How globalised super-exploitation makes modern capitalism tick

November 21, 2016

Imperialism in the Twenty-First Century: Globalization, Super-Exploitation, and Capitalism’s Final Crisis
By John Smith
Monthly Review Press, 2016

On April 24, 2013 a clothing factory in Rana Plaza, Dhaka, Bangladesh collapsed, killing 1133 workers and injuring 2500 others.

This image of super-exploited, fatally-trapped workers, hemmed in by national borders and racist migration policies preventing them from moving to safer, better-paid work opens John Smith’s book — and illustrates his outrage.

This book is both a highly detailed economic analysis and an intervention aimed at liberating workers worldwide. While examining high-level economic data, Smith never takes his eyes off the misery these facts mean for real-life people.

Capitalists control “a greater proportion of world wealth than ever in history and that wealth is growing faster than ever before, while the fraction of it being invested productively has never been lower,” Smith says.

Entering into a crisis in the 1970s, capitalism climbed out of that slump and delayed its final crisis via “globalization’s two defining transformations”: financialisation and outsourcing.

Crucially, he says that “this crisis is not rooted in finance but in capitalist production itself”. That is: there is no way out for capitalism, its disease is fatal.

The current, interdependent form of globalisation is a distinct stage in the relationship between labour and capital — unevenly combining Northern nations’ workers and those in the global South. Though connected by international “value chains”, workers are encouraged to compete in a cut-throat “race to the bottom” on wages, exploited by the same capitalists but at different intensities.

Globally, the industrial proletariat has never been larger in number or as a proportion of the overall working population. And yet its share of wages has fallen in both the South and the North — with the worst declines in Southern countries.

Smith exposes how the surplus value created by these super-exploited Southern workers is captured and transferred via a “value-chain” into corporate profit columns in the imperialist North.

Others have researched this, but Smith’s contribution is to show that the vital characteristic of modern imperialist profit gouging is forcing wages below the value of labour power.

World leaders have worked hard to enforce World Bank and International Monetary Fund diktats on tariff cuts and freedom for capital flows. The watch-words for this process are “outsourcing” and “global labour arbitrage” — that is: chase down the poorest of the poor and work them to death.

Neoliberal globalisation is, therefore, the unfolding of the imperialist form of the capital relation as explained by Russian revolutionary Vladimir Lenin in 1915 in Imperialism, the Highest Stage of Capitalism.

However, Smith points out: “Lenin could not have included a conception of how value is produced in globalized production processes because this phenomenon was only to emerge in a later phase of capitalist development.

“These circumstances have resulted in an inevitable disconnection, persisting right to this day, between Lenin’s theory of imperialism and Marxist value theory.”

That is, some mainstream Marxists have seriously misunderstood the source of imperialist profits.

Smith takes issue with well-known left-wing writer David Harvey for not explaining why capitalism’s “spatial fix” — more than 83% of manufacturing workers live in the global South — can produce super-profits.

And while drawing upon ex-financial banker Tony Norfield’s work, he goes further than Norfield’s belief that it is the transnational corporations’ (TNCs) financial hegemony that gives them power.

Smith says that “about 80 percent of global trade (in terms of gross exports) is linked to the international production networks of TNCs”. He uses simple examples to illustrate the profits being sucked out of poor countries.

In 2006, an Apple iPod generated a 52% gross profit after it left China. Apple had a similar number of workers employed in the US marketing its iPhones to the number making them in China.

But Apple’s US wages totalled US$719 million, while the Chinese wages bill was only $19 million. The Chinese workers received an average of $1540 a year for mind-numbing labour, whereas Apple engineers and managers averaged $85,000.

Apple made an even bigger killing with its iPhones. Production costs per phone were $178.96 while selling in the USA for $500 — a 64% gross profit.

Smith quotes research showing that if Apple chose to manufacture in the US and pay US-level wages, it would still have a 50% profit on its iPhones. But why should Apple bother if it can pay Chinese wage slaves a pittance?

It is the same story with the production of T-shirts and coffee, two other commodities Smith investigates. But this process appears invisible to mainstream economics — it simply does not appear because of way the data is constructed.

Karl Marx identified that capitalism has an inherent tendency to a declining rate of profit, which guarantees its crises. Capitalism has various opportunities — countervailing tendencies — to delay, mitigate or even cure those crises, but always at the expense of workers.

In its earliest and crudest stage of development, capitalism extracted absolute surplus value via a longer working day and used brutal state violence to bring more people into its factories.

Workers died like flies and there was a real concern that there might not be a replacement generation of toilers for the factories. However, in its mature phase, there was a rise in relative surplus value from labour-saving technology. That reduced the value of labour power per item produced and even allowed for shortening the working day.

The price reduction of consumption goods allowed the working class to reproduce itself and deliver a new crop of workers to the factory gates. The increasing sophistication of machinery also required a higher level of general education, which rising productivity could subsidise.

But nowadays, Smith argues, Southern workers are experiencing that old-fashioned, super-exploitation — the vicious driving down of wages below the value of the reproduction of labour power.

This form of imperialism slows the development of the productive forces because outsourcing of production is an alternative to investment in new, capacity-expanding technology. The labour power of an enormous mass of humanity is essentially being wasted purely because it is cheap.

There are Marxist economists who argue that imperialist super-profits come from the difference in the productivity of labour between poor and rich countries due to greater investments in machinery. They think that workers in Northern countries have higher wages because of this difference in productivity.

Smith argues against those, like Alex Callinicos and Joseph Choonara, who propose this. Smith says the consumption goods consumed by Northern workers are, in large part, no longer produced in the North.

It is the productivity and wages of Southern workers that now determine the value of the goods reproducing labour power in imperialist countries.

Such super-exploitation is not completely corralled into the global South. As capital has “migrated” in search of lower wages, the borders of Australia and other imperialist nations have become militarised.

But racism and xenophobia are not meant to completely stop the migration of workers from poor countries. Rather, the migration flows are regulated to ensure migrants’ vulnerable, second-class status.

Effectively, capitalism has reinforced the working class in its Northern heartlands via illegal migration. Moreover, “the influx of women into wage labor in all countries means that the working class now much more closely resembles the face of humanity, greatly strengthening its chances of prevailing in coming battles,” Smith says.

Smith believes this proletarian force is the seed bed for a new international socialist movement.

[Abridged from Links International Journal of Socialist Renewal.]

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