Not unjustly, Michael Roberts in his blog has read John Smith’s book “Imperialism in the Twenty-First Century” as a complement to Tony Norfield’s book “The City” (we would add to John Milios et al. book “Rethinking Imperialism”). While Milios’ and Norfield’s texts trace in particular the structural development of financial capital in modern imperialist countries and show the dominance of the financial powers of the global North (U.S. and Britain, etc.), Smith aims to show that it is primarily the “super-exploitation” of wage workers in the global South that is the basis of modern imperialism in the 21st century.
The book begins with three examples of how wage workers in the Global South are “super-exploited” at wages below the value of labor (including textile workers in Bangladesh). Smith writes: “The starvation wages, death-trap factories and stinking slums of Bangladesh are representative of the conditions endured by hundreds of millions of working people throughout the Global South, the source of the surplus value that sustains profits and feeds unsustainable overconsumption in imperialist countries.” The surplus value created by these super-exploited workers is appropriated by the transnational corporations and transferred as profit to the imperialist countries of the North through the international supply chains.
Walmart, M&S and other major British and U.S. retailers profit from appropriating the surplus value of Bangladeshi textile workers, but so do the companies that provide advertising, security and other services, and finally the states that tax the profits and wages of employees and impose VAT on every sale. It is a scandal that the official statistics do not show the profits of American, European and Japanese corporations based on the super-exploitation of workers in the Global South, rather the huge mark-ups on production costs appear as profits created in the U.S., Britain and other imperialist countries where these goods are also consumed, and this is precisely then with the result that each garment increases the gross national product of the country where it is consumed far more than that of the country where it is produced. For example, Smith writes of Apple’s relationship with Foxconn, “The only part of Apple’s profits that appears to come from China is that which results from the sale of its products in that country. As in the case of the T-shirt made in Bangladesh, so in the case of the latest electronic gadget, the flow of wealth from Chinese and other low-wage workers that supports the profits and prosperity of Northern companies and nations is rendered invisible in economic data and in the brains of economists.”
Smith goes on to mention an example pointed out by Norfield of textile workers in Bangladesh, where a T-shirt made there is sold in Germany for €4.95 by H&M. Here, H &M pays the Bangladeshi manufacturer €1.35 for each T-shirt (that’s 28% of the final retail price, 40¢ of which covers the cost of 400 grams of cotton raw material imported from the U.S.; shipping to Hamburg adds another 6¢ per T-shirt to the book). Thus, €0.95 of the final selling price remains in Bangladesh and is shared between the company, the workers, the suppliers of inputs and services, and the Bangladesh government, which in turn increases Bangladesh’s gross domestic product by that amount. The remaining €3.54 is added to the gross domestic product of Germany, the country where the T-shirt is consumed. This amount is made up as follows: €2.05 represents the costs and profits of the German transporters, wholesalers, retailers, advertising, etc. (a portion of which is returned to the government through various taxes). Finally, H&M makes 60¢ profit per shirt, while the German state earns 79¢ of the sales price through the 19% VAT; 16¢ covers various “other items.” Another example shows incredible numbers, with a KP Maclane polo shirt from Bangladesh selling in the U.S. for $175, possessing a 718% markup on production costs.
Norfield sums up, “Much of the revenue from the sale price goes to the government in the form of taxes and to a wide range of workers, executives, landlords and businesses in Germany. The cheap T-shirts and a variety of other imported goods are affordable and are an important source of revenue for the state and for everyone in wealthier countries.” Ultimately, the super-exploitation of workers in poorer countries creates a direct economic benefit for the mass of people in richer countries. It is worth adding that, according to Smith, the average wage of female workers in Bangladesh in 2010 was only 73% of that of male workers (33.9% of working-age women were employed in 2010, compared to 79.2% of working-age men).
When wage levels have already fallen below the reproduction costs of workers in the Global South and cannot be reduced further, buyers and suppliers look for savings in other areas of international supply chains (input costs, transaction costs, logistics, coordination costs, demand management, etc.). The result is increasing pressure on diverse suppliers to reduce overall costs, ignore health and safety regulations, and extend the workday.
Despite the ideology of free trade under neoliberalism, there are a number of protectionist measures taken by imperialist countries. In 2013, the U.S. government slapped $809.5 million in tariffs on $4.9 billion of Bangladesh’s apparel exports, an average tariff of 16.5 percent. At the same time, the average wage of Bangladesh’s 4 million workers was $780 per year, for a total wage bill of $3.1 billion. The tariffs the U.S. government imposed on its apparel imports in 2013 alone exceeded the wages of the workers who produced those goods.
Similar conditions and structures can be found for Apple’s iphone and Dell’s laptops, according to Smith. Thus, it is important to ask what contribution the 1.23 million workers employed by Foxconn international in Shenzhen, China, who assemble Dell’s laptops and Apple’s iPhones – and the tens of millions of other workers in low-wage countries around the world who produce cheap inputs and consumer goods for Western markets – make to the profits of Dell, Apple and other leading Western companies.
It is important to note, specifically for China, that according to Chinese government figures in 2010, some 260 million workers are officially considered residents of their rural places of origin, which denies them rights and access to a wide range of benefits in the cities where they live and work. This is called the hukou system, through which the CCP government seeks to control the influx of labor from the countryside and create cheap labor for transnational corporations and their suppliers.
Smith further points out that about 80% of world trade (measured by gross exports) is linked to the international production networks of the transnational corporations, with about 60% of world trade, according to UNCTAD, consisting of trade in intermediate goods and services that enter the production process of goods and services for final consumption at various stages. Smith repeatedly argues that the outsourcing of production to the global South has been a strategy of capitalist corporations from the beginning to push back unionization, even in developed countries, and to drive down wages there. Yet it is precisely an important feature of contemporary globalization that a large and growing share of the labor force in many global supply chains is now located in developing countries of the Global South. To sharpen the notion of super-exploitation, Smith repeatedly attempts to show, with a wide range of empirical evidence, that it is wages squeezed below the value of labor power that are chiefly responsible for the huge profits of modern imperialist corporations. This explanation is asserted as the main feature of 21st century imperialism, and in part counterposed to the financial hegemony (Milios, Norfield) of transnational corporations or the expropriation of capital and wealth (Harvey) as the essential feature of imperialism. Smith sums up, “The greed of capitalists for ultra-cheap labor is a fundamental determinant of the global displacement of production.”
However, for a comprehensive explanation of the structures and developments of imperialism in the 21st century, it is also necessary, and this must be objected to Smith, to examine the mutual relations of the imperialist countries, which continue to host a large flow of direct investment. The production of the world market in the course of neoliberal globalization since the 1980s shows that the world market is more than just the aggregation of states and companies, it is a complex structure, a chain of international relations, flows of commodity and monetary capital and monetary causal links, which, although based on the different national states, as well as the different systems of capital power, the complex structure of the world market develops a certain autonomy and yet it does not result in a unified economic structure of the same. The world economy is not simply the sum of national parts, but it is itself a hierarchically differentiated structure, within which today, in particular, the growth of capital exports of the enterprises of the leading imperialist states is promoted, the space for the circulation of capital and the financial industry is expanded, and a complex relationship between leading and subaltern nations is established within the framework of complicated networks of information transmission, international credit relations are extended and transnational corporations are formed and international derivatives trade is expanded, and peripheral countries are successively integrated into the capitalist world economy through the dynamics emanating from the capitalist centers, opening them up as markets or as low-cost production sites qua the super-exploitation of their workers.
The latter, however, is not the only factor attracting transnational corporations to emerging markets; rather, as in the case of the Bangladesh garment industry, factors such as worker flexibility, the absence of independent unions, and the relative ease with which workers can be forced to accept long workdays are also part of the equation.
Let’s look again at the impressive numbers Smith provides regarding Apple’s iPhone recovery. In 2006, the 30GB iPod retails for $299, while the total production cost, with all production done overseas, was $144.40, giving a gross profit margin of 52 percent. Gross profit is split between Apple, its retailers and distributors, not to mention passed on in part to the U.S. government through taxes on sales, profits and wages. In official statistics, gross profit is counted as value added in the U.S. and contributes to the U.S. gross national product. Offshore jobs are mostly low-wage, while U.S. jobs are divided between high-paid engineers and managers and lower-paid retail and non-professional workers. Yet research and development accounted for more than two-thirds of the total payroll in the U.S., and workers involved in it were paid an average of $85,000 per year. Meanwhile, 12,250 Chinese manufacturing workers received $1,540 per year, or $30 per week – just 6% of the average wages of U.S. retail workers, 3.2% of the wages of U.S. manufacturing workers, and 1.85% of the wages of U.S. professional workers.
Yet Apple has maintained its exorbitant markups to this day despite competition from Samsung and other companies. According to a UBS report released in September 2013, production costs for a 16GB iPhone 5C were $156 and rose to $213 for a 16GB iPhone 5S, while the retail price for each unlocked device was $549 and $649, respectively, resulting in gross margins of 61 percent and 67 percent. While Apple’s stock price has continued to rise, that of its main Chinese supplier, Hon Hai, has steadily fallen.
After Smith again demonstrates the drama of super-exploitation using a cup of coffee, he sets out the seven main theses of his book:
1) The T-shirt, the iPhone, and the cup of coffee are representative examples of the new imperialism, of products of global “value chains” and global production networks. For Smith, outsourcing is the most important transformation of neoliberal globalization, namely the globalization of production processes due to the demand of transnational corporations headquartered in imperialist countries for low-wage labor recruited in the countries of the global South. It is important to distinguish in-house outsourcing from the increasingly favored “arm’s length” structure that inheres an independent supplier.
2 Labor market conditions need to be examined, as well as production and capital market conditions. The former imply the conditions under which workers from the global South can sell their labor power, with particular reference to the massive structural unemployment and underemployment in low-wage countries, the development of a surplus population, and the violent suppression of the free mobility of working people across borders between imperialist countries and low-wage countries.
- the analysis of global wage developments. i.e. international wage differentials, growing wage inequality within a country, and the accelerating decline in labor’s share of national income. The calculation of real wages paid in national currency requires their conversion into “purchasing power adjusted” dollars and corrects for market exchange rates that equalize the purchasing power of “hard” and “soft” currencies
4.Purchasing power anomaly exists because of international differences in labor productivity and restrictions on the free international mobility of workers. Alleged international differences in labor productivity are used by mainstream economists to explain and justify global wage differentials. Smith denies the neoclassical view that wages are low in the South because productivity is low there. For Smith, there is a deliberate attempt by neoclassical theory to identify wage growth with labor productivity, and many Marxists go along with this because they confuse use value (the production of things and services) with their value (the prices of production). Instead, wage differentials are substantially influenced by the enforced suppression of labor mobility – in other words, by a factor that is, at first glance, quite independent of productivity.
5 Smith continues the search for a concept of international differences in the rate of surplus value by revisiting the debate over “dependency” that accompanied the anti-colonial national liberation movements of the 1960s and 1970s. The chapter on “Imperialism and the Law of Value” completes the quest by taking up Marx’s theory of value, as presented in the three volumes of Capital, as a starting point for explaining the concept of super-exploitation.
- the concealment of super-exploitation in official data and statistics.
- Contrary to the consensus of most economists, Smith intends to show that the 2007 crisis was a financial crisis only in form; rather, it was the inevitable result of the explosive contradictions of globalized capitalist production. We raise objections.