Global East Asia Response Paper

Jenny Chan, Ngai Pun, and Mark Selden (2013)

Steger chap. 3 review

Transnational corporations (TNCs) are one of the three major building blocks of the contemporary Global Economic Order

Three building blocks of 21st c. Global Economic Order: 1. Huge transnational corporations (TNCs) 2. Powerful international economic institutions

� IMF, World Bank, WTO 3. Large regional business and trade networks

� APEC Asian Pacific Economic Cooperation (APEC+3) � EU European Union � NAFTA North American Free Trade Agreement � [TPP TransPacific Partnership]

Definition: Global Economic Order The contemporary Global Economic Order is the neoliberal economic order working together with restriction on trade and f lows of capital motivated by national, regional, or justice concerns

The global economy is also a nexus

Neoliberal Deregulation

Keynesian & Other

Regulation

Engine driving globalization?

The Global Economic Order’s interconnections are set in motion by political decisions

� Globalization is multi-dimensional; based on interaction between politics and the economy (and other dimensions)

Chan, Pun, & Selden’s essay “The politics of global production” explains exactly how TNCs function as a building block of the Global Economic Order. � The article also shows the impact of TNCs

on local wages and working conditions for rural-migrant workers.

Electronic devices OFF

What to call these corporations? Steger: Transnational corporations TNCs (p.55)

1. Apple 2. Exxon-Mobil 3. Berkshire Hathaway 4. Google 5. Microsoft 6. PetroChina 7. Wells Fargo 8. Johnson & Johnson 9. Industrial & Commercial Bank of China 10. Novartis

What to call these corporations? Chan, Pun, & Selden: Multinational corporations (Multinationals)

� Apple � Foxconn

Transnational corporation—legal definition (thefreedictionary.com) “Any corporation that is registered and operates in more than one country at a time; also called a multinational corporation. A transnational, or multinational, corporation has its headquarters in one country and operates wholly or partially owned subsidiaries in one or more other countries.”

What to call the economic system? (1) Steger: Global Economic Order

� Defined by a relationship between deregulation based on neoliberal ideology and regulation based on national-regional-justice concerns.

(2) Chan, Pun & Selden: Global neoliberal capitalism � Defined by a relationship between neoliberal

state domination and workers rights (a justice concern).

Chap. 3 response paper � In your paper, you can use the terms TNC

and multinational interchangeably. � You can refer to the global economy as

inclusive of Steger’s Global Economic Order and Chan, Pun & Selden’s Global neoliberal capitalism.

Organization of today’s essay (1) Introduction (2) Politics of global outsourcing and relation to

labor (3) China’s global emergence and new working class (4) Analysis of Apple-Foxconn business relationship (5) Response of workers to “just-in-time” production

demands (6) Conclusion

Key concepts: � Global Commodity Chains � Power Asymmetry � Buyers versus Contract Manufacturers � Contract Manufacturers versus Workers � Role of Neoliberal State in Political

Economy

Fieldwork Observed tensions between manufacturers such as Foxconn and corporate buyers such as Apple Inc.

Global Commodity Chains (flows) � Apple’s success is entwined with Foxconn’s

� Buyer—Apple: “the world’s most valued brand; dominates the electronics sector”

� Contract manufacturer—Foxconn: “world’s largest electronics contractor; China’s biggest exporter”

� Labor as key component in global production chains � Laborers are agents who are able (sometimes) to

demand improvement in working conditions because they are enmeshed in tightly integrated production

Turning point: 2001 China enters WTO Foxconn became China’s leading exporter the same year (2001) and still is today. � This has led to great social changes in China

Equation for new social class: Domestic & transnational capital + state collaboration ____________________________ new rural-migrant industrial class

Labor protest movement Rural-migrant workers have rising expectations:

� higher wages � better working conditions � career advancement

Chinese gov’t solutions Foxconn’s recent expansion of factories moved from coastal Chinaàinland China:

� Part of China’s “Go West” project � Takes advantage of lower wage levels there � Promotes ethnic unity, stimulates employment

Steger: TNCs are building blocks Focus of Chan, Pun, & Selden’s essay: Local

consequences resulting from global power dynamics of TNC buyer-driven supply chain

� Transnational (global) pressures exert a powerful effect on national (local) terrains

Apple’s success “Apple’s financial success is inseparable from its globally dispersed network of efficient suppliers based mainly in Asia.” (p. 5)

Apple’s “ruthlessness” Foxconn gives big discounts to Apple in order to keep its high-volume production contracts

� Parts discounts � High production capacity discounts � Air freight discounts

� Foxconn’s revenues rise due to increase in volume of production

� At the same time, Foxconn’s profit margin has shrunk from 3.7% in 2007 to 1.5% in 2012

Apple’s global image � Apple shifted some production to Foxconn’s

rival Pegatron (another Taiwan company) after Foxconn worker suicides in spring, 2010

� Explanation: to diversify risks

Summer project: working in Pegatron factory in Shanghai https://www.youtube.com/watch?v=5ItLIywwepY (4.43)

3,100 Yuan/month ($450) 10.5 hours of work X 6 days a week X 4 weeks (month) = 252 hours $450 a month (divided by)/ 252 = $1.78/hr.

iPhone 7 retail price: $650 Manufacturing cost: $5 Components: $220 Profit: $425 According to a teardown carried out by IHS Markit, a 32GB iPhone 7 that retails for $650 costs Apple only $220 in components, with manufacturing adding another $5 to the price.

Are workers exploited? FACT #1: Apple makes profit of $425/iPhone 7 and pays $5 to the workers who assemble it. FACT #2: Apple’s “ruthlessness” makes your iPhone cheaper.

Discussion Question 1: Would you be willing to pay more for an iPhone (or any smartphone) so that workers could get better wages? Why or why not? Question 2: How much more would you be willing to pay? Twice as much-$10 ($3.56/hr.)? Ten times as much-$50 ($17.80/hr.)?

Globalization is a horizontal relationship

Global production

Local labor

Power asymmetry � Buyers (global retailers & brand

merchandisers such as Apple, HP, Dell) � Contract manufacturers (producers and

distributors of merchandise such as FoxConn, Flextronics, Quanta, Pegatron)

Power asymmetry (unequal G-L Nexus)

Global buyers (Apple)

Local contract manufacturers

(Foxconn)

Impact of power asymmetry (1) Goal of buyers (global retailers): Low production costs to maximize their profits

(2) Result for contract manufacturers: They must lower working standards for laborers to meet demand

Origin of power asymmetry “Intense bargaining by big buyers over costs and profits has kept a tight rein over producers, frequently slashing profit margins.” (p. 3)

Sept. 2012 worker protests In 2012, shift from iPhone 4S to iPhone 5 and speedup in delivery time put Foxconn workers in Taiyuan under intense pressure. � Sept 23, 2012 tens of thousands of workers rioted,

demanding higher pay and better treatment � Foxconn deployed security and paramilitary to end

the riots, blaming a personal dispute among a few workers

State collaboration The (Chinese) state collaborates with supplier/manufacturers to discipline laborers when they revolt against working conditions

How can workers protest? Workplace bargaining power is high when their local work stoppage can affect wide- scale production

� Ex. Strike at auto parts supplier in Nanhai paralyzed Honda’s entire supply line in South China

China’s emerging labor movement � Feb. 2013 Foxconn agreed to allow workers to

hold direct elections for union representation

� Apple and Foxconn must support labor reforms to protect their corporate image and symbolic value

� If Chinese workers succeed, their struggles will shape labor and democracy throughout the world

Thurs. Feb. 22 reading Lecture: China’s green energy policy

� Reading: John Mathews and Hao Tan, "China's Continuing Renewable Energy Revolution: Global Implications." japanfocus.org (2013) 5 pp.