reading lect 14 nov - capitalism

Question 1

power and inequality in the global political economy

intro

Answer 1

Nicola Phillips

2017 political and eco juncture

growing inequality

• e.g. 2016: 62 richest people richer than 50% population -> 2017 8 richest richer than 50% population
• decline extreme poverty (US$1.5 per day) BUT increase poverty in general (US$2 per day)

focus = implications for socio-economic inequality of the particular form of industrial organization that has come to underpin the contemporary global economy, one organized around the structure of global value chains (GVCs) and global production networks (GPNs)

• how the dynamics of a global econ dominated by GVCs/GPNs contribute to the pattern of inequality that we observe around the world
• inequality directly produced by organization GVC world, not a bug in the system
• inequality important to how the GVC world came about + GVC important to understand inequality

Question 2

current form of global industrial organization

Answer 2

refer to a pattern of global and regional production coordinated and controlled by TNCs + that is functionally and geographically fragmented

• functionally fragmented = trade about intermediate goods and services (trade in tasks rather than final goods)
• geographical fragmentation = global and regional patterns of specialization with firms outsourcing/offshoring productive functions

GVC = global value chains

• full range of activities that economic actors engage in to bring a product to market (internet)
• article: we can plausibly suggest that the goal of industrial upgrading within GVCs has become nearly synonymous with eco development itself
• goal = enable lead firms to mobilize/exploit asymmetrical power relations in order to control how/where/who value is created and how it is captured

GPN = global production networks

GVC/GPN scholarship: rarely focus on inequality + has been converging with more conventional approaches to competitiveness (losing touch with its more critical origins)

Question 3

inequality arises at intersection of three dimensions of asymmetry in the power relations that crystallize in and around GVCs:

Answer 3

1. asymmetries of market power = relative positions of firms: oligopoly power among lead firms + competition among supplier firms
2. asymmetries of social power = wider patterns of poverty, wealth and inequality in the societal contexts in which GVCs are rooted + actors within GVCs + how social power is mobilized to reinforce patterns
3. asymmetries of political power = political dynamics that shape the governance of GVCs + highlight interaction between political interests

these dimensions of asymmetry interlock and intersect to produce patterns of socio-economic inequality

Question 4

asymmetries of market power

Answer 4

(examples based on iPhone)

GVCs -> where is value created and captured?

• more than half total value is captured by the lead firm (Apple)
• GVC in reality encompasses thousands of firms/enterprises involved in production (for Apple) (are not registered suppliers, no formal ties -> not in conventional depiction GVC) -> subcontracting leads to lower tiers to be removed from the world of first-tier suppliers and lead firms

GVC constructed by powerful eco and political interests to create a particular model of globalized production in which firms (not states) determine what will be produced where and on what terms
- states have been architects of the GVC world (e.g. loosening competition policy (expansion intellectual property protections) across the world)

market asymmetries:

• market dominance lead firms + lower tiers of production intensely competitive
• limited nr of buyers -> leading firms have monopsony power + buyers use market power to create competition between supplier firms (conditions of price and supply)

-> labour costs and practices as arena for input cost reduction -> lead firms prefer less regulation -> growth exploitative work
- e.g. Apple dormitory system in China with sweatshop conditions

! patterns of exploitation are not uniform or universal in global production, depends on: structure value chain, patterns of ownership, conditions labour market, political environment

!advance of production depends on a set of prior enabling conditions of inequality

“GVCs as purposefully constructed to facilitate the mobilization of asymmetries of market power by lead firms in order to create and capture value or profit, and of labour exploitation as arising within and from the ‘normal processes of power within production’. We have an insight into the disjunctures between where, how and by whom or what value is created, and captured, in the global economy—in other words, into how commercial dynamics in GVCs create and deepen socio-economic inequalities across the world through the twin mechanisms of facilitating the massive concentration of market power and enabling the proliferation of business models founded on exploitative labour strategies”

Question 5

asymmetries of social power

Answer 5

result of:

1. ‘great doubling’ labour force as China, India and former Soviet bloc joined the global econ in the 90s (Freeman)
2. ‘labour flexibilization’ = policy framework to facilitate liberalization+deregulation -> less worker protections + more flexibility employers + less welfare state
   (Cox: leads to: ‘transnational managerial class’ + class of ‘established labour’ + group of ‘social marginals’ (excluded or precarious form of employment))
3. migration: migrants lack power to engage in political action around was and conditions + lack rights and entitlements of citizenship (welfare protections) + much informal/forced/child labor

existing social inequalities -> environments in which market power dynamics can flourish

• globalization of production with lead firms mobilizing existing social inequalities to construct/maintain a flexible workforce vulnerable to relentless commercial pressure on wages and conditions
• especially where labour is abundant + relatively immobile

‘social categorization’ (Charles Tilly) = ways in which types of ‘markers’ are used to institutionalize/discriminate/exploit particular groups of people

• ‘inequality generating mechanisms’ = gender, age, race, ethnicity, case, religion = employed by those with social power to control access to value producing-resources

-> inequality is durable/intergenerational: exclusion from acces to value-producing resources and arenas of opportunity is perpetuated by consequences of exploitation in GVCs

Question 6

asymmetries of political power

Answer 6

focus = politics of global business and regulation

lead firms mobilize political power to create conditions of low labor and environmental standards

• dev. countries: incentives to be low-cost point in GVCs to increase exports + attract FDI -> incentives to limit regulatory costs for producers + to keep wages competitive + restrict workers opportunity to mobilize
  e.g. China’s Labour Contract Law 2008 raised wages and protections -> big firms moved to more permissive + cheaper labor countries (Cambodia + Vietnam)
  e.g. provisions in bilateral investment treaties to protect FDI interests
• representatives of big business occupy seats in parliaments and congresses around the world + use lobbying to secure favorable legislation

= TNCs push for the gaps in public governance that are necesary for their business models to thrive

• firms play the major role in determining what will be produced, where and on what terms
• firms play major role in how production will be regulated (incl. through labor and envir. standards)
  triangle of power global supply chains = brands, contract factories, NGOs that provide pressure to improve standards (rather than 2004 employers, contractors and gov)

GVC world = governance shifted to private actors + corporate social responsibility (CSR) and voluntary self-regulation of firms = model of ‘transnational private regulation’

-> what kinds of gov. initiatives under what conditions can improve labor and other tandards?

• combi public and private governance: continuation ‘regulatory renaissance’
• not all firms seek to circumvent/undermine public regulation (e.g. some firms agitated for gov regulation Modern Slavery Act 2015 UK)

are states and govs absent in a GVC world? no: state remain core part of political eco of governance, architect of the GVC world + active in process of delegating/outsourcing governance to private actors
!still TNCs and states are not united and for the same cause: intense political contestation between states and firms

Question 7

conclusion

Answer 7

incremental change will not be sufficient to address the distributional implications of the GVC world (bc inequality is not a bug in the system but a foundational to the functioning of the GVC, a consequence of interactions market, social and political power)

inequality = global problem + maybe defining political problem of our age

• 2017: renewed focus inequality in public discourse: Brexit, election Trump, rise populist right

Yet a focus on those people and sections of society alienated from globalization and crushed by its distributional dynamics cannot capture the full complexity of the political moment in which we find ourselves.
Equally relevant is the question of for whom the system works: how, politically, the opportunities are protected for the massive concentration of wealth, power and advantage that we have explored here, and how economic, social and political inequalities can be manipulated and created afresh for that purpose

nationalistic/nativistic response to inequality of the radical right has not been coherently challenged by the left
-> vision needed of a progressive, internationalist politics capable of addressing issues of power and inequality in the global political economy that have led us to this juncture + capable of producing foundation for more equitable/inclusive forms of growth and dev.