Aug 18, 2017

The Economics of Imperialism

Philip Roddis

The most important book I’ve read in years is John Smith’s Imperialism in the Twenty-First Century: Globalization, Super-Exploitation and Capitalism’s Final Crisis.

Here’s an abridged extract from its opening words:

The collapse of Rana Plaza, an eight-story building housing textile factories, a bank and shops in an industrial district north of Dhaka, Bangladesh’s capital, on 24 April 2013, killing 1,133 garment workers and wounding 2,500, was one of the worst workplace disasters in history. This disaster, and workers’ grief, rage, and demands for justice, stirred sympathy and solidarity from working people around the world— and a frantic damage-limitation exercise by the giant corporations that rely on Bangladeshi factories for their products yet deny any responsibility for the atrocious wages, living, and working conditions of those who produce all their stuff.

Adding to the sense of outrage is the fact that, the day before, cracks had opened in the building’s structure. An initial inspection resulted in its evacuation and a recommendation that it remain closed. Next morning a bank and shops on the ground floor obeyed this advice, but thousands of garment workers were ordered back to work on pain of dismissal.

When generators illegally installed on the top floor were started up the building collapsed. Jyrki Raina, general secretary of IndustriALL, an international union federation, called it “mass industrial slaughter.” The screams of thousands trapped and crushed as concrete and machinery cascaded down upon them unleashed a full-spectrum shockwave, amplified by the anguished howl of millions around the world. The calamity made headline news. Consumers of clothes made in Bangladesh’s garment factories were confronted by their connection to the people whose hands made their clothes, by their miserable existence on this earth. Like an x-ray beam, Rana Plaza lit up the global economy, throwing into sharp relief a fundamental fact about global capitalism normally kept out of sight and mind: its good health rests on extreme rates of exploitation of workers in the low-wage countries where production of consumer goods and intermediate inputs has been relocated.

The attention of the world was drawn in particular to Bangladesh’s poverty wages, the lowest of any major exporter in the world and death-trap factories — five months earlier a fire at nearby Tazreen Fashions killed 112 workers, trapped behind barred windows and locked doors while working long into the night; to the violent suppression of union rights and incestuous relations between factory owners, politicians, and police chiefs — no employer in Bangladesh’s garment industry has ever been convicted of an infringement of health and safety laws…

The garment industry is “the quintessential example of a buyer-driven commodity chain … where global buyers determine what is to be produced, where, by whom, and at what price.” Bangladesh’s garment industry distils the export-oriented industrialization strategy pursued by governments across the Global South. Said TUC General Secretary Frances O’Grady of the Rana Plaza disaster, “This proves that, in the global race to the bottom on working conditions, the finishing line is Bangladesh.”

Starvation wages, death-trap factories and fetid slums in Bangladesh typify conditions for hundreds of millions of workers in the Global South, source of surplus value sustaining profits and unsustainable overconsumption in imperialist countries. Bangladesh is also in the front line of another consequence of capitalism’s reckless exploitation of living labor and nature: “climate change”, more accurately described as capitalist destruction of nature. Most of Bangladesh is low-lying. As sea levels rise and monsoons become more energetic, farmland is inundated with salt water, accelerating migration into the cities…

Rana Plaza not only shone a light on the pitiless exploitation of Bangladeshi workers. It lit up the hidden structure of global capitalism, revealing the extent to which the capital-labor relation has become a relation between Northern capital and Southern labor. The garment industry was first to shift production to low-wage countries, yet power and profits remain in the grip of firms in imperialist countries. This reality is different from the fantasies of neoliberalism’s apologists. Few dispute that Primark, M&S, Walmart and other retailers profit by exploiting Bangladeshi garment workers. Why else have they raced to outsource the production of their clothes to the lowest of low-wage countries?

A moment’s thought reveals other beneficiaries: the commercial capitalists who own the buildings leased by these retailers, the myriad companies providing them with advertising, security, and other services; and also governments, which tax their profits and their employees’ wages and collect the VAT on every sale. Yet, according to trade and financial data, not one penny of U.S., European, and Japanese firms’ profits or governments’ tax revenues derive from the sweated labor of the workers who made their goods. The huge markups on production costs instead appear as “value-added” in the UK and other countries where these goods are consumed, with each item of clothing expanding the GDP of the country where it is consumed by far more than that of the country where it is produced. Only an economist could think there is nothing wrong about this!

That first chapter goes on to consider two other products, iPhones and coffee. These too are produced in the global south for consumption in the north. Although very different products, Smith’s teasing out of the socioeconomic relations they embed shows their commonality. All are created under conditions of a super-exploitation which mainstream economics is at pains to conceal or obscure by a ‘value chain’ orthodoxy that would have us believe an iPhone made in China for $80 retails in the west for $800 not through exploitation but because the activities of shipping, advertising and packaging add $720 of value.

Imperialism in the Twenty-First Century is not the easiest of reads, despite Smith’s cogent and frequently witty style. I see three reasons for this. One is that it is empirically dense. While its engagement with a wealth of detail is what makes its so valuable, it demands very close study. This is not a bedtime book.

The second reason is that its theoretical chapters confront, point by point, the arguments of the value-chainers and marginalists* to lance a blister of far-fetched assumption, tautology and what PG Wodehouse would call in-and-out running. All stem from the need to avoid the truth that manufacturing is outsourced southwards to exploit low wages premised on various factors, the most important being high unemployment. In taking on such arguments, Smith plants his political-economy feet squarely on terrain Marx opened up in Capital: a labour theory of value simple in its fundamentals but less so in the detail, particularly for an imperialist world order unknown to Marx and barely dawning in Lenin’s day. These theoretical exchanges, not just with the apologetics of mainstream economists but errant marxists too, again do not make for light reading.

My third reason brings me closest to a criticism of Smith’s stupendous achievement. This book is a conversion from a Ph.D thesis and the fact shows here and there in overly complex and at times suboptimal structure. It would benefit from the kind of revisit an author cannot usefully make until reflective time has passed. Given the author’s knowledge, passion and writing skills, I see a case for a reworked version. One that simplifies: axing – never a pain-free editorial task – some of the more arcane point and counterpoint while retaining the supporting detail that makes it so important and remarkable a work; one that deserves the wider readership such a reworking would attract.

That said, underlying the book is a simple combination of circumstances we needn’t subscribe – as I in fact do – to any theory of value to grasp. When Europe industrialised in the nineteenth century, those displaced from the land were too numerous to be absorbed by manufacturing. This created labour supply-demand ratios very favourable to capital. (Marx and Engels wrote at length on capitalism’s need for a “reserve army of unemployed”.) But while holding down wage levels to boost profits, high levels of unemployment are potentially dangerous. Fortunately for the social order in Europe – less so for the indigenous victims of genocide in the Americas and Antipodes – a ‘new world’ was opening up to beckon industrious souls prepared to uproot and start afresh.
Recent decades have seen southwardly outsourced manufacturing replace, in the interests of arms-length distancing, direct foreign investment in subsidiaries of northern firms. The shift began gradually but accelerated in the nineties and noughties, as did value-chain ascendancy in economic ‘science’. But whether by direct ownership (mirroring the direct rule of colonialism) or outsourcing (under asymetric conditions that mirror the indirect rule of modern imperialism) the results are that two of the three conditions pertaining to nineteenth century Europe also apply in the global south, Asia especially. (For reasons outside my scope here Latin America is slightly – and Africa very – different.)

Check: as in Europe, hundreds of millions of Asia’s small farmers and land labourers have been displaced.
Check: as in Europe, their numbers are too high to find full employment in the city, a ‘reserve army’ exerting the same downward effect on wages.

Only on the third condition do we see a difference. Where the dispossessed of nineteenth century Europe looked in despair or hope to America and Canada, Australia and New Zealand, no such opportunities beckon for Asia’s landless and jobless. Ever stricter immigration controls – glaring exceptions to globalisation, and neoliberalism’s version of Apartheid South Africa’s infamous Pass Laws – see to that.

The upshot? Cheap consumables for the north, driving down the value of labour power there in ways we do require an understanding of the law of value to appreciate, are one consequence; super profits for the various capitals another. Only slightly less obvious is the fact of welfare systems in the north – armaments too – premised on taxes accruing to this ‘global value chain’. As I say in another post, insofar as we access municipal libraries and parks, send our children to state schools and/or rely on tax funded health and social care, we too are beneficiaries of the global exploitation.

That doesn’t make us equal partners though. We may see the only alternative as a ‘levelling down’; impoverishment of the global north to improve conditions in the south. Yes, those of limited understanding, incapable of envisioning any alternative to capitalism, fear or profess to fear precisely that. But as Marx saw, but humanists like J S Mill did not, the chaos and misery of capitalism – chaos and misery we in the north will be less shielded from as capital increases its share of the super-profits vis a vis that of the state – originate not in its relations of wealth distribution but in those of wealth creation. Even at this late hour, with the threats – to peace, natural environment, welfare and social justice – posed by production for profit exacerbated by a crowded planet, a fairer and sustainable world is possible. Just not under capitalism.

All the more reason, then, for a slightly less daunting version of John Smith’s invaluable work.