poorly diversified countries. Our mathematical approach exploits these second, third and higher order differences to create measures that approximate the amount of productive knowledge held in each of these countries.64
TABLE 3.1: Total Exports, by Product Complexity Percent of total exports in each Product Complexity Level (1 = highest; 6 = lowest)
Source: Table 6 in Arnelyn Abdon, Marife Bacate, Jesus Felipe and Utsav Kumar, Product Complexity and Economic Development, Levy Economics Institute Working Paper No. 616 (2010).
“Diversity” is here defined as the number of products that a country exports with “revealed comparative advantage,” that is, where their share of the global market in that good is greater than their share of global population, the idea being that countries specialize in what they do best, thereby exploiting their comparative advantage, and this is revealed in the composition of their exports.
One deficiency of complexity theory is that unavailability of data prevents its extension to trade in services. More serious, in the context of the present discussion, is that, in the words of World Bank researchers, “The technological sophistication and competitive stature of an exporter’s industrial base can be exaggerated when exports are used as a measure of industrial capability.”65 Thus China’s complexity score will be exaggerated by its export of iPhones and other electronic goods that are assembled, but not manufactured, in that country. Complexity theorists are aware of this problem, but their remedy is ineffective: “Countries may also export things they do not make. To circumvent this issue we require that countries export a fair share of the products we connect them to.”66 “Fair share” means when the share of a given commodity in a country’s total exports is greater than the global share of this commodity in global exports as a whole, that is, when its revealed comparative advantage (RCA) is greater than one—but iPhones, etc., will all pass this test and thus lead to an overestimation of China’s complexity score.
Abdon et al.’s Complexity Ranking lists 124 nations according to the complexity of their exports (see Table 3.2), while Hausmann and Hidalgo generate an Economic Complexity Index comprising 128 countries. Both present a broadly similar picture rich with fascinating details. In Abdon et al.’s ranking, all of the ten most complex nations are imperialist nations. In Hausmann and Hidalgo’s table Singapore, Slovenia, and the Czech Republic make it into the top ten most economically complex nations. Norway, Australia, and New Zealand, also members of this exclusive club, appear much further down among a slew of middle-income Southern nations, their position depressed by the large share of primary commodities in their exports. Also notable is the lowly position of Greece and Portugal, the two countries most battered by the Eurozone crisis, indicating that these nations directly compete not with core Eurozone countries, but with China and other low-wage nations.67 Pakistan, Sri Lanka, Bangladesh, and Cambodia, four countries whose exports consist mostly of garments, languish at the bottom of the table among the poorest nations on earth.
There is a broad consensus among economists and policy makers that the loss of competitiveness by peripheral countries in the Eurozone vis-à-vis Germany and other core countries is at the heart of the forces tearing Europe apart. Unable to restore their competitiveness through currency devaluation, their only option is savage cuts in nominal wages, including that part of it received in the form of social benefits. Contemplating the divergence between German and Mediterranean productivity, Financial Times journalist Samuel Brittan commented that “even the Greek colonels, Franco, Mussolini or Salazar would have been hard put to reduce nominal wages on the scale required.”68 But this broad consensus rests on a false premise—that Germany is Greece’s, Spain’s, etc., principal rival. As Jesus Felipe and Utsav Kumar have pointed out:
Ireland, Spain, Portugal, and Greece do not compete directly with Germany in many products that they export and hence comparing their aggregate unit labor costs and drawing conclusions is probably misleading…. German exports are concentrated in the most-complex products of the complexity scale … in the case of Greece and Portugal, their exports are concentrated in the least-complex groups…. Their export shares (by complexity groups) are similar to those of China. If China were the correct comparator, then perhaps the situation of the European countries would be significantly worse. We believe that this is where the real problem of the peripheral countries lies…. The problem is that they are stuck at middle levels of technology and they are caught in a trap. Reducing wages would not solve the problem.69
TABLE 3.2: Complexity Ranking
Source: Appendix C in Arnelyn Abdon, Marife Bacate, Jesus Felipe, and Utsav Kumar, Product Complexity and Economic Development, Levy Economics Institute Working Paper No. 616 (2010).
The European Union is a club of imperialist nations, part of the united front with other imperialist powers against so-called emerging nations, and which during the neoliberal era has considerably deepened its exploitative and parasitic relation with the Global South. Spain, Portugal, and Greece are minor imperialist nations whose economies, banking systems, political structures, and military forces are an integral part of Europe and whose history is of marauding, oppressor nations. The short list of core nations, Fred Halliday reminds us, has “remained the same for a century and a half, with the single addition of Japan.”70 But now at least one of them—Greece—is threatened with ejection from this club, and finds itself increasingly in competition with China and other low-wage countries, a competition that it is unable to win because of its much higher wages and its lack of a technological edge.
The Index of Complexity suggests that a Grexit from the EU would merely formalize its demotion from this imperialist club. In 1978, Greece’s complexity index was 0.64, the lowest in Western Europe. By 2008 this had collapsed to 0.21, on a par with China, as can be seen from Greece’s ranking in Table 3.2. In contrast, the indices of Portugal and Spain which in 1978 stood at 0.85 and 1.05 respectively, have suffered a much gentler decline, to 0.70 and 0.93.71 In other words, though Europe’s core nations have a complementary relation with Chinese firms, using them in the competitive battle against each other and with those in Japan and North America, Greek firms increasingly find themselves in direct competition with Chinese firms. It is no surprise to find Greece in the relegation zone. Relegation, that is, from the club of imperialist nations. Consumption levels are declining rapidly, but ejection from the Eurozone will very likely result in Greece’s precipitous collapse. Bourgeois democracy would be unlikely to survive such an eventuality, with the return of military dictatorship a distinct mediumterm possibility. Should Greek workers show signs of challenging Greece’s capitalist rulers for power, fascist violence will be mobilized against them, opening the possibility of a fully fledged fascist government taking power on the mainland of Europe.
Asymmetric Market Structures: Monopolistic “Lead Firms” in the North, Cutthroat Competition in the South
The Index of Complexity, whose most striking feature, according to Abdon et al., is that “richer countries are the major exporters of the more complex products while the poorer countries are the major exporters of the less complex products,”72 reveals with remarkable clarity the extent to which poor countries, and therefore firms in poor countries, do not compete with firms in rich countries. The enormous significance of this for the operation of the law of value in the contemporary global economy will be considered in chapter 8. The aim of this and the preceding chapter is to to identify and analyze the most important empirically observable features of the outsourcing relationship, in particular the fact that, in the words of
