target="_blank" rel="nofollow" href="#ub3481e0f-b1ba-57cf-8a4b-f01ae62aaf28">Chapter 7, “Global Labor Arbitrage: Key Driver of the Globalization of Production,” considers attempts by mainstream economists to understand the significance of wage-driven production outsourcing. Finding these to be, at best, purely descriptive, we turn to contemporary Marxist scholarship, and find this, with few but important exceptions, to be astonishingly indifferent to and accepting of bourgeois economists’ argument that international wage differentials merely reflect international differences in labor productivity. The remainder of chapter 7 continues the quest for a concept of international differences in the rate of exploitation by visiting the debate on “dependency” that accompanied the anticolonial national liberation movements of the 1960s and 1970s, while chapter 8, “Imperialism and the Law of Value,” completes the quest by testing the ability of Marx’s theory of value, as presented in Capital’s three volumes, to explain the ancient and modern reality of super-exploitation.
6. HOW IMPERIALIST EXPLOITATION IS OBSCURED BY CONVENTIONAL INTERPRETATIONS OF ECONOMIC DATA. Chapter 9, “The GDP Illusion,” explains one of the most striking paradoxes revealed in the analysis in chapter 1 of the global commodity: commodities produced mostly or entirely in low-wage countries and consumed mostly or entirely in imperialist countries expand the GDP of the nations where they are consumed by far more than the GDP of the nations where they are produced. The source of this optical illusion is found in a fallacy that is at the heart of mainstream bourgeois economic theory and its heterodox variants: the tautological conflation of the value generated in production of a commodity with the price realized by its sale.
7. THE ORIGIN, NATURE, AND TRAJECTORY OF THE GLOBAL ECONOMIC CRISIS—WHY THE “FINANCIAL CRISIS” IS ROOTED IN CAPITALIST PRODUCTION. The first nine chapters of this book analyze the defining transformation of the neoliberal era, namely the outsourcing and global shift of production. Chapter 10, “All Roads Lead into the Crisis,” shows why this transformation, itself a response to the system-threatening crisis of the 1970s, prepared the ground for the reappearance of systemic crisis in 2007. Contrary to the economists’ cozy consensus, this concluding chapter argues that this is a financial crisis in form only, and that no understanding of the origin, nature, and trajectory of the global economic crisis is possible unless it is seen as the inevitable result of explosive contradictions at the heart of globalized capitalist production. The chapter concludes by arguing that the current crisis is the most profound in the two centuries of capitalism’s existence—and this is before we include, as we must, the added dimension of climate change, a euphemism for the capitalist destruction of nature. A decades-long economic depression, increasingly punctuated by wars and revolutions, is now unavoidable. There are two possible outcomes: either humanity resumes the transition to socialism inaugurated by the Russian Revolution one century ago, or it will descend into barbarism.
Outsourcing, or the Globalization of Production
How the capital-labor relation has evolved during the neoliberal era is the subject of this book. Chapter 1 zoomed in on three representative global commodities; this chapter turns the telescope around, presenting a historical and panoramic view of the global transformation of production and of the producers, the global working class. The purpose of this and the next chapter is to develop a rich, sharply focused concept of the globalization of production. To develop tools needed for analysis of this phenomenon, we will critically examine standard definitions of “production,” “industry,” and “services.”
ANTECEDENTS OF GLOBAL OUTSOURCING
In order to oppose their workers, the employers either bring in workers from abroad or else transfer manufacture to countries where there is a cheap labor force. Given this state of affairs, if the working class wishes to continue its struggle with some chance of success, the national organisations must become international. Let every worker give serious consideration to this new aspect of the problem.1
—KARL MARX, 1867, Address of the General Council to the Lausanne Congress of the Second International
The wildfire of outsourcing spread during the past three decades is the continuation, on a vastly expanded scale, of capital’s eternal quest for new sources of cheaper, readily exploitable labor-power. What began as a trickle in mid-nineteenth-century Europe and became a steady stream in North America in the early twentieth century had, by the end of that century, become a flood tide, described by Kate Bronfenbrenner and Stephanie Luce as “a systematic pattern of firm restructuring that is moving jobs from union to non-union facilities within the country, as well as to non-union facilities in other countries.”2 Antecedents of modern wage-arbitrage–driven outsourcing of production can be found in diverse branches of the nineteenth-century economy. Clothing and textiles, which played an important role in all stages of capitalist development, provide many early examples of the wage-arbitrage–driven production outsourcing that Karl Marx warned about 150 years ago.
The story of jute, the “golden fiber” native to Bangladesh and used for sacking and canvas sheets, contains important elements and features that foreshadow modern low-wage-seeking production. In the early nineteenth century, industrialists in Dundee worked out how to modify their linen- and flax-spinning machinery to process jute, spelling the demise of India’s hand-spinning industry. By 1860, Dundee’s sixty jute mills employed some 50,000 mostly female workers, many of them Irish migrants who had fled the Great Famine to find work in what was a notoriously low-paid sector of the economy. They were nevertheless more expensive than Indian workers, prompting Dundee’s jute barons to shift production to Bengal. Chhabilendra Roul reports that the first mechanized jute spinning mill in India was established in 1855 on the banks of the Hoogli River near Kolkata by a George Auckland, an Englishman, “with machinery imported from John Kerr of Douglas Foundry, then the leading machine manufacturer for flax machinery in Dundee.”3 By the first decade of the twentieth century the bulk of production had shifted to India, yet remained in the possession of Scottish jute barons, who successfully blocked the entry of Indian capitalists and who went on to provide a billion sandbags for Britain’s trenches in the First World War.4
IN LINKED LABOR HISTORIES, A STUDY of the co-evolution of the labor movements in New England and Colombia since the late 1900s, Aviva Chomsky argues that modern outsourcing “continues a pattern begun by the earliest industry in the country, the textile industry, a century earlier,5 and recounts how flight “from strong trade unions and toward cheap labor” saw New England textile mills pioneer international production outsourcing in the Americas, relocating first to North Carolina in the first decades of the twentieth century, then to Puerto Rico in the 1930s, and to Colombia and beyond in the decades since the Second World War.
The absence of international borders aided capital mobility in North America, where, as Gary Gereffi recounts, by the early twentieth century “many industries … began to move to the US South in search of abundant natural resources and cheaper labor, frequently in ‘right to work’ states that made it difficult to establish labor unions. The same forces behind the impetus to shift production to low-cost regions within the United States eventually led US manufacturers across national borders.”6
Global outsourcing of manufacturing production began in earnest in the 1960s and 1970s, with the exodus of production jobs in shoes, clothing, toys, and electronic
