The Outsourcing of Manufacturing and the Rise of Giant Global Contractors: A Marxian Approach to Some Recent Transformations of Global Value Chains

Abstract

This article aims to show that the Marxian ‘law of value’ can provide solid foundations for the comprehension of the constitution and dynamics of Global Value Chains (GVC). It offers an explanation of the social processes of ‘value creation and capture’ within a chain based on the system-wide motion of global capital accumulation. A firm connection is thus established between the particular dynamics internal to each industry and the general dynamics of the ‘system as a whole’, which is, precisely, where the greatest weakness of the GVC approach lies. Furthermore, the usefulness of those general theoretical insights is then shown through a more empirical discussion of recent transformations in the composition and governance structure of GVC resulting from two interrelated processes: the tendency for a growing de-linking between innovation and manufacturing and the rise of highly concentrated global contractors. These phenomena have paradigmatically developed in the electronics industry, giving rise to the formation of the so-called modular or turnkey production networks. The discussion therefore focuses on that particular industrial sector.

Keywords:

• global value chains
• electronics industry
• Marx
• law of value
• capitalist competition

Notes

The notion of value-added, widely used in the GVC literature, is not explanatory but of a fundamentally descriptive/heuristic nature (Kaplinsky 2000) and, one could add, quite flawed when deployed as a substitute for the rate of profit as an indicator of the accumulation capacity of individual capitals (Starosta 2010).

The productive attributes of workers include the strictly material or technical dimension of labour power required by the particularity and complexity of the productive functions to be performed, as well as its ‘moral’ attributes (that is, the general forms consciousness and self-understandings that make those workers suitable for the specific forms of discipline that a certain organisation of the capitalist labour process entails). The term ‘productive subjectivity’ captures this two-fold dimension of labour power.

ECMs have kept some mass production facilities in the US located in the southern and south western states, which are precisely those characterised by low union presence (Steiert 2005).

The next two sections partly draw on arguments more fully developed Starosta (2010).

Prices of production of commodities can be resolved into cost prices (the cost of ‘inputs’ – labour power and means of production, including the depreciation of fixed capital), plus the normal profits of capital (the general rate of profit on the total capital advanced for its production). See Marx (1981: 257–8).

Although this is rarely noted by contemporary commentators, the very origins of the GVC approach can actually be traced back to the intellectual lineage of Monopoly Capital theory. Indeed, the World-System paradigm from within which the GVC developed (then under the label Global Commodity Chain or GCC) agreed with most of the essential tenets of the Monopoly Capital tradition (Hopkins 1977). The founding contributions to the GCC approach thus were variations on the themes of Monopoly Capital theory, albeit refashioned for a globally-dispersed but functionally-integrated hierarchical network of firms (see, for instance, Gereffi et al. 1994: 2; Hopkins and Wallerstein 1994: 18).

However, as Gough notes (2003, p. 25), those particularities must not be seen as an irreducible and self-subsistent singularity that escapes determination by the general motion of the social forms of capitalist production. Instead, they must be grasped as different possibilities grounded in the fundamental processes of capitalist economies. For more extensive methodological reflections on the connection between the general and the particular in the study of GVC, see Starosta (2010).

A more conclusive typology would need to be based on a rigorous quantitative measurement of the concrete annual rate of profit of each of the capitals in the chain (Starosta 2010).

In stricter Marxian terms, this depends on the extent to which the individual price of production of first-mover outsourcing firms sinks below a normal price of production still regulated by manufacturing in-house. In turn, this would be the outcome of the interaction between two major factors: the impact of outsourcing on ‘cost price’ and, on the other hand, its effect on the capital advanced (both on its magnitude and on its turnover time).

Furthermore, it is also clear that the relocation of the valorisation process is not the only concrete form taken by the politically mediated fragmentation of the productive subjectivity of the global collective labourer. As many scholars have noted, politically managed international migration of workers can do the job as well (Phillips 2009).

However, this different constellation does not involve the transcendence of the NIDL, but represents a more complex form assumed by the same general content.