Yet conventional depictions of the value chain tend to focus only on its upper tiers, specifically on registered factories and the increasingly powerful giant supplier firms in east Asia, of which Foxconn is the most notable in the electronics sector. Very often these will be subcontractors to the first- or second-tier supplier firms, or informal units operating way down in the least visible parts of the value chain.
These extend to the tiers associated with the production of raw materials for the electronics industry, which in mobile phone production notably include the mineral coltan. This is especially so in those value chains characterized by relationships between firms based on arm's-length subcontracting arrangements, as distinct from those organized around direct ownership and control by the lead firm of a network of affiliated entities.
Indeed, the length and complexity of value chains organized around subcontracting, in electronics and many other sectors, mean that productive activities in the lower tiers are in every sense removed from the world of first-tier suppliers and lead firms. It is especially common for workers in the lower tiers of the value chain, particularly in informal units and home settings, to be entirely unaware of the final destinations of the products they contribute to producing, or of which lead firm or supplier firm controls the production process in which they participate.
Starting with the illustrative iPhone example helps to underline the core point that the globalization of production along these lines is no accident: GVCs have been purposefully constructed by powerful economic and political interests to bring about a particular model of globalized production. We have already established that this pattern of production is driven by lead firms seeking to create and harness significant global asymmetries of market power in the interests of generating and capturing profit, facilitated and buttressed by states and other political actors.
With the maturing of GVCs, it has come to be firms, not states, that now play the major role in determining what will be produced where and on what terms, and what will be traded on what terms. So, to a great extent, global patterns of production that were once strongly shaped by constellations of state policies are now artefacts of value-chain governance.
Reducing Inequality: An Essential Step For Development And Wellbeing
States are, though, by no means passive bystanders: on the contrary, along with powerful corporate interests, they have been architects of the GVC world, providing facilitative governance functions ranging across trade policy, development policy, corporate tax policy, competition policy and other areas. Competition policy is perhaps particularly significant. The loosening of competition policy across the world reflects the much greater political tolerance of the high levels of market concentration and the high levels of market power that characterize lead firms in GVCs, and as a consequence the trends of massive wealth concentration which form a core feature of the global political economy of inequality.
The increasing concentration of market power is apparent in many sectors. Examples include retailing Walmart, Amazon, Alibaba , office software and operating systems Microsoft , smartphones Apple and Samsung , large commercial aircraft Boeing and Airbus , soft drinks Coca-Cola and credit card networks Visa and MasterCard.
The consolidation and mobilization of these market asymmetries rests on securing a structure of production in which a small number of very large firms at the top, in many cases the branded retailers, occupy oligopolistic positions—that is, positions of market dominance, and in which the lower tiers of production are characterized by densely populated and intensely competitive markets.
Especially where required quality standards are high, labour becomes the key arena for input cost reduction; equally, in sectors where the key requirement is flexibility in the face of significant commercial risk whether for reasons of seasonal dynamics or highly variable commercial conditions , business models are built around the aggressive management of labour supply, conditions and wages.
Firms in price-sensitive and labour-intensive sectors, as well as firms which rely on retail strategies, prefer less stringent regulation and will go to some lengths to secure those conditions. The consequence across the world has been the explosive growth of precarious, insecure and exploitative work in global production, performed by a workforce significantly made up of informal, migrant, contract and female workers, 29 and extending at the end of the spectrum to the purposeful use of forced labour.
We know that diverse forms of labour exploitation are embedded in Apple's supply chains and those of other electronics producers, not least from a steady flow of revelations about the use of forced labour, unpaid student intern labour and child labour in supplier factories for Apple, Samsung, HP, Dell and other firms. Exploitation and forced labour are also rife way down the value chain in the production of raw materials. We are used to focusing on conditions in garment factories in Bangladesh, electronics factories in Taiwan, horticulture in South Africa or the cut flowers industry in Ecuador.
Yet, particularly in retail, the dynamics of GVCs extend to geographic and social locations that are not generally included in this literature, in North America or Europe, where they bring about parallel trends associated with offshoring strategies, labour practices involving pressure on wages, contracts and conditions, and an appreciable incidence of forced labour. All of these phenomena shape patterns of inequality in these contexts, both in terms of how existing inequalities facilitate these practices, and in terms of the inequalities that their outcomes act to produce or reinforce.
We must nevertheless beware of excessive generalization. It is important to recognize that these patterns of exploitation and abuses of labour rights are not uniform or universal in global production, and that a great deal of contingency attaches to the nature and structure of the value chain, patterns of ownership, the type and condition of the labour market, the political environment and institutional context, the form that public and private governance initiatives take, the nature of end consumer markets, and the possibilities for labour agency.
Impressive empirical research has sought to document these patterns of contingency, and develop propositions about where, when and under what circumstances labour rights and standards are more likely to be protected, and where, when and under what circumstances they are more likely to be violated. At the same time, these inequalities are not simply outcomes, as they are often understood to be in debates about labour standards. Rather, echoing an insight well established in classical theories of political economy, the advance of production depends on a set of prior enabling conditions of inequality—and this brings us to the second dimension of the triangular structure depicted in figure 1.
How do these enabling social asymmetries come about, and what forms do they take? There are three aspects that deserve attention. Across the world, as much in the United Kingdom and United States as in India, Argentina, Mexico or South Africa, new laws were passed to dismantle previous regimes of worker protections and to provide employers with maximum flexibility in handling labour.
In a contribution in , Robert W. This expanding population is largely comprised of the global working poor—a category that orthodox economic and development policy thinking has long struggled to accommodate, as work is envisaged in this thinking as the route out of poverty and the key to poverty reduction. The question of marginality in this sense has never been more pronounced or pressing; but the marginality stems as much from the terms of in clusion in global economic activity as from conditions of ex clusion.
The third aspect of particular relevance relates to the inequalities which stem from migration. Migrant labour was identified above as one of the most important constituencies in this new global labour force—and here, obviously, our interest is in the low-paid, low-skill segments of the labour force, which are also significantly feminized in many sectors. The dynamics of precarious employment and adverse incorporation are magnified by the particular vulnerabilities of migrant workers, especially where they are working in the informal economy. Migrant workers lack the power to engage in political action around wages and conditions, and they lack the rights and entitlements associated with citizenship or residency.
Laws governing immigration or internal movements also often act to strip these workers of labour or welfare protections, constrain their ability to seek satisfactory working conditions by changing employers, and provide mechanisms that employers can use to manipulate them, particularly perhaps when the worker is undocumented, such as the threat of denunciation to immigration authorities.
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Forced labour and child labour are strongly, although not exclusively, associated with the inequalities which attach to the migrant labour force. These existing social inequalities provide the environment in which the commercial dynamics within GVCs outlined in the previous section can flourish. Conversely, where labour is scarce, employers are more likely to raise wages and improve conditions in order to attract and retain workers. A final layer in our discussion relates to the asymmetries of social power which come into play in generating these patterns of exploitation and inequality.
It is through these mechanisms that inequality, in Tilly's phrase, becomes durable, and often intergenerational: exclusion from access to value-producing resources and arenas of opportunity is perpetuated by the consequences of exploitation in GVCs, perhaps particularly in those forms associated with forced and child labour.outer-edge-design.com/components/via/3457-phone-location-app.php
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Let us then take the argument on to the third point of the triangular scheme in figure 1 , returning to our starting-point of the geographic fragmentation of global production. We have explored the business case for this kind of model and its social foundations, but now need to incorporate a more explicit recognition of the asymmetries of political power which underpin it. These asymmetries take many forms across diverse arenas of governance and policy, some of which such as the governance of immigration and mobility we have already touched on. Given constraint on space, this final section will focus on the politics of global business and regulation.
We have established that the geographic fragmentation of production is driven in large part by the search of many firms in many sectors for permissive regulatory and political environments, particularly in relation to labour and environmental standards. However, it is not simply that these conditions exist and firms take locational decisions on that basis. Rather, lead firms mobilize vast political power to create those conditions and ensure that they are maintained. In the competition to attract foreign investment and to increase their exports, many developing countries have incentives to be the low-cost point in GVCs.
Similarly, enforcement mechanisms remain either underdeveloped or unimplemented. For many states, these outcomes emerge from the significant asymmetries of political and bargaining power that exist between their governments and transnational and some local firms. However, it is not simply that these conditions exist and firms take locational decisions on that basis. Rather, lead firms mobilize vast political power to create those conditions and ensure that they are maintained.
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In the competition to attract foreign investment and to increase their exports, many developing countries have incentives to be the low-cost point in GVCs. Similarly, enforcement mechanisms remain either underdeveloped or unimplemented.
For many states, these outcomes emerge from the significant asymmetries of political and bargaining power that exist between their governments and transnational and some local firms. For others, the pressures of compulsion are less pronounced, but the competitive dynamics of the global economy and the demands of economic development push in the same direction, given additional impetus by the political power of transnational business. Evidence of these political dynamics abounds. China's Labour Contract Law of , for example, increased wages and protections for workers.
A large number of big firms responded by moving their operations to sites in countries such as Vietnam or Cambodia where the regulatory environment remained even more permissive and labour costs even lower.
Arguments about political incentives against regulation are just as relevant to the more advanced economies as in the so-called developing world, where political dynamics between governments and big business, as well as ideological affinities between them, have substantially the same outcomes in terms of a retraction of regulation.
As indicated above, it is firms, not states, that now play the major role in determining what will be produced, where and on what terms, and what will be traded internationally. Specifically, firms also play a major role in determining how production will be regulated, including through labour and environmental standards. In consequence, the debate has recently shifted to an important and fascinating consideration of what kinds of governance initiatives, under what conditions, can make a difference in improving labour and other standards in the global economy, and what kinds of effective regulation can be conceived in the context of a world dominated by powerful business actors and the competitive dynamics of GVCs.
At the same time it must not be forgotten that there are plentiful examples of firms that have engaged in meaningful responsibility and accountability initiatives with some positive outcomes, and that not all firms are engaged in strategies of continually seeking to circumvent or undermine public regulation.
It is interesting that in Britain, during the process of drawing up the Modern Slavery Act of , some businesses agitated for at least an element of government regulation inasmuch as they perceived a need for a level playing field in relation to labour practices. At the same time, the relentless pressure on electronics firms from media and NGOs, noted above, has led to some significant initiatives to address the problem of labour abuses in their value chains.
A final caveat is in order. Some states are more politically willing than others to challenge big business, through regulation or other means.
Asymmetries of market power
Similarly, intense political contestation occurs between states and firms, as they tussle for control over the terms of production and the value created in the global economy. Tax scandals represent one case-study of this contestation. Another is the tension between business and government in relation to immigration policy and its consequences for labour supply. In relation to labour standards, there has emerged a politics of blame, where firms are apt to place responsibility on state regulation and blame its deficiencies, states are apt to insist that these are supply-chain issues, consumers receive appeals from each side, and workers continue to labour in conditions of systematic exploitation.
Asymmetries of political power thus form a critical part of the picture of how inequalities are produced and reproduced in a GVC world. Governance and politics matter, in short, and political power—both public and private—fuses in dynamic ways with market power and social power to produce the patterns of inequality in the global political economy that have been so amply observed over recent years.
At the time of writing in early , public discourse had renewed its focus on inequality in an attempt to understand seismic events such as the UK's referendum vote to leave the European Union, the election of Donald Trump as president of the United States, and the rise of the populist right in several countries. Questions of disadvantage, alienation and exclusion are all critical to this conjunction of events and trends. 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.
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Whether this means that we are seeing a significant crisis of capitalism, of an order which could usher in a substantively new order, remains an open question and one which deserves continued careful attention. To this extent, the inescapable conclusion is that incremental change will not be sufficient to address the distributional implications of the GVC world. The nationalistic, nativistic response of the political right in this context is deeply unpalatable and alarming to many, but has not yet been met with a coherent challenge from the centre or the left.
A compelling vision is needed of a progressive, internationalist politics that is capable of addressing the issues of power and inequality in the global political economy which have led us to this juncture, and capable of producing a foundation for significantly more equitable and inclusive forms of growth and development.
Oxford University Press is a department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide. Sign In or Create an Account. Sign In. Advanced Search. Article Navigation. Close mobile search navigation Article Navigation. Volume Article Contents. Asymmetries of market power. Asymmetries of social power. Asymmetries of political power. Power and inequality in the global political economy Nicola Phillips.