The notion exploded in the 1990s, in mainstream debates and on the left, that there had been a great transformation in capitalism.
It was said it had changed from a series of national capitalist systems to an integrated globalised system.
Transnational corporations were cast as global predators that were free to scour the globe for markets and, in particular, low costs.
This new global order disempowered workers. If they kicked off about wages or conditions, factories would simply move elsewhere. It is a common assumption that all manufacturing has moved to the East and China.
But the mobility of capitalism has been greatly exaggerated.
Adopting new technology or relocating are only temporary fixes for individual capitals and the system as a whole. States continue to play a critical role to capitalism’s development and location.
Contradictions within capitalism mean nothing is inevitable or irreversible.
The cheap labour economic miracles of the 1970s and 1980s—ranging from Spain and Brazil to South Africa and South Korea—each created militant working class movements. Workers successfully improved wages and conditions, and played a key role in the struggle for democracy.
If there was nothing to keep capital stuck in one place capitalist production would resemble, in the words of Marxist economist David Harvey, “an incoherent and frenetic game of musical chairs”.
Only some sections of capital are mobile at all.
For example, activities associated with constructing and maintaining the physical and human infrastructure of capitalism are fixed.
Public sector services—care for the elderly and the majority of health and education provision—are immobile. So is all capital associated with physical infrastructure—airports, transport, energy, construction and telecommunications.
Some sections of capital are more mobile, but can’t always quickly move production. In the car industry, costs such as building new plants and investing in machinery are high. When you have spent time and money you won’t move quickly.
Even in sectors where capital and production is supermobile, production has not relocated exclusively to low-wage sites.
Since the liberalisation of the clothing industry in 2005, China’s share of world exports in clothing has risen from 18 percent to 34 percent. But Europe’s share has also increased from 28 percent to 31 percent in the same period.
China shows how advantages gained from a particular locality can only be temporary. The laws of competition erode any initial advantage, resulting in a new round of relocations.
Collective Brands is a US footwear company shifting some production from China to Indonesia. Its CEO said the “utopia for one stop sourcing for quality and low price has been China…but utopias never last”.
The meteoric rise of China’s economy—averaging growth rates of 10 percent for the last 30 years—was based on an endless supply of cheap migrant workers. These moved from inland China to the Special Economic Zones in the coastal regions.
But there is no longer an endless stream of pliant migrant workers. Labour markets have tightened with more vacancies than workers looking for work.
All of these reduce the level of profit that firms can make in a particular locality.
Some labour-intensive businesses are moving from the coastal regions to inland China. Nike used to make most of its trainers in China, but many of its big suppliers have moved elsewhere.
In 2011 the Boston Consulting Group (BCG) argued that the gap is closing between the opportunities offered in China and in the southern states of the US.
It gave examples of many companies moving production back to the US.
It concluded that China’s cost advantage over the US is shrinking. Higher US productivity, a weaker dollar and other factors are closing the cost gap between the US and China.
The BCG specifically compares China with the southern states of Alabama, Mississippi and South Carolina, which have anti-union laws and lower wages. The cost of industrial land is higher in some parts of China than Alabama, Tennessee and North Carolina.
Of course, for some sections of capital, China will continue to be profitable for production and provide access to a vast market.
But the evidence shows no inexorable flood of jobs from high to low wage economies in China and South East Asia.
Shifts in capital are not frictionless. Firms are not free from the shackles of national states to roam the globe in search of profits.
The location and relocation of capital does not take place on the basis of careful calculations of the owners or managers of capital. National states provide infrastructure, reproduce labour and offer a battery of support for their own capital.
Competition drives constant reorganisation.
Country is pitted against country, regions against other regions—both within nation states and in other nation states.
Governments protect their industries with, often, spurious claims that other countries are competing unfairly.
Bosses use the spectre of global competition, and offshoring and outsourcing of jobs, as a stick to beat workers with.
They claim decent wages, pensions and working conditions are barriers to competition.
But today’s problems, such as unemployment in Europe, are not the result of outsourcing or offshoring of jobs.
They are rooted in the long-term stagnation of capitalism.
More immediately, draconian austerity measures have slashed the living standards of workers since the 2007-8 crisis.
When workers accuse those in other countries of “taking their jobs”, they are lining up with their own ruling class.
It is only when workers understand their common cause across national boundaries that there can be a real defence of jobs and employment.
Then we can see the beginnings of a force that can challenge an anarchic system that destroys the livelihoods and welfare of all working class people.
Capitalism’s long global expansion
The debates of the 1990s were partly triggered by new countries becoming more integrated into global capitalism.
For example, Eastern European economies were fully drawn into the world market.
China undertook fundamental reforms. Developing countries were forced to drop “barriers to trade”.
Since then global capitalism has plunged into a deep crisis and arguments about its reorganisation are taking a slightly different form.
But Karl Marx had identified the system’s global nature a century and a half earlier.
He wrote in the Communist Manifesto “The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere.”
Here he made three critical arguments about capitalism—first its global spread, second, that it is a dynamic system, which must always expand to survive.
Third, he argued that at the heart of the system is competition and that is what drives constant change.
We have seen massive changes in technology, quicker ways of producing, finding new markets, cheaper places to produce.
Steamships, railways and the telegraph revolutionised communication and the movement of goods and materials in the 19th century.
In the 20th century jet aircraft, computers and satellites reduced geographical barriers, while containerisation increased the efficiency of moving goods.
Capitalism drew in previously inaccessible destinations and opened up new places of production and new markets. This intensified competition between capitalists.
Marx compared capitalism to the stagnant feudal system.
Capitalism was explosive in terms of changes it brought in a short space of time—and this was driven by competition.
This is a very useful starting point for understanding what is going on today.
- New Capitalism? The Transformation of Work, Kevin Doogan, £16.99
- The Communist Manifesto, Marx and Engels, £2
Available at Bookmarks, the socialist bookshop.020 7637 1848 or bookmarksbookshop.co.uk