Unravelling Capitalist Globalization

Despite the prolonged global economic crisis since 2007/2008, neo-liberal economic thought and practice continue to reign supreme. In his important book Capitalist Globalization: Consequences, Resistance and Alternatives (Monthly Review Press, 2013), Martin Hart-Landsberg makes a number of key interventions unravelling the myth of neo-liberalism as well as the dynamics underlying capitalist accumulation.

First, he identifies a new stage in the dynamics of globalization in recent years, the stage of contract manufacturing. Large transnational corporations (TNCs) no longer own production facilities across several countries, but increasingly tend to contract out key parts of the production process. As the main organisers of production chains, TNCs’ structural power has increased yet further. ‘To the extent that participating firms are not themselves transnational, it means that TNC dominance over international economic activity is greater than previously stated. And to the extent that these firms are themselves transnational, it means that contemporary capitalist accumulation dynamics have given rise to a hierarchically structured, interlocking system of TNCs’ (P.20). This has led to a tightly integrated production system across borders especially in East Asia. ‘The central role of cross-border production networks in knitting together East Asia’s economic activity is perhaps best highlighted by the growing importance of parts and components in the region’s trade’ (P.33).

Second, Hart-Landsberg makes clear why the push for free trade agreements (FTAs) has become so prominent. In order to ensure that cross-border production networks function smoothly, the unhindered flow of parts and components is an absolutely essential precondition. ‘All together, 119 FTAs were negotiated in the Asia-Pacific region between 2002 and 2006. During the period, China negotiated or proposed FTAs with 28 different countries. By comparison, the total was 21 for the European Union and 10 for the United States’ (P.30). The large number of FTAs by China, however, does not support ideas of a rising economic giant. Rather, it is China’s cheap labour that make it an ideal assembly platform of pre-fabricated parts for export to North America and Europe. In fact, whole East Asia is dependent on these export locations. ‘Since the region’s trade activity largely involves an intraregional trade of parts and components culminating in China-based exports aimed primarily at the United States and the European Union, the reality is that Asia has become ever more tightly integrated and dependent on exporting to developed capitalist markets, especially the United States’ (P.36). In other words, instead of economic powerhouse, China turns out to be in a highly fragile position in the global economy. 

Foxconn iPhone Workers Line Up, by Photo Giddy

While economic growth measured in national GDP levels may look impressive, when growth is calculated in terms of share in value-added, the picture changes drastically. Hart-Landsberg draws convincingly on Mexico, which had embarked on such a growth strategy years earlier than China. ‘Between 1980 and 1997 Mexico’s share in world manufactured exports rose tenfold, while its share in world manufacturing value added fell by more than one-third, and its share in world income (at current dollars) [fell] by about 13 percent’ (PP.85-6). The main profit is made by large Western TNCs, which draw on cheap labour in China and other locations, be it directly, be it via sub-contractors such as the case of Apple with Foxconn in China. As John Smith illustrates, ‘Hon Hai [Foxconn] made $2.4 billion in profits in 2010, or $2,400 per employee, compared to $263,000 in profits reaped by Apple for each of its 63,000 employees (43,000 of whom are in the United States)’ (Smith 2012).

Equally important is the changing nature of FTAs. Since the end of the GATT Uruguay Round in 1994, the free trade agenda has been expanded from a focus on lowering tariffs to new areas including intellectual property rights, trade in services and trade related investment measures (Bieler, Hilary and Lindberg 2014: 3-5). The expanded free trade agenda, importantly, also includes state-investor enforcement mechanisms, undermining state sovereignty vis-à-vis TNCs further. Hart-Landsberg illustrates this well in relation to the US – South Korea FTA and concludes ‘no wonder that government and business leaders prefer to call the KORUS FTA a free trade agreement and to concentrate public attention on tariff issues. If the full requirements of this and other agreements were popularly known, people might better understand why they face ever worsening options. They would see that their situation is primarily the result of well applied class power rather than impersonal “market forces”. And they would better appreciate the need to organize in their own defense’ (P.118). In short, talking about free trade has increasingly become a smoke-screen for more drastic restructuring measures.

The last point leads into Hard-Landsberg’s fourth major contribution. He demonstrates clearly that state-centric approaches are increasingly obsolete. As he states early on, ‘the fact that a diverse group of states continue to pursue policies that significantly limit their own authority over economic activity highlights the existence of a common class interest shared by transnational capital, one that transcends national and competitive differences’ (P.26). In short, when analysing capitalist exploitation and resistance, it is not state rivalry and co-operation, which has to be at the core of investigation, but class struggle. ‘This reality highlights the critical importance of studying capitalist dynamics from a class rather than nation-state perspective’ (P.62).

Photo by Greenpeace Switzerland

Analysing globalization from a class perspective reveals that workers around the world are the ones who have lost out. In China, ‘wages as a share of GDP fell from approximately 53 percent of GDP in 1992 to below 40 percent in 2006. Private consumption as a percent of GDP also declined, falling from approximately 47 percent to 36 percent over the same period’ (P.50). Chinese workers are clearly not the beneficiaries of Chinese development. And yet, US workers have not benefitted either as the loss of jobs in manufacturing, outsourced to cheap labour countries in East Asia and here in particular China, was not made up with new jobs in services. ‘The loss of manufacturing work reduced the demand for local non-traded services and thus non-manufacturing employment. At the same time, the loss of manufacturing work swelled the supply of non-manufacturing workers, putting downward pressure on non-manufacturing wages’ (P.58). Across the world, the expanded neo-liberal free trade agenda has endangered development. Free trade has not been a driving force behind development. Instead, ‘trade liberalization contributed to the deindustrialization of many third world countries, thereby increasing their import dependence’ (P.81).

Importantly, where other academics stop in their analysis of what is going on, Hart-Landsberg continues and looks for potential alternatives and social class forces, who could support them. Clearly, resistance by trade unions is not automatic. When assessing the position of US unions vis-à-vis the FTA with South Korea, Hart-Landsberg concludes that ‘unfortunately, the demand for “review and renegotiate” suggests that there is a basic core to the agreement that is acceptable. The implication is that contemporary capitalist accumulation dynamics provide an acceptable framework for structuring a fair, equitable, and responsive relationship between the two countries’ (P.126). Successful resistance requires broader alliances with a perspective beyond the workplace, Hart-Landsberg concludes. ‘We need to develop a strategic focus that can help us build movements for change that embrace the principles of equality, democracy, and solidarity in both practice and vision’ (P.134).

Photo by little shiva

One of the key alternative practices analysed by Hart-Landsberg is the Bolivarian Alliance for the Americas (ALBA). At its beginning in 2004 was a treaty between Venezuela and Cuba with the former providing petroleum to the latter at very favourable prices in exchange for doctors and teachers from Cuba, working in some of Venezuela’s poorest states. Importantly, direct negotiations between the two countries had replaced a reliance on prices set by the market and, therefore, directly challenged capitalist dynamics. In Hart-Landsberg’s view ‘this approach represents a “middle-ground” strategy of group de-linking. ALBA governments hope that de-linking will provide the protection they need to engage in the coordinated planning and production required to overcome existing economic distortions and weaknesses. And, by acting as a group, these governments hope to ensure that their respective national enterprises will have access to the broader markets they need to enjoy economies of scale and obtain scarce resources and technology’ (P.180).

If there is one criticism I have to make, then it is the missing conclusion. It would have been useful, if Hart-Landsberg had summed up the results of his investigation and deliberated about the implications for the future. Nonetheless, this is a hugely impressive book, which I highly recommend for reading to all those academics and activists alike, wanting to contribute to resistance against capitalist exploitation. Considering current negotiations of a Trans-Pacific Partnership Agreement (TPPA), a US-EU Transatlantic Trade and Investment Partnership (TTIP) as well as a Trade in Services Agreement (TISA), this book will remain essential reading for some time.

The class struggle in Norwich montage by Roger Blackwell

References:

Bieler, Andreas, John Hilary and Ingemar Lindberg (2014) ‘Trade Unions, “Free Trade” and the Problem of Transnational Solidarity: An Introduction’, Globalizations,Vol.11/1: 1-9.

Smith, John (2012) ‘The GDP Illusion: Value Added versus Value Capture’, Monthly Review, Vol.64/3; available at http://monthlyreview.org/2012/07/01/the-gdp-illusion, accessed 08/11/2013.

Prof. Andreas Bieler

Professor of Political Economy

University of Nottingham/UK

Andreas.Bieler@nottingham.ac.uk

Personal website: http://andreasbieler.net

10 August 2014