that value is transferred or redistributed between capitals in order to achieve equilibrium prices that equalize profits. Conversely, to recognize the existence of such flows is to dislodge the keystone of the ruling economic theory, causing the entire edifice to collapse. Renaming “profit’ as “rent,” as do Milberg, Kaplinsky, Gereffi, and others studying this phenomenon, does not clarify this question. In fact, it blurs the important distinction between profit and rent.57 Milberg’s notion of “rents accruing abroad” implies that the South-North flow continues; and simply calling it rent says nothing about a really interesting implication of this. These “rents accruing abroad” appear in the GDP—the gross domestic product—of the importing nation—even though they were “accrued abroad.” The solution of this paradox, which we have been hinting at so far, will be presented in chapter 9, “The GDP Illusion.”
THE STRUCTURE OF WORLD TRADE
A most striking feature of the imperialist world economy is that, as we have seen, Northern firms do not compete with Southern firms, they compete with other Northern firms, including to see who can most rapidly and effectively outsource production to low-wage countries. Meanwhile, Southern nations fiercely compete with one another to pimp their cheap labor to Northern “lead firms.” We therefore have N-N competition, and we have cutthroat S-S competition, but no N-S competition—that is, between firms, if not between workers. Of course, important exceptions can be identified and qualifications can be made, but the overall pattern is clear: Apple competes with Samsung and Nokia, but not with FoxConn, Taiwan Semiconductor Manufacturing Company (TSMC), and its other suppliers. Similarly, British Home Stores (BHS) and Marks & Spencer (M&S) compete with each other but not with their Bangladeshi suppliers, and the same goes for Tesco, General Motors, or any other TNC sourcing its final goods or intermediate inputs from suppliers in low-wage countries. The lead firms’ relationship with their suppliers is therefore complementary, not competitive, even if it is highly unequal. This important point was underlined by Richard Herd, head of the China division at the Organisation for Economic Co-operation and Development (OECD), who noted that “at the moment, China is not a threat to Japan’s core industries”; on the contrary, outsourcing laborintensive production tasks to China has given many Japanese firms “a new lease on life … if you look at Chinese exports and Japanese exports they are not competing, they are complementary.”58
The complementary relation between Japanese and Chinese firms can be applied to relations between firms in imperialist and oppressed nations in general. China’s manufacturing industry is no more a threat to the supremacy of U.S. TNCs than are the maquiladoras along the U.S.-Mexican border. Not only do the headline figures that show a huge deficit in trade with China actually reflect the importation of intermediate inputs produced in Japan, Malaysia, South Korea, and elsewhere, a great deal of it results directly from the decision of U.S. firms to move their production to take advantage of low Chinese wages. There cannot be anything more absurd nor more disingenuous than the nationalist-protectionist hoopla over the U.S. trade deficit with China!
The same is true of Europe’s TNCs. As Ari Van Assche, Chang Hong, and Veerle Slootmaekers explain in a study of EU-Chinese trade, “Europe’s importers and retailers … increasingly rely on cheap inputs and goods from Asia…. EU companies are now also producing in low-cost countries, and not simply importing inputs.”59 Far from being locked in competition with China, “the possibility of offshoring the more labor-intensive production and assembly activities to China provides an opportunity to our own companies to survive and grow in an increasingly competitive environment,”60 and they conclude, “Our direct competitors in the tasks in which we have a comparative advantage are not located in China, but continue to be the usual suspects: the United States, Western Europe and a handful of High-Income East Asian economies.”61
Competition between firms in imperialist and developing countries does exist. Even in the garment sector, where the global shift of production to low-wage countries is most advanced, low-end producers have not entirely disappeared from imperialist countries and residual competition with firms in low-wage countries persists. Competition between firms on both sides of the global divide is much more intense in branches and sectors where the global shift is still under way, as in the automobile industry. Finally, great significance must be attached to rising competition between imperialist firms and firms in China, South Korea, and Taiwan and elsewhere that are beginning to directly compete with them in strategic and/or higher value-added products. A prime example of the latter is China’s rapid rise to dominance of solar panel and wind turbine production; another is the rise of Chinese civil engineering behemoths now regularly undercutting their European and North American rivals in tenders for railway, port, and power station construction; companies such as HTC, Samsung, and Xiaomi are challenging Apple’s supremacy in smartphone production. The pharmaceutical industry is another important terrain of competition, with firms based in imperialist countries with Indian firms like Cipla and Ranbaxy challenging the supremacy of the West’s “big pharma.” This is an important trend, a real exception to the dominant pattern of trade established during the era of neoliberal globalization, and is part of the evidence that, in some sectors at least, the grip of imperialist capital is being loosened by Southern competitors
Nevertheless, despite these and other high-profile examples of N-S competition, the overwhelmingly dominant form of interaction between firms in imperialist and low-wage economies is synergetic and complementary. The general absence of head-to-head competition between firms on opposite sides of the N-S divide is brought into sharp focus by the “complexity index” developed by Arnelyn Abdon, Marife Bacate, Jesus Felipe, and Utsav Kumar at the Asian Development Bank and by Harvard’s Ricardo Hausmann and César Hidalgo. This approach classifies both national economies and individual commodities according to their complexity, “complex economies” being “those that can weave vast quantities of relevant knowledge together, across large networks of people, to generate a diverse mix of knowledge-intensive products,” while complex products, for example, “medical imaging devices or jet engines, embed large amounts of knowledge and are the results of very large networks of people and organizations. By contrast, wood logs or coffee embed much less knowledge, and the networks required to support these operations do not need to be as large.”62
The “Index of Complexity”
To explain the idea of complexity, Abdon et al. use the simile of a Lego bucket to represent a country and various kinds of Lego pieces to represent the capabilities available in the country:
The different Lego models that we can build (i.e., different products) depend on the kind, diversity, and exclusiveness of the Lego pieces that we have in a bucket…. A Lego bucket that contains pieces that can only build a bicycle most likely does not contain the pieces to create an airplane model. However, a Lego bucket that contains pieces that can build an airplane model may also have the necessary pieces needed to build a bicycle model…. Hence, determining the complexity of an economy by looking at the products it produces amounts to determining the “diversity and exclusivity” of the pieces in a Lego bucket by simply looking at the Lego models it can build.63
Hausmann and Hidalgo provide a useful illustration of the number-crunching methodology used to generate their Index of Complexity:
Consider the case of Singapore and Pakistan. The population of Pakistan is 34 times larger than that of Singapore. At market prices their GDPs are similar since Singapore is 38 times richer than Pakistan in per capita terms…. They both export a similar number of different products, about 133. How can products tell us about the conspicuous differences in the level of development that exist between these two countries? Pakistan exports products that are on average exported by 28 other countries (placing Pakistan in the 60th percentile of countries in terms of the average ubiquity of their products), while Singapore exports products that are exported on average by 17 other countries (1st percentile). Moreover, the products that Singapore exports are exported
