By Annavajhula J.C. Bose, Department of Economics, SRCC (University of Delhi)
Historically, we can identify three phases in productive capital mobility.
In the 19th century and in the period before the First World War, there were very weak restrictions on capital mobility. There were also very weak restrictions on labour mobility, and it was reflected in the migration of almost one-third of the population of Europe to America, the migration of large numbers of South Asians to Africa, Southeast Asia, and the Caribbean, the migration of large numbers of Chinese to Southeast Asia and to the west coast of America and so on. The gold standard was in force, and so this really was a globalised world, with weak national borders. However, this was not a globalised world of nation states. Instead it was a globalised world of empires. There were actually very few sovereign states, and the rest were the colonies of the empires.
The short period from the First World War up to the 1980s was a phase with capitalism in individual, independent countries, with strong restrictions on both capital and labour mobility and weak linkages of trade and capital movements. Actually, this was a phase when nation states took on classic forms of territorial states, exercising strict controls over their national economies and making a distinction between the welfare of their own citizens and the welfare of others.
The latest phase can be said to have started from the 1990s that ushered in a new phase of globalisation, with a globalised world of sovereign states rather than empires, and revolutionary developments in aviation and information technology that have transformed the whole globe into a single integrated economy for all practical purposes.
One major difference between the 19th century globalisation and the current phase of globalisation is that the former allowed a combination of capital and labour mobility, while the latter is about capital free to move but labour mobility highly restricted and fully regulated. The large number of developing country workers, who travel to take such jobs in developed countries, face many serious problems and usually pay large sums of money as bribes to obtain a position. They also often migrate illegally. The gap between developed and developing country wages is so great that many times workers are willing to take such high risks as, for example, tying themselves to the bottom of planes for 3,000 miles in order to take up a low paid, low grade job! To take up a job as a domestic maid in Hong Kong, large numbers of young women from Indonesia and the Philippines pay huge sums to middlemen.
Corporate-led contemporary globalisation has implanted the export-oriented development model based on foreign direct investment (FDI) in all developing countries, and therefore to accelerate economic growth under this model developing countries are compelled to compete with each other for more export orders and for a greater share of foreign investment. This competition between states is unique in the sense that ultimately it takes the form of offering cheaper natural resources and ensuring cheaper labour costs and therefore for winning this game they are engaged in a war with their own working classes. This is clearly reflected in the proliferation of anti-labour laws and regulations and in the corporate-state collusion consistently unleashing repression on labour in developing countries. It is also seen in the transfer of huge amounts of land and natural resources to the corporates by forcibly acquiring them from the people who then face mass displacement. Moreover, increasingly the most labour intensive, hazardous and environmentally costly industries are transferred from developed to developing countries. This situation drastically increases the problems of occupational health and safety and also of environmental disasters.
This is not all. The free mobility of capital drastically reduces the collective bargaining power of labour and increases the bargaining power of capital in developed as well as developing countries due to the increased vulnerabilities of labour arising from deindustrialization or the threat of deindustrialisation. The de-industrialization trend is also expanding the reserve army of labour in developed countries, which in turn puts downward pressure on wages and reduces collective bargaining power of labour.
In this situation of capital being freely mobile and the mobility of labour restricted and controlled, TNCs are able to earn super profits by using the strategy of divide and rule, by way of intensifying the competition for jobs between labour in various countries. The majority of workers in the world are virtually converted into the reserve army of labour for international capital: When capital flows in, they are employed, and when capital flows out, they face unemployment. This is probably the first time in history that capital has enjoyed such favourable conditions. In addition, with the integration of erstwhile socialist countries into the capitalist world economy, this global labour market (for capital) has been expanded many times over. The integration of China alone into the capitalist world economy dramatically increased the number of workers competing with one another for jobs worldwide. There is indeed unlimited supplies of labour for a long time to come.
The threat to move production elsewhere has emerged as a most effective weapon in the hands of TNCs against labour, A classic example of this phenomenon could be seen following a strike by British auto workers in 1971. Ford Motors’ Chairman Henry Ford II declared that the manufacturing of parts of the Ford Escort and Cortina models might be transferred to Asia. Surveys conducted on the issue of such threats with management of multinational corporations and trade unions in the U.S. also provide good evidence that TNCs frequently use such blackmailing threats during disputes with unions so as to co-opt or defeat the latter. This threat is frequently used in the Asian countries to crush the labour movements. In recent decades, there have been several big strikes in India, particularly in the automobile industry, and in most cases this threat was used to weaken the unity of labour and to force the state to suppress labour.
This is not an idle threat, since capital has actually become foot-loose. Its nomadic existence has become a dominant strategy of transnational corporations to exploit the vulnerabilities of labour all over the globe, flying from places where workers and the people at large are acquiring better bargaining power to the places where labour and the people at large are the most vulnerable and virtually without any collective bargaining power. This also reflects the present character of transnational capital, which accepts no obligations to the countries it enters and to the people there.
Moreover, with the emergence of huge monopolistic corporations controlling major sections of markets and with overall stagnation in economic growth, capital has now established a system of flexible production with greater scope for product differentiation, as well as strictly controlling the output to the level of existing or generated demands of the markets. It is the requirement of this system of flexible production to have a system of flexible labour relations, i.e. labour ought to be hired and fired, just in time, as and when required. This system provides a supreme opportunity to save hugely on labour costs and super-exploit workers. The greater the reserve army of labour, the greater is the scope for capital to exploit the vulnerabilities of labour. Which in fact has been taking place. The global value chains and global supply chains now reach up to the tiny units of informal sectors, home-based workers and self-employed workers in order to fatten the profit margins of creating multinational value.
Source: Pratap, Surendra and Bose, Annavajhula J.C. 2015. Finanacialisation, International Capital Mobility and Primitive Accumulation: Triple Monsters Eating Up Livelihoods. International Journal of Development Research. 5 (5). May.