2

      Outsourcing, or the Globalization of Production

      How the capital-labor relation has evolved during the neoliberal era is the subject of this book. Chapter 1 zoomed in on three representative global commodities; this chapter turns the telescope around, presenting a historical and panoramic view of the global transformation of production and of the producers, the global working class. The purpose of this and the next chapter is to develop a rich, sharply focused concept of the globalization of production. To develop tools needed for analysis of this phenomenon, we will critically examine standard definitions of “production,” “industry,” and “services.”

       ANTECEDENTS OF GLOBAL OUTSOURCING

      In order to oppose their workers, the employers either bring in workers from abroad or else transfer manufacture to countries where there is a cheap labor force. Given this state of affairs, if the working class wishes to continue its struggle with some chance of success, the national organisations must become international. Let every worker give serious consideration to this new aspect of the problem.¹

      —KARL MARX, 1867, Address of the General Council to the Lausanne Congress of the Second International

      The wildfire of outsourcing spread during the past three decades is the continuation, on a vastly expanded scale, of capital’s eternal quest for new sources of cheaper, readily exploitable labor-power. What began as a trickle in mid-nineteenth-century Europe and became a steady stream in North America in the early twentieth century had, by the end of that century, become a flood tide, described by Kate Bronfenbrenner and Stephanie Luce as “a systematic pattern of firm restructuring that is moving jobs from union to non-union facilities within the country, as well as to non-union facilities in other countries.”² Antecedents of modern wage-arbitrage–driven outsourcing of production can be found in diverse branches of the nineteenth-century economy. Clothing and textiles, which played an important role in all stages of capitalist development, provide many early examples of the wage-arbitrage–driven production outsourcing that Karl Marx warned about 150 years ago.

      The story of jute, the “golden fiber” native to Bangladesh and used for sacking and canvas sheets, contains important elements and features that foreshadow modern low-wage-seeking production. In the early nineteenth century, industrialists in Dundee worked out how to modify their linen- and flax-spinning machinery to process jute, spelling the demise of India’s hand-spinning industry. By 1860, Dundee’s sixty jute mills employed some 50,000 mostly female workers, many of them Irish migrants who had fled the Great Famine to find work in what was a notoriously low-paid sector of the economy. They were nevertheless more expensive than Indian workers, prompting Dundee’s jute barons to shift production to Bengal. Chhabilendra Roul reports that the first mechanized jute spinning mill in India was established in 1855 on the banks of the Hoogli River near Kolkata by a George Auckland, an Englishman, “with machinery imported from John Kerr of Douglas Foundry, then the leading machine manufacturer for flax machinery in Dundee.”³ By the first decade of the twentieth century the bulk of production had shifted to India, yet remained in the possession of Scottish jute barons, who successfully blocked the entry of Indian capitalists and who went on to provide a billion sandbags for Britain’s trenches in the First World War.⁴

      IN LINKED LABOR HISTORIES, A STUDY of the co-evolution of the labor movements in New England and Colombia since the late 1900s, Aviva Chomsky argues that modern outsourcing “continues a pattern begun by the earliest industry in the country, the textile industry, a century earlier,⁵ and recounts how flight “from strong trade unions and toward cheap labor” saw New England textile mills pioneer international production outsourcing in the Americas, relocating first to North Carolina in the first decades of the twentieth century, then to Puerto Rico in the 1930s, and to Colombia and beyond in the decades since the Second World War.

      The absence of international borders aided capital mobility in North America, where, as Gary Gereffi recounts, by the early twentieth century “many industries … began to move to the US South in search of abundant natural resources and cheaper labor, frequently in ‘right to work’ states that made it difficult to establish labor unions. The same forces behind the impetus to shift production to low-cost regions within the United States eventually led US manufacturers across national borders.”⁶

      Global outsourcing of manufacturing production began in earnest in the 1960s and 1970s, with the exodus of production jobs in shoes, clothing, toys, and electronic assembly to low-wage countries, providing a new generation of commercial capitalists such as Tesco, 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,