Walmart, and Carrefour with the battering rams and trebuchets that helped them to end the reign of the “manufacturer’s recommended retail price” and established the supremacy of commercial capital in consumer goods markets. As U.S. labor historian Nelson Lichtenstein has observed:
For more than a century, from roughly 1880 to 1980, the manufacturing enterprise stood at the center of the U.S. economy’s production/distribution nexus…. Today, however, the retailers stand at the apex of the world’s supply chains…. The dramatic growth in the power of the American retail sector began in the 1960s and 1970s when Sears, K-Mart and some U.S. apparel makers/distributors began to take advantage of the cheap labor and growing sophistication of the light manufacturers in the offshore Asian tigers, especially Hong Kong, Taiwan and South Korea.7
Unable any longer to dictate prices to its distributors, the shift in power toward commercial capital increased pressure on the producer monopolies to ax agreements with their labor unions and to de-unionize and “flexibilize” their domestic labor force—and follow the trail blazed by the retail giants and outsource their labor-intensive production processes to low-wage countries. This involved both a redistribution of profits from industrial to commercial capitalists and the distribution of some of outsourcing’s bounty to increasingly wide sections of the working class through falling prices of consumer goods.
From the early 1960s, while the emerging retail giants were pioneering the outsourcing of toys, clothing, and other consumption goods, prominent electronics firms such as Cisco, Sun Microsystems, and AT&T were unleashing what was soon to become a torrent of outsourcing by hightech industry. Its driver was not the domestic battle with commercial capital but competition between U.S. and Japanese corporations. Until manufacturers learned how to print electronic circuits, circuit-board manufacture was exceedingly labor-intensive; its outsourcing to Taiwan and South Korea helped U.S. electronics firms to cut production costs and gave a mighty impulse to export-oriented industrialization in what became known as “newly industrializing countries.”10 The electronics and other high-tech industries have been at the forefront of the outsourcing wave. As an UNCTAD study found, “Strikingly, the growth rates of exports from developing countries exceed those of world exports by a higher margin the greater is the skill and technology intensity of the product category…. However, this does not signify a rapid and sustained technological upgrading in the exports of developing countries.” Far from it—“The involvement of developing countries is usually limited to the labor-intensive stages in the production process.”11
The high-water mark of production outsourcing occurred, not coincidentally, in the period leading up to the outbreak of global crisis in 2007, or as UNCTAD put it, “Since around 2000, global trade and FDI have both grown exponentially, significantly outpacing global GDP growth, 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
