Handbook On International Political Economy

Ralph Pettman

• Publisher: WSPC
• Year: 2012
• ISBN:
  9789814452182
• Topic: Ciencias biológicas
• Subtopic: Ciencias en general

International political economy (IPE) is a highly complex discipline, drawing not only from the fields of politics and economics, but also those as varied as philosophy, history and anthropology. Now widely accepted as a key dimension to contemporary world affairs, it is no longer possible to talk about international relations without talking about production and distribution, finance and investment, as well as consumption and trade. To ensure that our understanding of these topics is relevant to today's world, there is a constant need to revisit and challenge what is known about these topics. Besides being a comprehensive account of international political economy for academic study, this extensive collection also highlights salient issues that scholars, analysts and state leaders are most concerned with in today's world. Amongst these are issues concerning the rise of China and India as new economic superpowers, stability in the EU's political economy, the viability of the existing multilateral system of global trade, recent financial crises, as well as the impact of globalisation and marketisation on the world's workers and our physical environment. With contributions from prominent academics such as Susan K Sell ( George Washington University, D.C. ) and Geoffrey Blainey ( Professor Emeritus, University of Melbourne ), this volume makes for both a stimulating and thought-provoking read. Contents:

• Introduction:
  • International Political Economy: Competing Analyses (Ralph Pettman)
  • From Political Economy to International Political Economics (Hana Sabanovic and Sally Trethewie)
  • The Industrial "Revolution" and its Aftermath: The British, US and Japanese Empires (Geoffrey Blainey)
  • Global Economic Governance (John Langmore and Shaun Fitzgerald)
• Global Production:
  • Global Production: An Overview (Kate Macdonald)
  • The Rise of China and India (Pradeep Taneja)
  • Europe's Political Economy: The Search For Stability (Philomena Murray)
• Global Trade:
  • Global Trade: An Overview (Ralph Pettman)
  • A Multilateral System (Stephen Woolcock)
  • GATT and the WTO (Susan K Sell)
  • Containerisation (Lance Hoovestal)
• Global Finance:
  • Global Finance: An Overview (Mark Triffitt)
  • The International Monetary Fund (Nidhi Dutt)
  • Corruption and Financial Crises (Leslie Holmes)
• Globalisation and the North/South Divide:
  • Globalisation and the North/South Divide: An Overview (Thomas W D Davis)
  • Corporations (John Mikler)
  • The World's Workers (Verity Burgmann)
• Globalisation and the Male/Female Divide:
  • Globalisation and the Male/Female Divide: An Overview (Sheila Jeffreys)
  • Production/Reproduction (Meagan Tyler)
• The Global Environment:
  • The Global Environment: An Overview (Loren R Cass)
  • Resources (Gerry Nagtzaam)
  • Pollution (José Pablo Zambrano Ramírez)
  • Global Capitalism and Climate Change (Hans A Baer)
• Conclusion: The Cycle-of-Knowing (Ralph Pettman)

Readership: Graduate students and researchers in the area of international political economy, political and economic analysts, policymakers. Key Features:

• Comprises discussion and explanation of current issues using the concepts of political economy
• A coherent collection of chapters from various traditional disciplines
• Critical (and provocative) stance adopted by a unique collection of expert and engaged authors

Part One

Global Production

CHAPTER 5

Global Production: An Overview

Kate Macdonald

University of Melbourne

Economic production is fundamental to the operation of any economic system, serving to transform economic ‘inputs’ such as raw materials and labour hours into other more highly valued goods or services. Production is also a dimension of economic life in which most individuals participate directly in the form of paid or unpaid work, with significant and immediate consequences for their quality of life. It is perhaps not surprising then that the social organisation of production is one of the most controversial subjects within the field of international political economy.

Controversies surrounding social systems of production have particular importance within the capitalist economic and socialist domains that dominate contemporary studies of international political economy. (Capitalist systems of economic production, investment and accumulation are the central drivers of the economic growth through which capitalist societies have been able to achieve their much lauded material prosperity and living standards, though capitalist relationships of production are also widely condemned for their exploitation of hired labour, alienation of individuals from more intrinsically rewarding human pursuits, and negative social impacts in the form of widespread poverty, social inequality and environmental destruction.)

‘Capitalist’ production is typically underpinned by extensive protection systems for private property and a central role for markets in allocating social resources, via setting prices and coordinating market exchange. It also typically involves the dynamics of cumulative investment and the growth of productive output, often referred to as processes of capitalist ‘accumulation’.

As capitalist economies have become globalised during recent decades, much debate has focused on the increasingly global organisation of production in many economic sectors. Such debate has been largely social and economic in orientation, focusing on the new global business strategies through which production is coordinated across borders and exploring the implications of changing production patterns for processes of social and economic development (and underdevelopment) in poorer countries. Meanwhile, the significance of global production systems as sites of political power and struggle has often been overlooked.

The central aim of this chapter is to highlight the deeply political character of the contemporary reorganisation of global production. It seeks not only to paint a broad picture of globalised production but also to dissect the politics of these changes as they have played out in individual factories, farms and other workplaces around the world. This political orientation entails a focus on both the multiple forms of power involved in shaping new patterns of global production and the consequences of these patterns for the distribution of economic resources.

The discussion begins with a brief review of some important ways in which production is being globalised within the contemporary capitalist political economy. It then surveys several important aspects of the politics of global production: what have been some of the most important political drivers of the globalisation of production; who have been some of the most important winners and losers associated with these changes; and what have been some of the political responses through which the globalisation of production continues to be contested?

The chapter as whole tells a story in which the globalisation of production is being led by transnational businesses, while also being supported and facilitated by governments around the world. These changing patterns of production have important distributional consequences, influencing the way power and resources are shared between governments and businesses, between populations in different parts of the world, and between different occupational and social classes. These shifts in power and profit are giving rise to new forms of cross-border political mobilisation and struggle. A new politics of global production is emerging in which social actors across transnational boundaries attempt to hold powerful companies accountable for the new forms of power and privilege they command within a world of reorganised global production. At the same time, business power remains limited in important ways in the face of complex social and market dynamics and continuing government power. The new politics of global production, therefore, plays out on a complex and shifting terrain, in which neither business nor governments have full control over the social regulation of global production.

THE GLOBALISATION OF PRODUCTION: KEY TRENDS

The changing organisation of global production has been one of the most striking and distinctive features of a globalising political economy over the last few decades. So-called ‘globalisation-sceptics’, who see contemporary talk about the significance of ‘globalisation’ as being exaggerated, often point out that extensive flows of trade and investment between countries are nothing new. Yet few doubt that the current organisation of cross-border production through global business networks and supply chains is in many respects unprecedented.

There is much we could say in very general terms about the internationalisation of production during the decades following the Second World War. For most of this post-war period, stocks and flows of foreign investment (measures of which are usually closely linked to the globalisation of production) have grown faster than world income and sometimes faster than world trade. Such changes were particularly pronounced during the 1960s and then again since the mid-1980s. The significance of transnational companies (with operations established in multiple countries around the world) in global production and trade has also increased.

For the purposes of this discussion, three changes in the organisation of production over recent decades are of particular interest: the growth of production within transnational corporations; the growth of production beyond the boundaries of single firms and its coordination through global supply chains; and new geographies of global production.

Increased Production within Transnational Companies

Much global production still takes place within private firms, whose internal organisational systems are deployed to coordinate production and related processes of sourcing inputs, distribution and marketing. To this extent, the globalisation of production has largely mirrored the increased globalisation of transnational business organisation. In recent decades, the importance of transnational business activity organised through transnational corporations has expanded significantly, growing much faster than global trade or income. According to UNCTAD (United Nations Conference on Trade and Development) estimates, there are currently around sixty-four thousand transnational corporations (TNCs), defined as firms that own and operate plants or other facilities in one or more host countries outside their home country base. Together, these have about eight hundred and forty thousand foreign affiliates, accounting for about fifty-four million employees (figures cited by Koenig-Archibugi, 2004). These shifts are reflected in figures describing the increasing role of TNCs in international trade, particularly since the 1970s. About two thirds of international trade now involves TNCs and about one third involves “intra-firm” trade, that is, trade between affiliates of the same trans-national company (Walter and Sen, 2009, p. 172).

Increased Production within Global Supply Chains

Since the 1980s, increasing volumes of global production have been organised beyond the boundaries of individual firms. In slightly more jargon-laden terms, it is often said that functions that were previously carried out within the organisational boundaries of ‘vertically integrated’ corporations are now being ‘externalised’ through an increased reliance on arms-length network and market relationships as a way of coordinating production.

What this means in practical terms is that transnational companies in many agricultural and industrial sectors no longer rely primarily on in-house facilities to organise the production of the goods they sell. Rather, they now source much of their product through chains of contractual, market and network relationships spread across a number of countries. For many companies this has involved a shift toward increased reliance on outsourcing. Sometimes this takes the form of simple, reasonably short-term subcontracting arrangements. In other cases businesses establish longer-term networks of business partners, enabling detailed coordination concerning production processes while retaining some flexibility and responsiveness with regard to changing market conditions (Gereffi, 1996; Gereffi et al., 2005).

The global production strategies adopted by the US mega-corporation Walmart illustrate how these dynamics have played out within many companies in manufacturing and related retail sectors. Increasingly, such firms organise production through complex global supply chains, which powerful buyers such as Walmart largely control. Walmart has been transformed from a company that originally trumpeted its support of US producers to one that now sources up to seventy percent of its product from China. Although Walmart does not own the factories that produce the clothes, toys and other products sold in its stores, it plays an important role in the design and specification of these products, as well as in quality control and other aspects of the production processes involved. These controls are formalised in supplier contracts as well as through a variety of inspection and audit processes.

New Geographies of Global Production

In geographical terms, production in manufacturing sectors has shifted decisively away from the industrialised core economies of the rich world. Two seemingly competing tendencies can be observed. On the one hand, production has been increasingly dispersed across a large number of geographical locations. At the same time there has been significant ‘clustering’ of production in locations such as East Asia.

The status of China as a central location for global manufacturing production is a familiar story today and is discussed further in the following chapter. China has built up a critical mass of infrastructure and factory capacity that has made it a highly attractive location for manufacturing production. Some refer to it as the new ‘workshop of the world’. Geographical clustering dynamics have certainly not been limited to China, however. Low-cost, high-quality manufacturing locations have also been established in other parts of Asia (Singapore, Thailand, Malaysia and Indonesia in particular). Exports of merchandise trade from Asia to the rest of the world have increased substantially — not only for basic goods like clothing but also in more technologically sophisticated products. Trade within the Asian region is also important. For example, it is estimated that two thirds of the inputs for China’s processing activities come from Hong Kong, Japan, Korea and Taiwan (Ravenhill, 2006). Important regional concentrations of global production sites can also be found in Mexico (whose manufactured exports grew from just ten percent of total exports in 1980 to eighty-five percent by the end of the 1990s), in South America, and in Eastern and Central Europe (Gereffi and Sturgeon, 2004).

Considering these changes overall, the growing use of supply chains together with new geographies of global production have meant that the current patterns of global production are now much more ‘chopped up’ and ‘spread out’ — both geographically and organisationally — than used to be the case. In this new environment, firms and countries no longer trade simply in raw materials and final products. Rather, different firms and countries specialise not just in producing different products but in producing different parts of different products, focusing variously on design, assembly and marketing. Because not all production processes are equally amenable to this kind of disaggregation and dispersion, these patterns vary significantly across sectors. The changes involved have been particularly important in manufacturing, though similar forms of restructuring have also been important in some agricultural and horticultural sectors.

The changes involved are reflected in several broader economic trends as well. Trade in manufactured products is increasingly dominating merchandise trade generally, reflecting the dominance of global production chains in manufacturing sectors. Shares of trade in manufactures are also increasingly accounted for by trade in parts and components, again reflecting the tendency for global supply chains to “chop up” production processes and “spread them out” geographically (Gibbon and Ponte, 2005, p. 4).

POLITICAL DRIVERS OF REORGANISED GLOBAL PRODUCTION

In understanding why production has become globalised like this, some consideration of economic drivers is inescapable. Although this chapter aims to analyse global production through a primarily political lens, it is nevertheless important to briefly review some of the most important economic drivers behind these trends.

Firms can decide to reorganise their production activities in increasingly globalised ways for a number of reasons. In some cases, firms establish offshore production locations as a means of positioning themselves close to foreign consumer markets for their products. Global production strategies involving the movement of production facilities between different rich country locations are often motivated in this way.

In other cases, companies decide to pursue global production strategies as a means of lowering their production costs in highly competitive market environments. Global production strategies of this kind have been growing in importance in recent years as many transnational companies have sought new production locations in low-cost emerging markets. The increased competition facing producers in established production locations has played an important role in driving globalised production strategies of this kind. Competitive pressures have been particularly important in labour-intensive, low value-added sectors such as clothing, toys, electronics and other similar manufactured goods. In these sectors, waves of globalised production began in the 1960s and 1970s when many US and European firms found themselves suffering at the hands of emerging Japanese (and subsequently other East Asian) producers. Many such firms sought to reduce costs by relocating production to areas with cheaper labour rather than reorganising production processes at home to increase productivity. In many cases, the falling costs of foreign operations have been influenced not only by relatively cheap labour costs but also by the falling costs of international transport and communications (which are discussed elsewhere in this volume), improved organisational systems within transnational companies, and strengthened productive capacity in some developing country production locations.

These kinds of economic drivers of global production have clearly played a central role in motivating the global production patterns described above. However, excessive focus on economic factors of these kinds can lead to the neglect of the equally important political drivers of global production.

One obvious source of political pressure sitting behind these changes was the policy conditions that incentivised or at least enabled many of them. Relevant policy reforms took place in a number of areas as part of international agendas to do with trade and investment liberalisation, as well as to do with broader policy agendas associated with deregulation and liberalisation within many national economies around the world.

At the international level, significant shifts in the international policy environment have occurred over the last two decades. In the first few decades after the Second World War, policy was oriented towards strengthening governments’ sovereign rights over national resources and regulating foreign investors in ways that were believed to promote national development. In this environment, transnational businesses seeking global production strategies often faced significant suspicion or hostility from prospective host governments. More recently, extensive international trade and investment liberalisation has played an important role in creating a much more favourable environment for firms pursuing global production strategies. A proliferation of bilateral, regional and multilateral trade and investment treaties between countries has played an important role in facilitating freer trade and investment flows (of critical importance to enabling global production strategies) and providing legal protection for the economic interests of trans-national businesses wanting to establish production facilities outside their home country bases. At the multilateral level, the agreements negotiated at the Uruguay Round of the GATT (General Agreement on Tariffs and Trade) negotiations were of particular importance. At the bilateral and regional levels, a wide range of trade and investment agreements have now been signed.

Although these shifts in international policy have been important drivers and enablers of global production, they are only part of the story. Important national policy changes have also been enacted in many countries around the world. Key policy reforms implemented during the period of expansion in global production included increased openness to trade and financial flows and enhanced tax incentives for foreign investors. In some cases, the liberalisation of shipping and other transport markets also played an important role in lowering the business costs of sustaining offshore production activity. Also relevant for some firms were policy shifts that enabled freer currency convertibility. Meanwhile, financial sector liberalisation enabled the growth of a range of financial instruments, making cross border transactions easier to finance and also making it easier to hedge against currency risk. All of these policies pl...

Table of contents

• Cover Page
• Halftitle
• Title
• Copyright
• Foreword
• Contents
• List of Contributors
• Introduction
• Part One Global Production
• Part Two Global Trade
• Part Three Global Finance
• Part Four Globalisation and the North/South Divide
• Part Five Globalisation and the Male/Female Divide
• Part Six The Global Environment
• Conclusion The Cycle-of-Knowing
• Index