Migration, 5.4 million Bangladeshis worked overseas in 2012, more than half of them in India, around a million in Saudi Arabia, with the rest spread between other countries in the Middle East, Western Europe, North America, and Australasia. They sent $14bn from their wages to their families back home, equivalent to 11 percent of its GDP. In the same year, Bangladesh received $19bn for its garment exports, 80 percent of Bangladesh’s total exports, $4bn of which was paid out in wages to some 3 million RMG workers. Gross exports earnings includes the cost of imported cotton and other fabrics, typically 25 percent of the production cost, thus remittances from Bangladeshis working abroad approximately equalled total net earnings from garment exports. According to the World Bank, in 2013 each of Britain’s 210,000 Bangladeshi migrant workers remitted an average of $4,058, three times the annual wages of his (most Bangladeshi migrant workers are male) wife, sister, or daughter working in a garment factory back home. Why export-oriented industrialization has not provided enough jobs to absorb the growth of the workforce, obliging so many to migrate in search of work, will be considered in chapter 4.

       Outsourcing and the Reproduction of Labor-Power in Imperialist Nations

      Neoliberal globalization has transformed the production of all commodities, including labor-power, as more and more of the manufactured consumer goods that reproduce labor-power in imperialist countries are produced by super-exploited workers in low-wage nations. The globalization of production processes impacts workers in imperialist nations in two fundamental ways. Outsourcing enables capitalists to replace higher-paid domestic labor with low-wage Southern labor, exposing workers in imperialist nations to direct competition with similarly skilled but much lower paid workers in Southern nations, while falling prices of clothing, food, and other articles of mass consumption protects consumption levels from falling wages and magnifies the effect of wage increases. The IMF’s World Economic Outlook 2007 attempted to weigh these two effects, concluding: “Although the labor share [of GDP] went down, globalization of labor as manifested in cheaper imports in advanced economies has increased the ‘size of the pie’ to be shared among all citizens, resulting in a net gain in total workers’ compensation in real terms.”20 In other words, cost savings resulting from outsourcing are shared with workers in imperialist countries. This is both an economic imperative and a conscious strategy of the employing class and their political representatives that is crucial to maintaining domestic class peace. Wage repression at home, rather than abroad, would reduce demand and unleash latent recessionary forces. Competition in markets for workers’ consumer goods forces some of the cost reductions resulting from greater use of low-wage labor to be passed on to them.

      Perhaps the most in-depth research into this effect was conducted by two Chicago professors, Christian Broda and John Romalis, who established a “concordance” between two giant databases, one tracking the quantities and price movements between 1994 and 2005 of hundreds of thousands of different goods consumed by 55,000 U.S. households, the other of imports classified into 16,800 different product categories. Their central conclusion: “While the expansion of trade with low wage countries triggers a fall in relative wages for the unskilled in the United States, it also leads to a fall in the price of goods that are heavily consumed by the poor. We show that this beneficial price effect can potentially more than offset the standard negative relative wage effect.” They calculate that China by itself accounted for four-fifths of the total inflation-lowering effect of cheap imports, its share of total U.S. imports having risen during the decade from 6 to 17 percent, and that “the rise of Chinese trade … alone can offset around a third of the rise in official inequality we have seen over this period.”21

      The conclusion to be drawn from this brief survey is that the globalization of

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