Intan Suwandi

Labor-Value Commodity Chains: The Hidden Abode of Global Production

NYU Press is the proud distributor of books from Monthly Review Press. Explore an adapted excerpt from Value Chains: The New Economic Imperialism by Intan Suwandi, and visit Monthly Review to read a longer version of this excerpt. 

“So all these big developed countries, they have their own protection measures to face globalization. But a country like us, we are so naive, so innocent, so young. We are a developing country. We don’t have expertise in making this kind of regulation. Indonesia in the end becomes the target market. We have to open [our market], people come in. Some investments come in because our labor is very cheap. But in the end of the day, what happens? They’re selling their products here, mostly, and we don’t have any protections.”

The quotation above is taken from one of the interviews I conducted with top managers at two companies in Indonesia. Interestingly, the opinion expressed by this interviewee, a representative of capital from the global South, is predicated on the persistence of the hierarchical world economy, a phenomenon that is recognized by all classes in the South, but which has recently been the subject of a renewed debate among Western scholars, including those on the left.

The debate itself largely centers on the question of whether imperialism is still relevant in today’s world economy, characterized by a new international division of labor linked to global commodity chains or global value chains. Some argue that the globalization of production has done wonders to decrease inequalities among nations, since the incorporation of the countries of the global South into the world economy has promoted their development. The recent success stories of some Asian countries, especially China and India, are seen as validating this argument. Numerous figures, even on the left, see the complexities of global commodity chains, along with the rise of “emerging economies,” such as China, Russia, Brazil, India, South Africa, and Indonesia, among others, as supposed evidence that what we have now is no longer an imperialist world economy, but merely “shifting hegemonies.”1 Economists, sociologists, and geographers, mainstream and radical alike, often focus on the decentralized characteristics of such chains.2

In a panel held at the New School’s Center for Public Scholarship in New York City on May 1, 2017, titled “Imperialism: Is It Still a Relevant Concept?,” Marxist geographer David Harvey—repeating some of the arguments expressed in his “Commentary” in Utsa Patnaik and Prabhat Patnaik’s A Theory of Imperialism—emphasized his rejection of what he referred to as “the straitjacket of imperialism.” Explicitly following Giovanni Arrighi in his 1983 edition of The Geometry of Imperialism, Harvey claimed that he did not find the category of imperialism “compelling” or useful in examining today’s world economy, viewing it as a conception of a “fixed structural constraint” that needs to be abandoned by those on the left, rather than a spatially dynamic configuration. Harvey’s comments in the book by the Patnaiks and in his presentation in New York in May 2017 have engendered an ongoing debate, starting with a critique of his arguments by Marxist political economist John Smith, originally published on the Monthly Review website but then continued in the Review of African Political Economy blog. In addition to Harvey and Smith, others joined the debate, with notable posts by Patrick Bond, Walter Daum, Andy Higginbottom, Adam Mayer, and Lee Wengraf.3

This disagreement on the left is not new. Many socialist thinkers in Europe and the United States have long rejected any notion that there is an “economic taproot” to imperialism, to utilize John Hobson’s famous phrase, and have argued that imperialism is either nonexistent or a product of the state and not the economy, and thus political or geopolitical (and not economic) in nature, unrelated to the functioning of capitalism as a mode of production.4 But what engendered the most recent debate was Harvey’s statement that he not only largely rejected the theory of imperialism, but also suggested that “the historical draining of wealth from East to West for more than two centuries has…been largely reversed over the last thirty years” (emphasis added).5

At the heart of this controversy is the question of whether the changing context of today’s global power relations—or what Harvey refers to, in his reply to Smith’s critique, as “complex spatial, interterritorial and space-specific forms of production, realization and distribution”—could lead to the conclusion that the drain from the global South/East to the global North/West does not exist anymore, or has been reversed, and that the concept of imperialism has become obsolete. Is it true that the notion of imperialism is nothing but, in the words of Bond, an “old-fashioned binary of oppressed and oppressor nations”? Is it reasonable to claim, as Wengraf explains, that the rise of emerging economies, which arguably leads to “sub-imperialism,” signifies the end of imperialism itself, especially highlighting cases such as China’s growing role in “tak[ing] advantage of the era of neoliberal assault in sub-Saharan Africa” that has helped secure its position as the United States’ “dominant global rival”? Or is it, as Higginbottom says, that “sub-imperialism does not mean the end of imperialism” (a position also held by Daum) but a “mutation out of neo-colonial capitalism and continues to demonstrate many of its features”? Furthermore, given the abundance of facts offered by its proponents, is it true that, as Harvey alleges, those who argue that imperialism persists today merely engage in “rank idealism”? Or is it the opposite, as Mayer declares, that those like Harvey who “deny imperialism” (borrowing Smith’s words) are the ones who are “thinking in an idealist way” by “entirely omitting the factor of time, history, and historical materialism” from the discussion, particularly “when mistaking money flows and production flows for imperial standing”?6

The analysis of global commodity chains creates some crucial questions in relation to the points above: (1) whether decentralized global commodity chains can be seen as constituting a decentralization of power among the major actors within these chains, and (2) whether the complexities of these chains suggest that the hierarchical, imperialist characteristics of the world economy have been superseded. I argue that the answer to both of these questions is no. Despite the seemingly decentralized networks, and notwithstanding the existing complexities that characterize global commodity chains, the capital-labor relations inherent in these chains are still imperialistic in their configurations.

As in V. I. Lenin’s conceptualization, imperialism can be broadly defined as the “complex intermingling of economic and political interests, related to the efforts of large capital to control economic territory.”7 Imperialism has several interrelated aspects: (1) geopolitical (including military) struggle by nation-states for positions within the international hierarchy of the system, encompassing the control of colonies or neocolonies, (2) dispossession of petty producers outside of capitalist production, and (3) global exploitation (along with expropriation—or appropriation without an equivalent) of labor in capitalist production, particularly under the domination of multinational firms emanating primarily from the core of the system.8 This work focuses almost entirely on the third aspect, without in any way denying the significance of the other two. At issue is the extraction (or drain) of surplus from the poor countries by the rich countries and/or their corporations. I argue that one way to understand the persistent imperialist characteristics of the world economy is through examining the exploitation that occurs in what Karl Marx calls “the hidden abode of production”—which, in the era of global commodity chains, is located in the global South. Although production has shifted to the South, imperialist relations of exchange continue to prevail, precisely due to the fact that the difference in wages between the North and South is greater than the difference in productivity. As Tony Norfield argues in The City, imperialism in “the present stage of capitalist development” has its primary basis in the inescapable reality that “a few major corporations from a small number of countries dominate the world market,” world finance, and the global structure of production.9

In the capitalist mode of production, the capital-labor relation is the central relation of exploitation. As Paul Sweezy argues, while “every class society is characterized by the necessary/surplus labor dichotomy, hence by an implicit rate of exploitation…only in capitalism does this take the value form, with the rate of exploitation expressing itself as a rate of surplus value.”10 It is impossible to examine the capitalist economy and the class struggles central to it without focusing on the issue of exploitation, analyzed through the labor theory of value. This remains equally true when examining the economy on a global level.

My analysis begins with a framework of global commodity chains that puts labor at the center of its formulation. The framework is called labor-value commodity chains, or labor-value chains for short. Unlike mainstream theories on this subject, this framework takes into account the questions of power, class, and control—questions that must be addressed if we want to bring the exploitation/expropriation that occurs in global commodity chains out into the open. It is crucial that the theoretical and methodological analysis of labor-value chains developed here incorporates a calculation of cross-national variation in unit labor costs in manufacturing. The measurement of unit labor costs—typically presented as the average cost of labor per unit of real output, or the ratio of total hourly compensation to output per hour worked—combines labor productivity with wage costs (the price of labor), in a manner closely related to Marx’s theory of exploitation. Lower unit labor costs point to a higher rate of exploitation in production, and vice versa. The failure of some Marxist theorists, such as Charles Bettelheim (and, more recently, Claudio Katz) to understand this fundamental relation has caused enormous confusion, leading Bettelheim to conclude, independent of these empirical relations, that the rate of exploitation is always higher in the more developed country simply because it is more developed.11

In this sense, the labor-value chains framework is a means to embed global exploitation within the framework of the labor theory of value. The maximization of gross profit margins through the reduction of unit costs is the goal of capitalists, and this “sets in motion a continuing search for new methods of production, new sources of labor, new ways of organizing the labor process.” The reduction of unit costs, most importantly, depends on “the portion of total unit costs that derives from the labor input, i.e., the unit labor cost.” This in turn depends on two factors integral to Marx’s concept of exploitation: the price (wage) of labor power and labor productivity.12 The concept of unit labor costs, in this sense, is an operationalization of the rate of exploitation, which considers not only the question of wages but also the question of productivity.

The labor-value chains framework, empirically operationalized through the examination of unit labor costs, thus allows us to see that, behind the complexities of global commodity chains, exploitation persists. Global capital (that is, multinational corporations) engage in the search for low unit labor costs around the globe to accrue higher profit margins and overall profits. Data on unit labor costs show that countries with the highest participation in labor-value chains—the top three being China, India, and Indonesia—also have very low unit labor costs. This means that not only are wages low in these countries, but productivity is high. The global organization of labor-value chains, then, is a means to extract surplus value through the exploitation of workers in the global South.

But how exactly does this extraction happen? It is difficult to find current analyses in the field that provide a more or less complete picture of how global commodity chains work. On the one hand, there are excellent works that utilize global commodity-chain or global value-chain (GCC/GVC) frameworks and examine firms and how value is added (read: captured) from suppliers in the global South. But most of them are not concerned with the question of labor exploitation—some of them even represent the view of capital, suggesting that corporations in the North grab the opportunity to extract the surplus value “offered” by the global South. On the other hand, there are also many excellent works in social sciences that provide detailed examinations of how workers are treated in the factories that assemble goods for multinational companies. But these works usually omit the connection between the control of the labor process and the intricate power relations that govern the commodity chains in a way that can bring out the specific mechanisms in which control is exerted through different actors within the chains.

Hence, it is necessary to address both the macro aspects of labor-value chains and the mesolevel aspects, namely, the processes that occur at the firm level. The macro aspects help us understand how imperialistic relationships between the global North and the South are perpetuated through exploitation and expropriation of the latter by the former. At the mesolevel, these relationships involve the process in which multinationals exert control over their dependent suppliers, and how such unequal relationships among companies then affect the other end of the unequal power relations—that is, those between the employers and the workers at the firm. Relying on works on systemic rationalization and flexible production, as well as empirical investigations at the point of production, it is possible to connect the labor-value chains framework to particular cases, as in my own research, where I conducted observations and interviews at two Indonesian suppliers. What this shows is how dominant companies (giant multinationals) within the chains extract surplus value through various mechanisms of control, both in terms of controlling the production processes of their dependent suppliers and in terms of controlling the labor process of workers employed by these suppliers. Their goal here is to make sure that unit labor costs are stably low, even in cases where wage costs are increasing (such as the increase in minimum wage issued through governmental policies). Control mechanisms are instituted to allow global capital to maintain a low unit labor cost by making sure that productivity can be increased.

In the end, these observations suggest that labor-value chains, as a part of the restructuring of the world economy driven by the imperative of capital accumulation, are imperialistic in their characteristics: the very reality captured by the concept of the global labor arbitrage within global finance. Labor-value chains involve a form of unequal exchange based on a worldwide hierarchy of wages, in which global capital (firms headquartered in the global North) captures value from the South through the over- or superexploitation of the labor of workers who manufacture the goods. In essence, more labor is obtained for less. Giant oligopolistic multinationals take advantage of differential unit labor costs within an imperialist system of “world value”; they control much of the world market through their international operations, and the fact that capital can move much more freely than labor (its movement restricted by factors such as immigration policies) allows multinationals to take advantage of immense labor price differences on a global level. They thus possess more freedom to pursue higher profits through the substitution of higher-paid labor with low-paid labor globally.

This means that, far from moving toward transnationalization, the processes that occur in labor-value chains point to the fact that capital accumulation processes are inseparable from the unequal relations among nation-states. They therefore reflect the much higher rates of exploitation imposed on workers in the global South, with the state still serving as an instrument and locus of capital accumulation. Indeed, the complexities of global commodity chains highlighted in the mainstream discussion of the subject often disguise the structural relationship of underdevelopment, whereby the export of capital, as Paul Baran and Sweezy observe, “far from being an outlet for domestically generated surplus, is a most efficient device for transferring surplus generated abroad to the investing country.”13

The concept of labor-value chains, then, is a theoretical and empirical device with which to look at this issue from a global South perspective, that is, to reveal the exploitative relations that hide behind the veil of globalized production.

Keep reading on Monthly Review…

 

Value ChainsIntan Suwandi is is a frequent contributor to Monthly Review magazine and has written on imperialism for various publications. She has recently received her Ph.D in sociology from the University of Oregon. Her first book, Value Chains: The New Economic Imperialism, is available from Monthly Review Press.

 

 

 

 

 

 

Notes

  1.  David Harvey, “Imperialism: Is It Still a Relevant Concept?,” (paper presented at Center for Public Scholarship, New School for Social Research, New York, May 1, 2017); David Harvey, “A Commentary on A Theory of Imperialism,” in A Theory of Imperialism, Utsa Patnaik and Prabhat Patnaik (New York: Columbia University Press, 2017), 154–72. Harvey indicates that he adopted the notion that the concept of imperialism should be replaced with that of shifting hegemonies after reading Giovanni Arrighi’s The Geometry of Imperialism: The Limits of Hobson’s Paradigm (London: Verso, 1983), 173.
  2.  Gary Gereffi, “The Organization of Buyer-Driven Global Commodity Chains: How U.S. Retailers Shape Overseas Production Networks,” in Commodity Chains and Global Capitalism, ed. Gary Gereffi and Miguel Korzeniewicz (Westport: Praeger, 1994), 95–122; Gary Gereffi, “Global Production Systems and Third World Development,” in Global Change, Regional Response, ed. Barbara Stallings (Cambridge: Cambridge University Press, 1995), 100–142; Gary Gereffi, “The New Offshoring of Jobs and Global Development,” ILO Lecture Series (Geneva: International Labour Organization, 2005); William Milberg and Deborah Winkler, Outsourcing Economics: Global Value Chains in Capitalist Development (Cambridge: Cambridge University Press, 2013).
  3.  Harvey, “Imperialism: Is It Still a Relevant Concept?”; John Smith, “A Critique of David Harvey’s Analysis of Imperialism,” MR Online, August 26, 2017. For the threads on the Review of African Political Economy (ROAPE) blog, http://roape.net, see: John Smith, “David Harvey Denies Imperialism,” January 10, 2018; David Harvey, “Realities on the Ground: David Harvey Replies to John Smith,” February 5, 2018; John Smith, “Imperialist Realities vs. The Myths of David Harvey,” March 19, 2018; Adam Mayer, “Dissolving Empire: David Harvey, John Smith, and the Migrant,” April 10, 2018; Patrick Bond, “Towards a Broader Theory of Imperialism,” April 18, 2018; Walter Daum, “Is Imperialism Still Imperialist? A Response to Patrick Bond,” May 16, 2018; Andy Higginbottom, “A Self-Enriching Path: Imperialism and the Global South,” June 19, 2018; Lee Wengraf, “U.S.-China Inter-Imperial Rivalry in Africa,” November 16, 2018.
  4.  John A. Hobson, Imperialism: A Study (New York: James Pott & Company, 1902), 76–99. Western socialists have evinced wide variations in criticisms of the classic concept of imperialism in the broad sense, previously made famous by thinkers such as V. I. Lenin, Rosa Luxemburg, Paul Baran, Harry Magdoff, and Samir Amin. These include arguments that (1) imperialism is beneficial in promoting development in poor countries, as in Bill Warren, Imperialism: Pioneer of Capitalism (London: Verso, 1980); (2) the view that rates of exploitation (but not profits) are higher in the center than in the periphery, as in: Charles Bettelheim, “Theoretical Comments,” in Unequal Exchange, Arghiri Emmanuel (New York: Monthly Review Press, 1972), 302–4; Claudio Katz, “Revisiting the Theory of Super-Exploitation,” Links International Journal of Socialist Renewal, July 5, 2018; and Alex Callinicos, Imperialism and the Global Political Economy (Cambridge: Polity, 2009), 181; (3) the notion that imperialism has been replaced by an amorphous Empire, as in Michael Hardt and Antonio Negri, Empire (Cambridge, MA: Harvard University Press, 2000); (4) the idea that imperialism in the classical sense has been replaced by a transnational capitalism displacing nation-states and national economies—as in William I. Robinson, Into the Tempest: Essays on the New Global Capitalism (Chicago: Haymarket, 2019)—and the view that imperialism is no longer primarily economic but political and geopolitical in nature, and largely synonymous today with U.S. hegemony, as in Leo Panitch and Sam Gindin, The Making of Global Capitalism (London: Verso, 2012); and (5) the view of Arrighi and Harvey, discussed above, in which imperialism can be replaced by a concept of shifting hegemonies. Naturally, social democratic and liberal thinkers have generally rejected any connection between capitalism and economic imperialism, as in Mark Blaug, “Economic Imperialism Revisited,” in Economic Imperialism, ed. Kenneth E. Boulding and Tapan Mukerjee (Ann Arbor, MI: University of Michigan Press, 1972), 142–55.
  5.  Harvey, “A Commentary on A Theory of Imperialism,” 169.
  6.  See the posts by Smith, Harvey, Mayer, Bond, Daum, Higginbottom, and Wengraf on the ROAPE blog, mentioned in endnote 3.
  7.  As addressed by Jayati Ghosh in “Globalization and the End of the Labor Aristocracy,” Dollars & Sense: Real World Economics 329 (2017).
  8.  For works that discuss these forms of imperialism, see John Bellamy Foster, Naked Imperialism (New York: Monthly Review Press, 2006); Utsa Patnaik and Prabhat Patnaik, A Theory of Imperialism; John Smith, Imperialism in the Twenty-First Century (New York: Monthly Review Press, 2016). For a more elaborate discussion regarding the concepts of exploitation and expropriation, see John Bellamy Foster and Brett Clark, “The Expropriation of Nature,” Monthly Review 69, no. 10 (March 2018): 5.
  9.  Tony Norfield, The City: London and the Global Power of Finance (London: Verso, 2017), 5–6.
  10.  Paul Sweezy, “Marxian Value Theory and Crises,” in The Faltering Economy, ed. John Bellamy Foster and Henryk Szlajfer (New York: Monthly Review Press, 1984), 238.
  11.  Bettelheim, “Theoretical Comments,” 302–4; Katz, “Revisiting the Theory of Super-Exploitation.” See also Emmanuel’s reply to Bettelheim in Emmanuel, Unequal Exchange, 380–83.
  12.  Richard Edwards, “Social Relations of Production at the Point of Production,” The Insurgent Sociologist 8, no. 2 & 3 (1978): 110.
  13.  Paul A. Baran and Paul M. Sweezy, Monopoly Capital (New York: Monthly Review Press, 1966), 107–8.

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