Capitalism remains interlocked with imperialism, and Suwandi’s Value Chains demonstrates a core aspect of international mechanisms of exploitation, argues Dominic Alexander

Capitalism has always been international in nature. Even reaching back to its earliest embryonic form, in the concentrations of industry and merchant capital in Renaissance Italy, capital depended upon a European-wide trading market.[1] The system’s true emergence came in the context of the European conquest of the Americas, its trading outposts in Asia, and the establishment of the Atlantic slave trade. An international hierarchy enabled by atrocity, war and plunder has always been central to the functioning of capitalism.

Imperialism is therefore an indispensable concept for understanding structural international hierarchies, and is no more likely to become an irrelevant dimension than is the tendency towards crisis. Any form of left politics that imagines the working class can make progress towards equality and social re-distribution without dealing with the international context of the power of their domestic ruling class is doomed to fail in its goals. International structures of power and exploitation have always been instrumental in dividing and weakening working-class movements.

It further makes no sense to view imperialism through an antinomy of the political and economic, as if it must be one or the other, but not an interrelation of the two. Imperialism is a complex of different mechanisms and structures, through which a ruling class based within one state, but not necessarily confined to it, is able to control and exploit the resources and labour of another society. IntanSuwandi’s very useful book, Value Chains, is concerned to delineate the nature of one such mechanism through which multinational corporations transfer value internationally, but is careful to note that this is just one aspect of the total operations of imperialism, ‘not the picture’ (Suwandi, p.9).

Surplus value and imperialism

Contrary to the views of some apologists for neoliberal globalisation, and troublingly some Marxists, the relocation of so much of industrial production to developing countries does not represent the end of imperialism (Suwandi, pp.14-15). Crucial to the whole debate is a clear understanding of the labour theory of value, and the nature of exploitation in capitalism. Only productive labour in the creation of commodities can create surplus value, the source of profit for the capitalist.

Surplus value can only be realised as profit when the commodities are sold, which enables many different economic actors to appropriate shares of the value created in production, apart from the direct employer of productive labour. The process also makes the operation of exploitation invisible on the surface, as the wage paid to the worker appears to be a ‘fair’ remuneration for the market value of labour power. However, the profit of the capitalist depends upon paying the worker less than the value that is created in the labour process. Crucially, the appropriation of surplus value does not happen on an ‘individual’ basis, firm by firm, but at the level of the totality of the market, or the social level. This means that it is quite possible, in fact, it is usual, for particular firms to be able to capture a greater share of surplus value available in the total economy than in fact their own production creates.

Just as exploitation is hidden from the individual worker, so the operation of the capitalist market hides the appropriation of value between capitals of different compositions, and consequently, in the context of international trade, between the productive activities of different nations. Labour intensive industries, certain types of agriculture for example, produce more surplus value than they are able to realise as profit. Conversely, technologically advanced industries, which therefore require high concentrations of capital, are capable of capturing higher shares of value than they create, given their more intensive use of capital over labour. This relationship creates an invisible mechanism by which the inequality between nations is reproduced.

There are clearly many different strategies, political and economic, through which imperialist states have historically forced other economies to concentrate on labour intensive commodity production, while the ‘core’ economy tends to monopolise the more capital-intensive, technologically advanced sectors. Whatever changes there may have been in the mechanisms of imperialism, however, the fundamental hierarchy has not changed in the neoliberal era. A recent study has shown that in an analysis of the ratio of national income to value added, as a way of measuring unequal exchange, as analysed above, showed that ten of the historically most developed economies, led by the United States, were still the overwhelming leaders in this respect, and therefore the only real candidates to be considered imperialist powers.[2] Large ‘emergent’ economies, such as Brazil, India, and even China, show substantial deficits in the measure of unequal exchange. China is not yet an imperialist power by this measure.

Unequal exchange on its own, however, immediately challenges the view that, in the age of neoliberal globalisation, as some argue, all has changed, with fairly advanced industry relocated to countries in Asia, for example, away from the historically more advanced economies. David Harvey has unhelpfully argued that this process has made imperialism as a concept redundant (Suwandi, p.14). One summary of this type of approach puts it like this:

‘how can we explain the fact that the single greatest U.S. export to China is soybeans, while China’s biggest export to the United States is computers? Does that make China an imperialist power? Is it extracting wealth from the periphery? Is the United States slipping into the periphery?’

The figures on unequal exchange expose this type of argument as incorrect in the first instance, but it additionally ignores the way value created in newly industrialised economies is appropriated by western-based multinationals. Commenting on the studies on unequal exchange discussed above, Michael Roberts noted that the methodology involved is not able to account for the magnitude of these transfers of value from developing to advanced economies through the structures of multi-national corporations: ‘much trade (one-third) is within companies across borders and the value transfer there is not captured’. Therefore, this whole crucial factor comesin addition to the clear evidence of continuing unequal exchange in the overall picture. This helps to put in context the importance of the subject of Suwandi’s study in Value Chains.

The global hierarchy of wages

The evidence for a global hierarchy of wages is overwhelming, with the difference in average wages between advanced economies and the rest being very much greater than differences in productivity. This points to higher rates of surplus value being created in the economic ‘periphery’, compared to the imperialist ‘core’. Suwandi’s argument is that it is the structural power of multinationals which enable them to enforce a regime upon production in dependent economies which propel the transfer of very significant quantities of value into their hands, through ‘labour-value commodity chains’ (p.17).

Thus, Indonesia is third behind India and China in the share of employment in global employment chains, but its unit cost of labour remains, despite recent increases, only 62% of that of the US (pp.37-8). The gap of unit labour costs, taking into account differences in productivity, between the core economies of the US, UK, Germany and Japan, against those of China, India, Indonesia and Mexico, ‘have been of the order of 40-60 percent during most of the last three decades’ (p.48). As a result, there remains a hierarchy of wealth and an international division of labour, so that, quoting Giovanni Arrighi, ‘the spread of industrialization appears not as a development of the semi-periphery but as peripheralization of industrial activities’ (pp.26-7).

Multinationals are able to both exploit and enforce these differences in labour costs through a variety of mechanisms, from their monopoly control over technology (pp.103-5), to their ability to use competition to enforce ‘flexibility’ upon manufacturing firms. Thus Apple, through its subcontractor Foxconn, switched assembly of its products to India after there was a mere 9-12% rise in labour costs in China and Indonesia (pp.61-2). Companies like Apple ‘are actually not real manufacturers, but merely merchandisers,’ yet they are able to absorb a great share of the surplus value created by subordinated manufacturers (p.52).

These much-vaunted ‘decentralised’ corporate structures do not create autonomy in the companies to which production is outsourced. Quite the reverse; Western-based multinationals are able to use competition between suppliers to obtain maximum ‘flexibility’ in production, which ensures that all sorts of costs are placed upon the latter, who in turn shift the burden onto their workers (pp.122-131). These forces do not just affect labour-intensive industry, but also more technologically advanced production (pp.99-100), where multi-nationalscan still force their suppliers to reveal their costs, to keep to targets, through control of information technology as well as competition. Structurally speaking:

‘In line with the problem in the control of technology and knowledge, practices such as outsourcing fail to guarantee greater autonomy … Systematic, supra-company rationalization has instead created hierarchical structures in the production chain, consisting of dominant (or core) and dependent segments’ (p.78).

The corporate hierarchy that results is certainly aided by repressive regimes, politically supported by Western powers, which enforce poor labour conditions, and even outright bans on trade unions. Across the world over the era of neoliberalism in the last forty-odd years, by various means, vast new populations of labour have been forced into the labour market. These people have greatly expanded, indeed made fully international, the ‘reserve army of labour’ that, as Marx observed, drives down the value of labour power. In addition, the ‘decentralised’ corporate structure throws up inherent difficulties for organised labour: ‘the revival of labor market segmentation due to flexible production “further weakens the bargaining power of labour unions, making it more difficult for them to organize new workers …”’ (p.79).

Structures of exploitation

The result of all these ‘conditions of political-economic power,’ for Suwandi, is the ‘super-exploitation’ of labour in the periphery in two senses. Firstly, there is a relative condition where rates of exploitation are simply higher in peripheral compared to core economies. Secondly, there does exist exploitation in the sense that workers are paid less than the cost of the reproduction of their labour power (p.65).This latter concept involves both the maintenance of the individual worker, and provision for bringing up a new generation of labour. As Marx defined it, this is all somewhat elastic, since the cost contains both a physiological and social element, where the latter incorporates accepted norms of what living should include.

In fact, Marx concerned himself with two forms of exploitation, relative and absolute. Relative surplus value is produced by making labour more productive, and absolute exploitation is the result of making the working day longer than necessary for the reproduction of labour power. Note that this is somewhat distinct from the situation where labour is being exploited to destruction, in being paid less than the cost of reproduction. This latter situation can occur anywhere, and in perhaps surprising quarters, but however broadly it is defined, it is clearly much more prevalent in dependent economies.

Marx actually ruled out analysing the form of exploitation where labour was not paid enough to reproduce itself. This sometimes seems to be taken to mean it does not happen in practice, or is unimportant, but that is surely to misunderstand Marx’s procedure in Capital. At points, Marx excludes certain aspects of the actual functioning of capitalism the better to expose its essential workings. In this case the rationale was clearly to show that even where the system was not obviously untenable, it was still inherently exploitative and driven towards crisis. This, again, does not mean that Marx did not consider the destruction of labour power to be an unimportant phenomenon in the system as it actually worked.

In reality, ‘super-exploitation’, in this sense of workers being exploited to the destruction of the capability to maintain labour-power, was clearly at work in the industrial cities of Marx’s time. The nineteenth-century factory acts in Britain very gradually outlawed child labour and brought the working day to a norm of ten hours. Partly these were forced on parliament through the struggles of workers and their trade unions. Also, however, there was an increasing recognition among the more thoughtful of the bourgeoisie that allowing that form of super-exploitation to continue was endangering the future reproduction of capital itself.

Globalised exploitation

Capitalism has not changed in any of its essential dynamics since Marx’s time, but the balance of power between capital and labour does shift through development. Currently, technological advances, including in the capacity for transport across the globe, have made the reserve army of labour effectively a global phenomenon, and this works against labour in relation to capital across the world. When capital can switch production from one low-wage economy to another with comparative ease, this, among other factors, produces the conditions in which it can drive down wages in some cases beyond the point where labour is capable of reproducing itself.

Even so, we could adopt Marx’s procedure and exclude that form of super-exploitation from consideration, and the different rates of surplus value would still underline the higher levels of exploitation enabled by capital’s structural power:

‘while overall market relations in the emerging economy are also transformed, the firm-level transformations are often parachuted in with no real organic relation to, or logic stemming from, the emerging economy, and are just as easily dismantled and removed. This, then, creates an illusion of development and advanced production in these countries, which nonetheless remain in a dependent condition’ (p.152).

The corollary of all this is an increase in pressure on labour globally, and not just in the dependent economies. Thus, the overall impact is that in core economies, investment begins to concentrate in the financial sector, so that ‘the cost of production is trimmed, and workers are usually the main victims; their wages are cut or they get laid off’ (p.93). This emphasises that the exploitation of workers in the periphery is not to the advantage of labour in the core, but to their detriment. At the same time, this really does not mean, as some like Harvey appear to be arguing, that the polarity of unequal exchange is now flowing in the opposite direction from the past, so that imperialism is no longer relevant.

Rather, value is still clearly flowing unequally from dependent to core imperialist countries as it has done since the beginning of capitalism. To reiterate, this is not to the benefit of the working class in the imperial centres. On the other side of the debate from Harvey, are some who argue that imperialism acts to ‘bribe and corrupt’ workers in the core countries, effectively paying them off in higher benefits and wages so that they are colluding in the exploitation of dependent economies.In this vein, John Smith has further argued that ‘monopolists and imperialists do have the option of sharing some of their monopoly rents and imperial rents with their own workers—to buy social peace, to expand the market for their goods.’

In theory, such may be possible, but it really is to mistake where the value extracted from the periphery is going. It is professional workers in the West, that is to say management and other higher social strata, who are the ones benefiting from the structural power of the multinationals over their supply chains. Thus, Apple’s iPod is made entirely overseas, but ‘52 percent of the final sale price is counted as value added in the United States and is added to U.S. GDP’ (Suwandi, p.158). The surplus value, the source of profit, is in fact entirely in the production process, and therefore originates entirely outside the US. However, the finance and administrative procedures take place in the core, and they count in capitalist accounting as ‘value added’, while in Marxist terms, these activities add no value at all (p.160). With all this value accruing in the imperial centre, it is the middle-class professionals ‘including the outsized “compensation” of corporate executives – [who capture] more than two-thirds of the total wage bill associated with iPod production’ (p.158). It is not the working class in the US who are the recipient of corporate social bribery here.

Social imperialism?

It would be true to say, therefore, that the structure of class in the core countries is deeply moulded by imperialism, and that there are layers of higher-paid professionals in particular who could be described as benefiting directly from imperialist exploitation. It is very well known that the era of neoliberalism, during which industrial production has been relocated to developing economies on such a huge scale, has been an era of stagnating wages, at best, for the bulk of the population in Western economies. This has been accompanied by underfunding of public services, rampant privatisation and austerity.

To argue that the working class in imperialist countries benefits materially from the exploitation of the periphery is a political error as well as an economic one. It is unfortunate that so many on the Left seem to react in an absolutist way, either in one direction or another. Harvey attempts to deny imperialist relations, while John Smith reverses the polarity by making the Western working-class its collaborators. The ruling class succeeds in its rule by exploiting divisions within the proletariat, and the goal of socialist politics is to overcome these divisions, not to fan them.

None of this is to say that many working people in the West cannot be convinced by prevailing discourses that their living standards depend upon imperial power, and the maintenance of existing structures of domination. Manifestly, our ruling classes are highly successful in this propagandistic endeavour. It is also true that large numbers of poor whites in the US have, historically and presently, been convinced of the necessity of the preservation of white supremacy for their benefit. This does not alter the fact that wages levels in this context have been lower both for black and white workers, than where such high levels of systematic inequality are not prevalent. The same divide is true of Northern Ireland, with its pervasive discrimination against Catholic workers, while the reward to Protestant workers, for their support of this bigotry, is lower average wages than elsewhere in the UK.

The transnational cul-de-sac

There is a further confusion added to these debates in the alternate theory that the capitalist class has transcended its moorings in nation states, and has become international in nature. The corollary here is also that nation-state imperialism has had its day. William I Robinson, a major advocate of this analysis, argues against the view ‘that the United States and other major capitalist powers are locked in inter-imperialist competition for control over Third World markets and resources.’[3] Instead, there are global ‘transnational networks’, whose nature are only ‘obscured behind the entanglement,’ and so we must not make ‘the effort to frame them within international relations and inter-imperialist rivalry.’

Indeed, Robinson argues, if we were to maintain the imperialist theory, we would have to regard the Indian Tata corporation as imperialist, due to its being ‘the largest employer’ in Britain: ‘Does this mean that India is now the imperial country that has subordinated its former colonial overlord’?[4] Clearly not, but the whole discussion seems to be unable to distinguish between capital’s international mobility, and the differentiated sources and structures of capital accumulation. A general structure of capital accumulation can allow any particular capital to seek its profits in a variety of strategies and locations without that affecting the predominant flow of surplus value.

Moreover, at the same time as imperialism is dismissed as a structuring of capital, Robinson maintains that ‘globalization is now bringing (at a worldwide level) precisely the polarization between a rich minority and a poor majority that Karl Marx predicted.’[5] In fact, ‘transnational class relations have been cultivated, in part, by US policy over the past few decades of globalization.’[6] The characterisation of ‘the US military as the “ministry of defence” of the TCC [transnational capitalist class],’[7] begs the question of whether all the arguments about transnational capital do not just come back to a confirmation of the scale of that one imperialism’s dominant position. Admissions like these underline the centrality of imperialism, in its interrelated political and economic dimensions, as the way that capital sustains an international hierarchy. In this context, lesser capitals, like the UK, or even the EU, find their own interests served by various degrees of subordination to the greater capital.

The state and imperialism

In the end therefore, ‘transnational capitalists’ really do depend upon particular states to drive their agendas in developing internationally the favourable conditions for accumulation. It is true that it is not one state as such that exploits another, but a class which extracts surplus value from labour. This does, however, require an imperial state to enforce the conditions which makes that possible, so these are real actors in this. Neither are states neutral or non-economic in nature, being normally almost wholly under the control of capital.

In fact, it seems likely that the more that capital is globalised, the more it needs to preserve the structure of nation states to maintain its control over labour. Harvey’s peculiar wish to dismiss imperialism, on the grounds that the working class in the core is not presently benefiting from globalisation, is a symptom of the way capital is able to make strategic political use of the international division of labour. Hence, the neoliberal age has also seen increasingly harsh conditions for migrants and a surge in reactionary anti-immigration politics.Among other results, these serve as an effective way to disciplinemigrant workers, and ratchet up rates of exploitation. Capital cannot abide genuine internationalisation; the rules for labour have to be different than for itself, in order to promote ever greater accumulation.

At a higher level of imperialist control,key international institutions, particularly the IMF and the World Bank, are firmly under the control of the main developed powers (not without friction between them). These enforce ‘liberalisation’ policies which benefit predominantly the large corporations and financial sectors of the core economies. Hence, Suwandi describes the pressure put on Indonesia by international financial institutions, in reaction against the raising of its minimum wage after a major general strike, to find compensating ways to maintain its ‘productivity’ as a low-wage economy (pp.165-7).

Any understanding of imperialism which seeks to define it separately as either a one-dimensional economic relationship, or composed of purely political structures, will miss how it continues to structure capitalism internationally, and maintain the exploitation of labour across the world. Suwandi’s analysis of the power structures of global value chains is a valuable empirical contribution to the understanding of the mechanisms of imperialism. It is done with a conceptual clarity that is otherwise surprisingly often missing from the debate.

Imperialism does not only serve to subordinate whole economies, and to discipline labour internationally, as it has done both in the core and periphery in different ways over the neoliberal era. It also acts to divide labour internationally, to break the bounds of solidarity which the working class needs to be able to act successfully against capital. Imperialism thus has an ideological function that is rooted in its very real, material economic and political structures. It is key for socialists to remember the goal of overcoming those factors which divide workers from one another, whether it be at local levels like the sectional interests of different trades, or newer versions of such pressures generated by neoliberal globalisation. Conceptually spiriting away imperialism from the analytical scene will do nothing to address the dis-organising forces it is able to unleash on labour. Anti-imperialism must always remain central to socialist campaigning.