in EPZs elsewhere in the world, 5 million in Mexico and Central America, with another million or so in each of Africa, the Middle East, and Central Europe. South America lags, with half a million employed in EPZs.
Although China remains the most important host, EPZs have been growing faster still in other low-wage countries: 80 percent of EPZ employment was accounted for by China in 1997, falling to 63 percent in 2005–6.53 After China, the largest EPZ employer is Bangladesh, with 3.25 million employees in 2005–6.
Since their inception, EPZs have been the focus of intense controversy, and were singled out by scholars and activists influenced by the New International Division of Labor school as the epitome of unbridled exploitation of low-wage labor by TNCs.54 In a survey for the ILO published in 2007, Milberg concludes that “despite the presence of EPZs—for over 30 years in some cases—there are very few cases where EPZs have played an important role in accomplishing … direct developmental goals,”55 and UNCTAD warned in 2004 that manufacturing EPZs were reproducing colonial forms of “enclave-led growth” in which “a relatively rich commodity-exporting sector, well connected to roads, ports and supported by ancillary services, exist side by side with large undeveloped hinterlands where the majority of the population live.”56
The general failure of EPZs to stimulate economic development outside of the zones, typically importing all inputs except labor and paying little or no taxes to host governments, has aroused further controversy. EPZs have also received much criticism because the export subsidies and other trade-distorting emoluments dangled by host governments to lure outsourcing TNCs confound efforts by the World Trade Organization to create a “level playing field.” Given the controversy surrounding EPZs and their paltry contribution to the economic and social development of their hosts, the question arises, why are they continuing to proliferate? The answer is that, having signed up to the IMF/World Bank–promoted strategy of export-oriented industrialization, EPZs provide governments in low-wage countries with a way to attract inward FDI and connect to global value chains. In addition, what “may be the most important political factor,” according to Milberg, is that “governments find the employment creation in EPZs to be essential for absorbing excess labor.”57
SERVICES AND THE GLOBALIZATION OF PRODUCTION
Until around the turn of the millennium, outsourcing was associated with labor-intensive links or “tasks” in the manufacture of commodities. This took place on a massive scale, despite the significant costs and delays involved in transporting commodities over long distances. The eruption of this into “services,” in particular any service that can be delivered instantaneously to a computer screen with zero transportation costs, has only become a practical possibility for most firms since the late 1990s. Richard Freeman’s prediction that “if the work is digital—which covers perhaps 10 percent of employment in the United States [around 14 million workers]—it can and eventually will be offshored to low-wage highly educated workers in developing countries,” was widely reported in the U.S. news media.58 So too an article in Foreign Affairs in 2006 by Alan Blinder, an eminent economics professor at Princeton University, titled “Offshoring: The Next Industrial Revolution?,” which warned “we have so far barely seen the tip of the offshoring iceberg, the eventual dimensions of which may be staggering.”59 Suddenly a layer of professional, middle-class workers began to feel the cold breath of global competition. As Gary Gereffi remarked, “While low-cost offshore production had been displacing U.S. factory and farm jobs for decades, the idea that middle-class office work and many high-paying professions were now subject to international competition came as something of a shock.”60 Under the subheading “This time it’s personal,” Blinder concluded, “Many people blithely assume that the critical labor-market distinction is, and will remain, between highly educated (or highly skilled) people and less-educated (or less-skilled) people…. The critical divide in the future may instead be between those types of work that are easily deliverable through a wire … and those that are not.”61
Services made up 75 percent of the GDP of “high-income countries” in 2013, but only 22 percent of their gross exports,62 but this understates their contribution because services also form part of the value added of exported manufactured goods. “While the share of services in gross exports worldwide is only about 20 percent,” reports UNCTAD, “almost half (46 percent) of value added in exports is contributed by service-sector activities, as most manufacturing exports require services for their production.”63
Clearly, a concept of the globalization of production that concentrates exclusively on manufacturing and ignores so-called services would be seriously deficient. Mainstream conceptions of industry and services classify economic activities according to the physical properties of their output, and therefore of the specific nature of the tasks, of the concrete labors, that generate it. Services are conventionally defined as weightless, intangible commodities; they cannot be stored and transported and therefore must be consumed in situ and at the moment of their production, as in the case, for instance, of a haircut or a bus journey. Thus, according to The Economist, services are “products of economic activity that you can’t drop on your foot.”64
Yet tangibility is not firm enough to serve as the criterion for dividing industry from services. In the first place, the delivery of the intangible service invariably also involves the consumption of a tangible product of “industry,” as in the scissors used to cut hair or the bus used to transport its passengers. A musical performance cannot be touched, but it does touch the human eardrum by means of a tangible perturbation of the air. Telecommunications are also classified as a service: as with a musical performance, a telephone conversation is consumed at the moment of its delivery and cannot be stored for later use.65 Yet this, too, involves a physical, tangible alteration of matter. Even transportation, also classified as a service, involves a change in the physical location of a product if not in its physical characteristics.
In contrast to the crude physicalist definition, what is critical from a Marxist perspective is not the nature of the specific labor but the social relations of its employment—whether it is employed in the production of commodities or as a personal service, and, if the former, whether the labor is performed in production or in circulation. To develop a valid, concrete and useful concept of the distinction between industry and services it is therefore necessary to consider the distinction between the production of commodities and their circulation.
The Production and Circulation of Commodities
The simplest form of market relation is barter. A barter trade, in which one commodity (for example, a pair of trousers) is exchanged directly for another (for example, a sack of flour), can be expressed by the expression C–C. Assuming equal exchange, C, representing the exchange-value of the commodity, is the same on both sides of the formula. The exchange-value of a commodity is determined not by the subjective desires of the buyers and sellers, as both orthodox and heterodox economic theory maintains,66 but by how much effort it took to make it. If, for example, it takes twice as long to produce a pair of trousers as a sack of flour, then the equilibrium exchange-value of a pair of trousers would be two sacks of flour.
As market relations expand, one commodity becomes the money commodity (usually gold), against which all other commodities are measured. Here, again assuming equal exchange, the formula now becomes C–M–C. In this case, market participants sell something they don’t need in order to buy something they do. Money (M) now intermediates between trouser-sellers and flour-sellers, thanks to which they do not need to meet face-to-face.
Unlike simple commodity producers, who sell in order to buy, merchants buy in order to sell. Their aim is not to acquire something they need, but to acquire money. Their starting and end points begin not with C, but with M. They buy some commodities and then sell them for a higher price. The formula now becomes M–C–M′ where the apostrophe signifies that s/he ends up with more money then s/he started
