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m o nt hlyre vie w.o rg http://m o nthlyreview.o rg/2011/11/01/the- glo bal- res erve- arm y- o f- labo r- and- the- new- im perialis m

J o hn Bellam y Fo s ter , Ro bert W. McChes ney and R. J am il J o nna m o re o n Eco no m ics , Glo bal Eco no m ic Cris is , Labo r

The Global Reserve Army of Labor and the New Imperialism :: Monthly Review

Jo hn Bellamy Fo ster (jf o ster@mo nthlyreview.o rg) is edito r o f Monthly Review and pro f esso r o f so cio lo gy at the University o f Orego n. Ro bert W. McChesney ([email protected]) is Gutgsell Endo wed Pro f esso r o f Co mmunicatio ns at the University o f Illino is at Urbana- Champaign. R. Jamil Jo nna is a Ph.D. candidate in so cio lo gy at the University o f Orego n.

In the last f ew decades there has been an eno rmo us shif t in the capitalist eco no my in the directio n o f the glo balizatio n o f pro ductio n. Much o f the increase in manuf acturing and even services pro ductio n that wo uld have f o rmerly taken place in the glo bal No rth—as well as a po rtio n o f the No rth’s preexisting pro ductio n—is no w being o f f sho red to the glo bal So uth, where it is f eeding the rapid industrializatio n o f a handf ul o f emerging eco no mies. It is custo mary to see this shif t as arising f ro m the eco no mic crisis o f 1974– 75 and the rise o f neo liberalism—o r as erupting in the 1980s and af ter, with the huge increase in the glo bal capitalist labo r f o rce resulting f ro m the integratio n o f Eastern Euro pe and China into the wo rld eco no my. Yet, the f o undatio ns o f pro ductio n o n a glo bal scale, we will argue, were laid in the 1950s and 1960s, and were already depicted in the wo rk o f Stephen Hymer, the f o remo st theo rist o f the multinatio nal co rpo ratio n, who died in 1974.

Fo r Hymer multinatio nal co rpo ratio ns evo lved o ut o f the mo no po listic (o r o ligo po listic) structure o f mo dern industry in which the typical f irm was a giant co rpo ratio n co ntro lling a substantial share o f a given market o r industry. At a certain po int in their develo pment (and in the develo pment o f the system) these giant co rpo ratio ns, headquartered in the rich eco no mies, expanded abro ad, seeking mo no po listic advantages—as well as easier access to raw materials and lo cal markets—thro ugh o wnership and co ntro l o f f o reign subsidiaries. Such f irms internalized within their o wn structure o f co rpo rate planning the internatio nal divisio n o f labo r f o r their pro ducts. “Multinatio nal co rpo ratio ns,” Hymer o bserved, “are a substitute f o r the market as a metho d o f o rganizing internatio nal exchange.” T hey led inexo rably to the internatio nalizatio n o f pro ductio n and the f o rmatio n o f a system o f “internatio nal o ligo po ly” that wo uld increasingly do minate the wo rld eco no my.1

In his last article, “Internatio nal Po litics and Internatio nal Eco no mics: A Radical Appro ach,” published po sthumo usly in 1975, Hymer f o cused o n the issue o f the eno rmo us “latent surplus- po pulatio n” o r reserve army o f labo r in bo th the backward areas o f the develo ped eco no mies and in the underdevelo ped co untries, “which co uld be bro ken do wn to f o rm a co nstantly f lo wing surplus po pulatio n to wo rk at the bo tto m o f the ladder.” Fo llo wing Marx, Hymer insisted that, “accumulatio n o f capital is, theref o re, increase o f the pro letariat.” T he vast “external reserve army” in the third wo rld, supplementing the “internal reserve army” within the develo ped capitalist co untries, co nstituted the real material basis o n which multinatio nal capital was able to internatio nalize pro ductio n—creating a co ntinual mo vement o f surplus po pulatio n into the labo r f o rce, and weakening labo r glo bally thro ugh a pro cess o f “divide and rule.”2

A clo se co nsideratio n o f Hymer ’s wo rk thus serves to clarif y the essential po int that “the great glo bal jo b shif t”3 f ro m No rth to So uth, which has beco me such a central issue in o ur time, is no t to be seen so much in terms o f internatio nal co mpetitio n, deindustrializatio n, eco no mic crisis, new co mmunicatio n techno lo gies—o r even such general pheno mena as glo balizatio n and f inancializatio n—tho ugh each o f these can be said to have played a part. Rather, this shif t is to be viewed as the result primarily o f the internatio nalizatio n o f mo no po ly capital, arising f ro m the glo bal spread o f multinatio nal co rpo ratio ns and the co ncentratio n and centralizatio n o f pro ductio n o n a wo rld scale. Mo reo ver, it is tied to a who le system o f po larizatio n o f wages (as well as wealth and po verty) o n a wo rld scale, which has its basis in the glo bal reserve army o f labo r.

T he internatio nal o ligo po lies that increasingly do minate the wo rld eco no my avo id genuine price co mpetitio n, co lluding instead in the area o f price. Fo r example, Fo rd and To yo ta and the o ther leading auto f irms do no t try to undersell each o ther in the prices o f their f inal pro ducts—since to do so wo uld unleash a destructive price war that wo uld reduce the pro f its o f all o f these f irms. With price co mpetitio n—the primary f o rm o f co mpetitio n in eco no mic theo ry—f o r the mo st part banned, the two main f o rms o f co mpetitio n that remain in a mature market o r industry are: (1) co mpetitio n f o r lo w co st po sitio n, entailing reductio ns in prime pro ductio n (labo r and raw material) co sts, and (2) what is kno wn as “mo no po listic co mpetitio n,” that is, o ligo po listic rivalry directed at marketing o r the sales ef f o rt.4

In terms o f internatio nal pro ductio n it is impo rtant to understand that the giant f irms co nstantly strive f o r the lo west po ssible co sts glo bally in o rder to expand their pro f it margins and reinf o rce their degree o f mo no po ly within a given industry. T his arises f ro m the very nature o f o ligo po listic rivalry. As Michael E. Po rter o f Harvard Business Scho o l wro te in his Competitive Strategy in 1980:

Having a lo w- co st po sitio n yields the f irm abo ve- average returns in its industry…. Its co st po sitio n gives the f irm a def ense against rivalry f ro m co mpetito rs, because its lo wer co sts mean that it can still earn returns af ter its co mpetito rs have co mpeted away their pro f its thro ugh rivalry…. Lo w co st pro vides a def ense against po werf ul suppliers by pro viding mo re f lexibility to co pe with input co st increases. T he f acto rs that lead to a lo w co st- po sitio n usually also pro vide substantial entry barriers in terms o f scale eco no mies o r co st advantages.5

T his co ntinuo us search f o r lo w- co st po sitio n and higher pro f it margins led, beginning with the expansio n o f f o reign direct investment in the 1960s, to the “o f f sho ring” o f a co nsiderable po rtio n o f pro ductio n. T his, ho wever, required the successf ul tapping o f huge po tential po o ls o f labo r in the third wo rld to create a vast lo w- wage wo rkf o rce. T he expansio n o f the glo bal labo r f o rce available to capital in recent decades has o ccurred mainly as a result o f two f acto rs: (1) the depeasantizatio n o f a large po rtio n o f the glo bal periphery by means o f agribusiness—remo ving peasants f ro m the land, with the resulting expansio n o f the po pulatio n o f urban slums; and (2) the integratio n o f the wo rkf o rce o f the f o rmer “actually existing so cialist” co untries into the wo rld capitalist eco no my. Between 1980 and 2007 the glo bal labo r f o rce, acco rding to the Internatio nal Labo r Organisatio n (ILO), grew f ro m 1.9 billio n to 3.1 billio n, a rise o f 63 percent—with 73 percent o f the labo r f o rce lo cated in the develo ping wo rld, and 40 percent in China and India alo ne.6

T he change in the share o f “develo ping co untries” (ref erred to here as the glo bal So uth, altho ugh it includes so me Eastern Euro pean natio ns), in wo rld industrial emplo yment, in relatio n to “develo ped co untries” (the glo bal No rth) can be seen in Chart 1. It sho ws that the So uth’s share o f industrial emplo yment has risen dramatically f ro m 51 percent in 1980 to 73 percent in 2008. Develo ping co untry impo rts as a pro po rtio n o f the to tal impo rts o f the United States mo re than quadrupled in the last half o f the twentieth century.7

Chart 1. Distributio n o f Industrial Emplo yment, 1980– 2008

No tes: “Industrial emplo yment” is a bro ad catego ry that includes mining, manuf acturing, utilities (electricity, gas, and water supply), and co nstructio n. Fro m 2003 to 2007, manuf acturing and mining averaged 58.1 percent o f to tal industrial emplo yment in the United States, while in China the ratio was 75.2 percent (see “Table 4b. Emplo yment by 1- digit secto r level [ISIC- Rev.3, 1990]”). Based o n the two largest eco no mies, theref o re, the bro ad catego ry o f “industrial emplo yment” systematically understates the extent to which the wo rld share o f manuf acturing has gro wn in develo ping co untries. Classif icatio n o f co untries as “develo ping” (So uth) and “develo ped” (No rth) is taken f ro m UNCTAD. T he sample averaged 83 co untries o ver the entire perio d and there were breaks in the co untry- level series depending o n ILO data availability. Fo r example, data were o nly available f o r India in 2000 and 2005, and this explains the spikes in these two years.

So urces: ILO, “Key Indicato rs o f the Labo ur Market (KILM), Sixth Editio n,” So f tware Package (Geneva: Internatio nal Labo ur Organizatio n, 2009); UNCTAD, “Co untries, Eco no mic gro upings,” UNCTAD Statistical Databases Online, http://unctadstat.unctad.o rg (Geneva: Switzerland, 2011), generated June 28, 2011.

T he result o f these glo bal megatrends is the peculiar structure o f the wo rld eco no my that we f ind to day, with co rpo rate co ntro l and pro f its co ncentrated at the to p, while the glo bal labo r f o rce at the bo tto m is co nf ro nted with abysmally lo w wages and a chro nic insuf f iciency o f pro ductive emplo yment. Stagnatio n in the mature eco no mies and the resulting f inancializatio n o f accumulatio n have o nly intensif ied these tendencies by helping to drive what Stephen Ro ach o f Mo rgan Stanley dubbed “glo bal labo r arbitrage,” i.e., the system o f eco no mic rewards derived f ro m explo iting the internatio nal wage hierarchy, resulting in o utsized returns f o r co rpo ratio ns and investo rs.8

Our argument here is that the key to understanding these changes in the imperialist system (beyo nd the analysis o f the multinatio nal co rpo ratio n itself , which we have discussed elsewhere)9 is to be f o und in the gro wth o f the glo bal reserve army—as Hymer was amo ng the f irst to realize. No t o nly has the gro wth o f the glo bal capitalist labo r f o rce (including the available reserve army) radically altered the po sitio n o f third wo rld labo r, it also has had an ef f ect o n labo r in the rich eco no mies, where wage levels are stagnant o r declining f o r this and o ther reaso ns. Everywhere multinatio nal co rpo ratio ns have been able to apply a divide and rule po licy, altering the relative po sitio ns o f capital and labo r wo rldwide.

Mainstream eco no mics is no t o f much help in analyzing these changes. In line with the Panglo ssian view o f glo balizatio n advanced by New York Times co lumnist T ho mas Friedman, mo st o rtho do x eco no mists see the gro wth o f the glo bal labo r f o rce, the No rth- So uth shif t in jo bs, and the expansio n o f internatio nal lo w- wage

co mpetitio n as simply ref lecting an increasingly “f lat wo rld” in which eco no mic dif f erences (advantages/disadvantages) between natio ns are disappearing.10 As Paul Krugman, representing the stance o f o rtho do x eco no mics, has declared: “If po licy makers and intellectuals think it is impo rtant to emphasize the adverse ef f ects o f lo w- wage co mpetitio n [f o r develo ped co untries and the glo bal eco no my], then it is at least equally impo rtant f o r eco no mists and business leaders to tell them they are wro ng.” Krugman’s mistaken reaso ning here is based o n the assumptio n that wages will invariably adjust to pro ductivity gro wth, and the inevitable result will be a new wo rld- eco no mic equilibrium.11 All is f o r the best in the best o f all capitalist wo rlds. Indeed, if there are wo rries in the o rtho do x eco no mic camp in this respect, they have to do , as we shall see, with co ncerns abo ut ho w lo ng the huge gains derived f ro m glo bal labo r arbitrage can be maintained.12

In sharp co ntrast, we shall develo p an appro ach emphasizing that behind the pheno meno n o f glo bal labo r arbitrage lies a new glo bal phase in the develo pment o f Marx’s “abso lute general law o f capitalist accumulatio n,” acco rding to which:

T he greater the so cial wealth, the f unctio ning capital, the extent and energy o f its gro wth, and theref o re also the greater the abso lute mass o f the pro letariat and the pro ductivity o f its labo ur, the greater is the industrial reserve army…. But the greater this reserve army in pro po rtio n to the active labo ur- army, the greater is the mass o f a co nso lidated surplus po pulatio n, who se misery is in inverse ratio to the amo unt o f to rture it has to undergo in the f o rm o f labo ur. T he mo re extensive, f inally, the pauperized sectio ns o f the wo rking class and the industrial reserve army, the greater is o f f icial pauperism. This is the absolute general law of capitalist accumulation.13

“No wadays…the f ield o f actio n o f this ‘law,’” as Harry Magdo f f and Paul Sweezy stated in 1986,

is the entire glo bal capitalist system, and its mo st spectacular manif estatio ns are in the third wo rld where unemplo yment rates range up to 50 percent and destitutio n, hunger, and starvatio n are increasingly endemic. But the advanced capitalist natio ns are by no means immune to its o peratio n: mo re than 30 millio n men and wo men, in excess o f 10 percent o f the available labo r f o rce, are unemplo yed in the OECD co untries; and in the United States itself , the richest o f them all, o f f icially def ined po verty rates are rising even in a perio d o f cyclical upswing.14

T he new imperialism o f the late twentieth and twenty- f irst centuries is thus characterized, at the to p o f the wo rld system, by the do minatio n o f mo no po ly- f inance capital, and, at the bo tto m, by the emergence o f a massive glo bal reserve army o f labo r. T he result o f this immense po larizatio n, is an augmentatio n o f the “imperialist rent” extracted f ro m the So uth thro ugh the integratio n o f lo w- wage, highly explo ited wo rkers into capitalist pro ductio n. T his then beco mes a lever f o r an increase in the reserve army and the rate o f explo itatio n in the No rth as well.15

Marx and the General Law o f Accumulatio n

In addressing the general law o f accumulatio n, it is impo rtant f irst to take no te o f a co mmo n misco nceptio n directed at Marx’s tendential law. It is custo mary f o r establishment critics to attribute to Marx—o n the basis o f o ne o r at mo st two passages taken o ut o f co ntext—what these critics have dubbed as an “immiseratio n theo ry” o r a “do ctrine o f ever- increasing misery.”16 Illustrative o f this is Jo hn Strachey in his 1956 bo o k Contemporary Capitalism, the larger part o f which was devo ted to po lemicizing against Marx o n this po int. Strachey repeatedly co ntended that Marx had “predicted” that real wages wo uld no t rise under capitalism, so that wo rkers’ average standard o f living must remain co nstant o r decline—presenting this as a pro f o und erro r o n Marx’s part. Ho wever, Strachey, to gether with all subsequent critics who have advanced this view, managed o nly to pro vide a single partial sentence in Capital (plus o ne early o n in The Communist Manifesto—no t o ne o f Marx’s eco no mic wo rks) as purpo rted evidence f o r this. T hus in the f amo us summary paragraph o n the “expro priatio n o f the expro priato rs” at the end o f vo lume o ne, Marx (as quo ted by Strachey) wro te: “While there is thus a pro gressive diminutio n in the number o f the capitalist magnates (who usurp and mo no po lise all

the advantages o f this transf o rmative pro cess) there o ccurs a co rrespo nding increase in the mass o f po verty, o ppressio n, enslavement, degeneratio n and explo itatio n….”17

Hardly reso unding pro o f o f a crude immiseratio n thesis! Marx’s po int rather was that the system is po larized between the gro wing mo no po lizatio n o f capital by a relatively smaller number o f individual capitals at the to p and the relative impo verishment o f the great mass o f peo ple at the bo tto m. T his passage said no thing abo ut the mo vement o f real wages. Mo reo ver, Strachey deliberately excluded the sentence immediately preceding the o ne he quo ted, in which Marx indicated that he was co ncerned in this co ntext no t simply with the wo rking class o f the rich co untries but with the entire capitalist wo rld and the glo bal wo rking class—o r as he put it, “the entanglement o f all peo ples in the net o f the wo rld market, and, with this, the gro wth o f the internatio nal character o f the capitalist regime.” Indeed, the “kernel o f truth” to the “theo ry o f immiseratio n,” Ro man Ro sdo lsky wro te in The Making of Marx’s ‘Capital’, lay in the f act that such tendencies to wards an abso lute increase in human misery can be f o und “in two spheres: f irstly (tempo rary) in all times o f crisis, and seco ndly (permanent) in the so - called underdevelo ped areas o f the wo rld.”18

Far f ro m being a crude theo ry o f immiseratio n, Marx’s general law was an attempt to explain ho w the accumulatio n o f capital co uld o ccur at all: that is, why the gro wth in demand f o r labo r did no t lead to a co ntinual rise in wages, which wo uld squeeze pro f its and cut o f f accumulatio n. Mo reo ver, it served to explain: (1) the f unctio nal ro le that unemplo yment played in the capitalist system; (2) the reaso n why crisis was so devastating to the wo rking class as a who le; and (3) the tendency to wards the pauperizatio n o f a large part o f the po pulatio n. To day it has its greatest signif icance in acco unting f o r “glo bal labo r arbitrage,” i.e., capital’s earning o f eno rmo us mo no po listic returns o r imperial rents by shif ting certain secto rs o f pro ductio n to underdevelo ped regio ns o f the wo rld to take advantage o f the glo bal immo bility o f labo r, and the existence o f subsistence (o r belo w subsistence) wages in much o f the glo bal So uth.

As Fredric Jameso n recently no ted in Representing Capital, despite the “mo ckery” thro wn at Marx’s general law o f accumulatio n in the early po st- Seco nd Wo rld War era, “it is…no lo nger a jo king matter.” Rather, the general law highlights “the actuality to day o f Capital o n a wo rld scale.”19

It is theref o re essential to take a clo se examinatio n o f Marx’s argument. In his best- kno wn single statement o n the general law o f accumulatio n, Marx wro te:

In proportion as capital accumulates, the situatio n o f the wo rker, be his payment high or low, must gro w wo rse.… T he law which always ho lds the relative surplus po pulatio n in equilibrium with the extent and energy o f accumulatio n rivets the wo rker to capital mo re f irmly than the wedges o f Hephaestus held Pro metheus to the ro ck. It makes an accumulatio n o f misery a necessary co nditio n, corresponding to the accumulatio n o f wealth. Accumulatio n at o ne po le is, theref o re, at the same time accumulatio n o f misery, the to rment o f labo ur, slavery, igno rance, brutalizatio n and mo ral degradatio n at the o ppo site po le, i.e. o n the side o f the class that pro duces its o wn pro duct as capital [italics added].20

By po inting to an “equilibrium” between accumulatio n o f capital and the “relative surplus po pulatio n” o r reserve army o f labo r, Marx was arguing, that under “no rmal” co nditio ns the gro wth o f accumulatio n is able to pro ceed unhindered o nly if it also results in the displacement o f large numbers o f wo rkers. T he resulting “redundancy” o f wo rkers checks any tendency to ward a to o rapid rise in real wages which wo uld bring accumulatio n to a halt. Rather than a crude theo ry o f “immiseratio n,” then, the general law o f accumulatio n highlighted that capitalism, via the co nstant generatio n o f a reserve army o f the unemplo yed, naturally tended to po larize between relative wealth at the to p and relative po verty at the bo tto m—with the threat o f f alling into the latter co nstituting an eno rmo us lever f o r the increase in the rate o f explo itatio n o f emplo yed wo rkers.

Marx co mmenced his treatment o f the general law by straightf o rwardly o bserving, as we have no ted, that the accumulatio n o f capital, all o ther things being equal, increased the demand f o r labo r. In o rder to prevent this gro wing demand f o r labo r f ro m co ntracting the available supply o f wo rkers, and thereby f o rcing up wages and

squeezing pro f its, it was necessary that a co unterf o rce co me into being that wo uld reduce the amo unt o f labo r needed at any given level o f o utput. T his was acco mplished primarily thro ugh increases in labo r pro ductivity with the intro ductio n o f new capital and techno lo gy, resulting in the displacement o f labo r. (Marx specif ically rejected the classical “iro n law o f wages” that saw the labo r f o rce as determined primarily by po pulatio n gro wth.) In this way, by “co nstantly revo lutio nizing the instruments o f pro ductio n,” the capitalist system is able, no less co nstantly, to repro duce a relative surplus po pulatio n o r reserve army o f labo r, which co mpetes f o r jo bs with tho se in the active labo r army.21 “T he industrial reserve army,” Marx wro te, “during perio ds o f stagnatio n and average pro sperity, weighs do wn the active army o f wo rkers; during the perio d o f o ver- pro ductio n and f everish activity, it puts a curb o n their pretensio ns. T he relative surplus po pulatio n is theref o re the backgro und against which the law o f the demand and supply o f labo ur do es its wo rk. It co nf ines the f ield o f actio n o f this law to the limits abso lutely co nvenient to capital’s drive to explo it and do minate the wo rkers.”22

It f o llo wed that if this essential lever o f accumulatio n were to be maintained, the reserve army wo uld need to be co ntinually resto cked so as to remain in a co nstant (if no t increasing) ratio to the active labo r army. While generals wo n battles by “recruiting” armies, capitalists wo n them by “discharging the army o f wo rkers.”23

It is impo rtant to no te that Marx develo ped his well- kno wn analysis o f the co ncentratio n and centralizatio n o f capital as part the argument o n the general law o f accumulatio n. T hus the tendency to ward the do minatio n o f the eco no my by bigger and f ewer capitals, was as much a part o f his o verall argument o n the general law as was the gro wth o f the reserve army itself . T he two pro cesses were inextricably bo und to gether.24

Marx’s breakdo wn o f the reserve army o f labo r into its vario us co mpo nents was co mplex, and was clearly aimed bo th at co mprehensiveness and at deriving what were f o r his time statistically relevant catego ries. It included no t o nly tho se who were “who lly unemplo yed” but also tho se who were o nly “partially emplo yed.” T hus the relative surplus po pulatio n, he wro te, “exists in all kinds o f f o rms.” Nevertheless, o utside o f perio ds o f acute eco no mic crisis, there were three majo r f o rms o f the relative surplus po pulatio n: the f lo ating, latent, and stagnant. On to p o f that there was the who le additio nal realm o f o f f icial pauperism, which co ncealed even mo re elements o f the reserve army.

T he f lo ating po pulatio n co nsisted o f wo rkers who were unemplo yed due to the no rmal ups and do wns o f accumulatio n o r as a result o f techno lo gical unemplo yment: peo ple who have recently wo rked, but who were no w o ut o f wo rk and in the pro cess o f searching f o r new jo bs. Here Marx discussed the age structure o f emplo yment and its ef f ects o n unemplo yment, with capital co nstantly seeking yo unger, cheaper wo rkers. So explo itative was the wo rk pro cess that wo rkers were physically used up quickly and discarded at a f airly early age well bef o re their wo rking lif e was pro perly o ver.25

T he latent reserve army was to be f o und in agriculture, where the demand f o r labo r, Marx wro te, “f alls abso lutely” as so o n as capitalist pro ductio n has taken it o ver. Hence, there was a “co nstant f lo w” o f labo r f ro m subsistence agriculture to industry in the to wns: “T he co nstant mo vement to wards the to wns presuppo ses, in the co untryside itself , a co nstant latent surplus po pulatio n, the extent o f which o nly beco mes evident at tho se exceptio nal times when its distributio n channels are wide o pen. T he wages o f the agricultural labo urer are theref o re reduced to a minimum, and he always stands with o ne f o o t already in the swamp o f pauperism.”26

T he third majo r f o rm o f the reserve army, the stagnant po pulatio n, f o rmed, acco rding to Marx, “a part o f the active reserve army but with extremely irregular emplo yment.” T his included all so rts o f part- time, casual (and what wo uld to day be called inf o rmal) labo r. T he wages o f wo rkers in this catego ry co uld be said to “sink belo w the average no rmal level o f the wo rking class” (i.e., belo w the value o f labo r po wer). It was here that the bulk o f the masses ended up who had been “made ‘redundant’” by large- scale industry and agriculture. Indeed, these wo rkers represented “a pro po rtio nately greater part” o f “the general increase in the [wo rking] class than the o ther elements” o f the reserve army.

T he largest part o f this stagnant reserve army was to be f o und in “mo dern do mestic industry,” which co nsisted o f “o utwo rk” carried o ut thro ugh the agency o f subco ntracto rs o n behalf o f manuf acture, and do minated by so - called “cheap labo r,” primarily wo men and children. Of ten such “o utwo rkers” o utweighed f acto ry labo r in an industry. Fo r example, a shirt f acto ry in Lo ndo nderry emplo yed 1,000 wo rkers but also had ano ther 9,000 o utwo rkers attached to it stretched o ut o ver the co untryside. Here the mo st “murdero us side o f the eco no my” was revealed.27

Fo r Marx, pauperism co nstituted “the lo west sediment o f the relative surplus po pulatio n” and it was here that the “precario us…co nditio n o f existence” o f the entire wo rking po pulatio n was mo st evident. “Pauperism,” he wro te, “is the ho spital o f the active labo r- army and the dead weight o f the industrial reserve army.” Beyo nd the actual “lumpenpro letariat” o r “vagabo nds, criminals, pro stitutes,” etc., there were three catego ries o f paupers. First, tho se who were able to wo rk, and who ref lected the dro p in the numbers o f the po o r in every perio d o f industrial pro sperity, when the demand f o r labo r was greatest. T hese destitute elements emplo yed o nly in times o f pro sperity were an extensio n o f the active labo r army. Seco nd, it included o rphans and pauper children, who in the capitalist system were drawn into industry in great numbers during perio ds o f expansio n. T hird, it enco mpassed “the demo ralized, the ragged, and tho se unable to wo rk, chief ly peo ple who succumb to their incapacity f o r adaptatio n, an incapacity that arises f ro m the divisio n o f labo ur; peo ple who have lived beyo nd the wo rker ’s average lif e- span; and the victims o f industry who se number increases with the gro wth o f dangero us machinery, o f mines, chemical wo rkers, etc., the mutilated, the sickly, the wido ws, etc.” Such pauperism was a creatio n o f capitalism itself , “but capital usually kno ws ho w to transf er these [so cial co sts] f ro m its o wn sho ulders to tho se o f the wo rking class and the petty bo urgeo isie.”28

T he f ull extent o f the glo bal reserve army was evident in perio ds o f eco no mic pro sperity, when much larger numbers o f wo rkers were tempo rarily drawn into emplo yment. T his included f o reign wo rkers. In additio n to the sectio ns o f the reserve armies mentio ned abo ve, Marx no ted that Irish wo rkers were drawn into emplo yment in English industry in perio ds o f peak pro ductio n—such that they co nstituted part o f the relative surplus po pulatio n f o r English pro ductio n.29 T he tempo rary reductio n in the size o f the reserve army in co mpariso n to the active labo r army at the peak o f the business cycle had the ef f ect o f pulling up wages abo ve their average value and squeezing pro f its—tho ugh Marx repeatedly indicated that such increases in real wages were no t the principal cause o f crises in pro f itability, and never threatened the system itself .30

During an eco no mic crisis, many o f the wo rkers in the active labo r army wo uld themselves be made “redundant,” thereby increasing the numbers o f unemplo yed o n to p o f the no rmal reserve army. In such perio ds, the eno rmo us weight o f the relative surplus po pulatio n wo uld tend to pull wages do wn belo w their average value (i.e., the histo rically determined value o f labo r po wer). As Marx himself put it: “Stagnatio n in pro ductio n makes part o f the wo rking class idle and hence places the emplo yed wo rkers in co nditio ns where they have to accept a f all in wages, even belo w the average.”31 Hence, in times o f eco no mic crisis, the wo rking class as an o rganic who le, enco mpassing the active labo r army and the reserve army, was placed in dire co nditio ns, with a multitude o f peo ple succumbing to hunger and disease.

Marx was unable to co mplete his critique o f po litical eco no my, and co nsequently never wro te his pro jected vo lume o n wo rld trade. Nevertheless, it is clear that he saw the general law o f accumulatio n as extending eventually to the wo rld level. Capital lo cated in the rich co untries, he believed, wo uld take advantage o f cheaper labo r abro ad—and o f the higher levels o f explo itatio n in the underdevelo ped parts o f the wo rld made po ssible by the existence o f vast surplus labo r po o ls (and no n- capitalist mo des o f pro ductio n). In his speech to the Lausanne Co ngress o f the First Internatio nal in 1867 (the year o f the publicatio n o f the f irst vo lume o f Capital) he declared: “A study o f the struggle waged by the English wo rking class reveals that, in o rder to o ppo se their wo rkers, the emplo yers either bring in wo rkers f ro m abro ad o r else transf er manuf acture to co untries where there is a cheap labo r f o rce. Given this state o f af f airs, if the wo rking class wishes to co ntinue its struggle with so me chance o f success, the natio nal o rganisatio ns must beco me internatio nal.”32

T he reality o f unequal exchange, whereby, in Marx’s wo rds, “the richer co untry explo its the po o rer, even where the latter gains by the exchange,” was a basic, scientif ic po stulate o f classical eco no my, to be f o und in bo th Ricardo and J.S. Mill. T hese higher pro f its were tied to the cheapness o f labo r in po o r co untries—attributable in turn to underdevelo pment, and a seemingly unlimited labo r supply (albeit much o f it f o rced labo r). “T he pro f it rate,” Marx o bserved, “is generally higher there [in the co lo nies] o n acco unt o f the lo wer degree o f develo pment, and so to o is the explo itatio n o f labo ur, thro ugh the use o f slaves, co o lies, etc.” In all trade relatio ns, the richer co untry was in a po sitio n to extract what were in ef f ect “mo no po ly pro f its” (o r imperial rents) since “the privileged co untry receives mo re labo ur in exchange f o r less,” while inversely, “the po o rer co untry gives mo re o bjectif ied labo ur in kind than it receives.” Hence, as o ppo sed to a single co untry where gains and lo sses evened o ut, it was quite po ssible and indeed co mmo n, Marx argued, f o r o ne natio n to “cheat” ano ther. T he gro wth o f the relative surplus po pulatio n, particularly at the glo bal level, represented such a po werf ul inf luence in raising the rate o f explo itatio n, in Marx’s co nceptio n, that it co uld be seen as a majo r “co unterweight” to the tendency o f the rate o f pro f it to f all, “and in part even paralyse[s] it.”33

T he o ne classical Marxist theo rist who made usef ul additio ns to Marx’s reserve army analysis with respect to imperialism was Ro sa Luxemburg. In The Accumulation of Capital she argued that in o rder f o r accumulatio n to pro ceed “capital must be able to mo bilise wo rld labo ur po wer witho ut restrictio n.” Acco rding to Luxemburg, Marx had been to o “inf luenced by English co nditio ns invo lving a high level o f capitalist develo pment.” Altho ugh he had addressed the latent reserve in agriculture, he had no t dealt with the drawing o f surplus labo r f ro m no n- capitalist mo des o f pro ductio n (e.g., the peasantry) in his descriptio n o f the reserve army. Ho wever, it was mainly here that the surplus labo r f o r glo bal accumulatio n was to be f o und. It was true, Luxemburg ackno wledged, that Marx discussed the expro priatio n o f the peasantry in his treatment o f “so - called primitive accumulatio n,” in the chapter o f Capital immediately f o llo wing his discussio n o f the general law. But that argument was co ncerned primarily with the “genesis o f capital” and no t with its co ntempo rary f o rms. Hence, the reserve army analysis had to be extended in a glo bal co ntext to take into acco unt the eno rmo us “so cial reservo ir” o f no n- capitalist labo r.34

Glo bal Labo r Arbitrage

T he pursuit o f “an ever extended market” Marx co ntended, is an “inner necessity” o f the capitalist mo de o f pro ductio n.35 T his inner necessity to o k o n a new signif icance, ho wever, with the rise o f mo no po ly capitalism in the late nineteenth and early twentieth centuries. T he emergence o f multinatio nal co rpo ratio ns, f irst in the giant o il co mpanies and a handf ul o f o ther f irms in the early twentieth century, and then beco ming a much mo re general pheno meno n in the po st- Seco nd Wo rld War years, was a pro duct o f the co ncentratio n and centralizatio n o f capital o n a wo rld scale; but equally invo lved the transf o rmatio n o f wo rld labo r and pro ductio n.

It was the increasing multinatio nal co rpo rate do minance o ver the wo rld eco no my, in f act, that led to the mo dern co ncept o f “glo balizatio n,” which aro se in the early 1970s as eco no mists, particularly tho se o n the lef t, tried to understand the way in which the giant f irms were reo rganizing wo rld pro ductio n and labo r co nditio ns.36 T his was clearly evident by the early 1970s—no t o nly in Hymer ’s wo rk, but also in Richard Barnet and Ro nald Müller ’s inf luential 1974 wo rk, Global Reach, in which they argued: “T he rise o f the glo bal co rpo ratio n represents the glo balizatio n o f o ligo po ly capitalism.” T his was “the culminatio n o f a pro cess o f co ncentratio n and internatio nalizatio n that has put the wo rld eco no my under the substantial co ntro l o f a f ew hundred business enterprises which do no t co mpete with o ne ano ther acco rding to the traditio nal rules o f the market.” Mo reo ver, the implicatio ns f o r labo r were eno rmo us. Explaining ho w o ligo po listic rivalry no w meant searching f o r the lo west unit labo r co sts wo rldwide, Barnet and Müller argued that this had generated “the ‘runaway sho p’ which beco mes the ‘expo rt platf o rm’ in an underdevelo ped co untry,” and which had beco me a necessity o f business f o r U.S. co mpanies, just like their Euro pean and Japanese co mpetito rs.37

Over the past half century, these glo bal o ligo po lies have been o f f sho ring who le secto rs o f pro ductio n f ro m the rich/high- wage to the po o r/lo w- wage co untries, transf o rming glo bal labo r co nditio ns in their search f o r

the rich/high- wage to the po o r/lo w- wage co untries, transf o rming glo bal labo r co nditio ns in their search f o r glo bal lo w- co st po sitio n, and in a divide and rule appro ach to wo rld labo r. Leading U.S. multinatio nals, such as General Electric, Exxo n, Chevro n, Fo rd, General Mo to rs, Pro cto r and Gamble, IBM, Hewlett Packard, United Techno lo gies, Jo hnso n and Jo hnso n, Alco a, Kraf t, and Co ca Co la no w emplo y mo re wo rkers abro ad than they do in the United States—even witho ut co nsidering the vast number o f wo rkers they emplo y thro ugh subco ntracto rs. So me majo r co rpo ratio ns, such as Nike and Reebo k, rely o n third wo rld subco ntracto rs f o r 100 percent o f their pro ductio n wo rkf o rce—with do mestic emplo yees co nf ined simply to managerial, pro duct develo pment, marketing, and distributio n activities.38 T he result has been the pro letarianizatio n, o f ten under precario us co nditio ns, o f much o f the po pulatio n o f the underdevelo ped co untries, wo rking in massive expo rt zo nes under co nditio ns dictated by f o reign multinatio nals.

Two realities do minate labo r at the wo rld level to day. One is glo bal labo r arbitrage o r the system o f imperial rent. T he o ther is the existence o f a massive glo bal reserve army, which makes this wo rld system o f extreme explo itatio n po ssible. “Labo ur arbitrage” is def ined quite simply by The Economist as “taking advantage o f lo wer wages abro ad, especially in po o r co untries.” It is thus an unequal exchange pro cess in which o ne co untry, as Marx said, is able to “cheat” ano ther due to the much higher explo itatio n o f labo r in the po o rer co untry.39 A study o f pro ductio n in China’s industrialized Pearl River Delta regio n (enco mpassing Guangzho u, Shenzhen, and Ho ng Ko ng) f o und in 2005 that so me wo rkers were co mpelled to wo rk up to sixteen ho urs co ntinuo usly, and that co rpo ral punishment was ro utinely emplo yed as a means o f wo rker discipline. So me 200 millio n Chinese are said to wo rk in hazardo us co nditio ns, claiming o ver a 100,000 lives a year.40

It is such superexploitation that lies behind much o f the expansio n o f pro ductio n in the glo bal So uth.41 T he f act that this has been the basis o f rapid eco no mic gro wth f o r so me emerging eco no mies do es no t alter the reality that it has generated eno rmo us imperial rents f o r multinatio nal co rpo ratio ns and capital at the center o f the system. As labo r eco no mist Charles Whalen has written, “T he prime mo tivatio n behind o f f sho ring is the desire to reduce labo r co sts…a U.S.- based f acto ry wo rker hired f o r $21 an ho ur can be replaced by a Chinese f acto ry wo rker who is paid 64 cents an ho ur…. T he main reaso n o f f sho ring is happening no w is because it can.”42

Ho w this system o f glo bal labo r arbitrage o ccurs by way o f glo bal supply chains, ho wever, is eno rmo usly co mplex. Dell, the PC assembler, purchases so me 4,500 parts f ro m 300 dif f erent suppliers in multiple co untries aro und the wo rld.43 As the Asian Develo pment Bank Institute indicated in a 2010 study o f iPho ne pro ductio n: “It is almo st impo ssible [to day] to def ine clearly where a manuf actured pro duct is made in the glo bal market. T his is why o n the back o f iPho nes o ne can read ‘Designed by Apple in Calif o rnia, Assembled in China.’” Altho ugh bo th statements o n the back o f the iPho nes are literally co rrect, neither answers the questio n o f where the real pro ductio n takes place. Apple do es no t itself manuf acture the iPho ne. Rather the actual manuf acture (that is, everything but its so f tware and design) takes place primarily o utside the United States. T he pro ductio n o f iPho ne parts and co mpo nents is carried o ut principally by eight co rpo ratio ns (To shiba, Samsung, Inf ineo n, Bro adco m, Numo nyx, Murata, Dialo g Semico nducto r, and Cirrus Lo gic), which are lo cated in Japan, So uth Ko rea, Germany, and the United States. All o f the majo r parts and co mpo nents o f the iPho ne are then shipped to the Shenzhen, China plants o f Fo xco nn (a co mpany headquartered in Taipei) f o r assembly and expo rt to the United States.

Apple’s eno rmo us, co mplex glo bal supply chain f o r iPo d pro ductio n is aimed at o btaining the lo west unit labo r co sts (taking into co nsideratio n labo r co sts, techno lo gy, etc.), appro priate f o r each co mpo nent, with the f inal assembly taking place in China, where pro ductio n o ccurs o n a massive scale, under eno rmo us intensity, and with ultra- lo w wages. In Fo xco nn’s Lo nghu, Shenzhen f acto ry 300,000 to 400,000 wo rkers eat, wo rk, and sleep under ho rrendo us co nditio ns, with wo rkers, who are co mpelled to do rapid hand mo vements f o r lo ng ho urs f o r mo nths o n end, f inding themselves twitching co nstantly at night. Fo xco nn wo rkers in 2009 were paid the minimum mo nthly wage in Shenzhen, o r abo ut 83 cents an ho ur. (Overall in China in 2008 manuf acturing wo rkers were paid $1.36 an ho ur, acco rding to U.S. Bureau o f Labo r Statistics data.)

Despite the massive labo r input o f Chinese wo rkers in assembling the f inal pro duct, their lo w pay means that their wo rk o nly amo unts to 3.6 percent o f the to tal manuf acturing co st (shipping price) o f the iPho ne. T he o verall pro f it margin o n iPho nes in 2009 was 64 percent. If iPho nes were assembled in the United States— assuming labo r co sts ten times that in China, equal pro ductivity, and co nstant co mpo nent co sts—Apple wo uld still have an ample pro f it margin, but it wo uld dro p f ro m 64 percent to 50 percent. In ef f ect, Apple makes 22 percent o f its pro f it margin o n iPho ne pro ductio n f ro m the much higher rate o f explo itatio n o f Chinese labo r.44

Of co urse in stipulating a mere tenf o ld dif f erence in wages between the United States and China, in its calculatio n o f the lo wer pro f it margins to be gained with United States as o ppo sed to Chinese assembly, the Asian Develo pment Bank Institute was ado pting a very co nservative assumptio n. Overall Chinese manuf acturing wo rkers in 2008, acco rding to the U.S. Bureau o f Labo r Statistics, received o nly 4 percent o f the co mpensatio n f o r co mparable wo rk in the United States, and 3 percent o f that in the Euro pean Unio n.45 In co mpariso n, ho urly manuf acturing wages in Mexico in 2008 were abo ut 16 percent o f the U.S. level.46

In spite o f the lo w- wage “advantage” o f China, so me areas o f Asia, such as Cambo dia, Vietnam, and Bangladesh, have ho urly co mpensatio n levels still lo wer, leading to a divide and rule tendency f o r multinatio nal co rpo ratio ns—co mmo nly acting thro ugh subco ntracto rs—to lo cate so me secto rs o f pro ductio n, such as light industrial textile pro ductio n, primarily in these still lo wer wage co untries. T hus the New York Times indicated in July 2010, that Li & Fung, a Ho ng Ko ng- based co mpany “that handles so urcing and apparel manuf acturing f o r co mpanies like Wal- Mart and Liz Claibo rne” increased its pro ductio n in Bangladesh by 20 percent in 2010, while China, its biggest supplier, slid 5 percent. Garment wo rkers in Bangladesh earned aro und $64 a mo nth, co mpared “to minimum wages in China’s co astal industrial pro vinces ranging f ro m $117 to $147 a mo nth.”47

Fo r multinatio nal co rpo ratio ns there is a clear lo gic to all o f this. As General Electric CEO Jef f rey Immelt stated, the “mo st successf ul China strategy”—with China here clearly standing f o r glo bal labo r arbitrage in general —“is to capitalize o n its market gro wth while expo rting its def latio nary po wer.” T his “def latio nary po wer” has to do o f co urse with lo wer labo r co sts (and lo wer co sts o f repro ductio n o f labo r in the No rth thro ugh the lo wering o f the co sts o f wage- co nsumptio n go o ds). It thus represents a glo bal strategy f o r raising the rate o f surplus value (widening pro f it margins).48

To day Marx’s reserve army analysis is the basis, directly and indirectly (even in co rpo rate circles) f o r ascertaining ho w lo ng the extreme explo itatio n o f lo w- wage wo rkers in the underdevelo ped wo rld will persist. In 1997 Jannik Lindbaek, executive vice president o f the Internatio nal Finance Co rpo ratio n, presented an inf luential paper entitled “Emerging Eco no mies: Ho w Lo ng Will the Lo w- Wage Advantage Last?” He po inted o ut that internatio nal wage dif f erentials were eno rmo us, with labo r co sts f o r spinning and weaving in rich co untries exceeding that o f the lo west wage co untries (Pakistan, Madagascar, Kenya, Indo nesia, and China) by a f acto r o f seventy- to - o ne in straight do llar terms, and ten- to - o ne in terms o f purchasing po wer parity (taking into acco unt the lo cal co st o f living).

T he central issue f ro m the standpo int o f glo bal capital, Lindbaek indicated, was China, which had emerged as an eno rmo us platf o rm f o r pro ductio n, due to its ultra- lo w wages and seemingly unlimited supply o f labo r. T he key strategic questio n then was, “Ho w lo ng will China’s lo w wage advantage last?” His answer was that China’s “eno rmo us ‘reserve army o f labo r ’…will be released gradually as agricultural pro ductivity impro ves and jo bs are created in the cities.” Lo o king at vario us demo graphic f acto rs, including the expected do wnward shif t in the number o f wo rking- age individuals beginning in the seco nd decade o f the twenty- f irst century, Lindbaek indicated that real wages in China wo uld eventually rise abo ve subsistence. But when?49

In mainstream eco no mics, the analysis o f the ro le o f surplus labo r in ho lding do wn wages in the glo bal So uth draws primarily o n W. Arthur Lewis’s f amo us article “Eco no mic Develo pment with Unlimited Supplies o f Labo ur,” published in 1954. Basing his argument o n the classical eco no mics o f Adam Smith and Marx (relying in f act primarily o n the latter), Lewis argued that in third wo rld co untries with vast, seemingly “unlimited” supplies o f labo r, capital accumulatio n co uld o ccur at a high rate while wages remained co nstant and at subsistence level.

T his was due to the very high reserve army o f labo r, including “the f armers, the casuals, the petty traders, the retainers (do mestic and co mmercial), wo men in the ho useho ld, and po pulatio n gro wth.” Altho ugh Lewis (in his o riginal article o n the subject) erro neo usly co nf ined Marx’s o wn reserve army co ncept to the narro w questio n o f techno lo gical unemplo yment—claiming o n this basis that Marx was wro ng o n empirical gro unds—he in f act ado pted the bro ader f ramewo rk o f Marx’s reserve army analysis as his o wn. T hus he po inted to the eno rmo us latent surplus po pulatio n in agriculture. He also turned to Marx’s no tio n o f primitive accumulatio n, to indicate ho w the depeasantizatio n o f the no n- capitalist secto r might take place.

Lewis, ho wever, is best kno wn within mainstream eco no mics f o r having argued that eventually a turning point wo uld o ccur. At so me po int capital accumulatio n wo uld exceed the supply o f surplus labo r (primarily f ro m a slo wdo wn in internal migratio n f ro m the co untryside) resulting in a rise in the real wages o f wo rkers in industry. As he put it, “the pro cess” o f accumulatio n with “unlimited labo r” and hence co nstant real wages must eventually sto p “when capital accumulatio n has caught up with the labo ur supply.”50

To day the Lewisian f ramewo rk, o verlapping with Marx’s reserve army theo ry and in f act derived f ro m it—but pro po unding the view (which Marx did no t) that the reserve army o f labo r will ultimately be transcended in po o r co untries as part o f a smo o th path o f capitalist develo pment—is the primary basis o n which establishment eco no mics raises the issue o f ho w lo ng glo bal labo r arbitrage can last, particularly in relatio n to China. T he co ncern is whether the huge imperial rents no w being received f ro m the superexplo itatio n o f labo r in the po o r co untries will rapidly shrink o r even disappear. The Economist magazine, f o r example, wo rries that a Lewisian turning po int, co mbined with gro wing labo r revo lts in China, will so o n bring to an end the huge surplus pro f its f ro m the China trade. Chinese wo rkers “in the cities at least,” it co mplains, “are no w as expensive as their T hai o r Filipino peers.” “T he end o f surplus labo r,” The Economist declares, “is no t an event, but a pro cess. And that pro cess may already be under way.” A who le ho st o f f acto rs, such as demo graphy, the stability o f Chinese rural labo r with its f amily plo ts, and the gro wing o rganizatio n o f wo rkers, may cause labo r co nstraints to co me into play earlier than had been expected. At the very least, The Economist suggests, the eno rmo us gains o f capital in the No rth that o ccurred “between 1997 and 2005 [when] the price o f Chinese expo rts to America f ell by mo re than 12%” are unlikely to be repeated. And if wages in China rise, cutting into imperial rents, where will multinatio nal co rpo ratio ns turn? “Vietnam is cheap: its inco me per perso n is less than a third o f China’s. But its po o l o f wo rkers is no t that deep.”51

Writing in Monthly Review, eco no mist Minqi Li no tes that since the early 1980s 150 millio n wo rkers in China have migrated f ro m rural to urban areas. China thus experienced a 13 percentage- po int dro p (f ro m 50 percent to 37 percent) in the share o f wages in GDP between 1990 and 2005. No w “af ter many years o f rapid accumulatio n, the massive reserve army o f cheap labo r in China’s rural areas is starting to beco me depleted.” Li f o cuses mainly o n demo graphic analysis, indicating that China’s to tal wo rkf o rce is expected to peak at 970 millio n by 2012, and then decline by 30 millio n by 2020, with the decline o ccurring mo re rapidly amo ng the prime age wo rking po pulatio n. T his he believes will impro ve the bargaining po wer o f wo rkers and strengthen industrial strif e in China, raising issues o f radical transf o rmatio n. Such industrial strif e will inevitably mo unt if China’s no n- agricultural po pulatio n passes “the critical thresho ld o f 70 percent by aro und 2020.”52

Others think that glo bal labo r arbitrage with respect to China is f ar f ro m o ver. Yang Yao , an eco no mist at Peking University, argues that “the co untryside still has 45% o f China’s labo ur f o rce,” a huge reserve army o f hundreds o f millio ns, much o f which will beco me available to industry as mechanizatio n pro ceeds. Stephen Ro ach has o bserved that with Chinese wages at 4 percent o f U.S. wages, there is “barely…a dent in narro wing the arbitrage with majo r industrial eco no mies”—while China’s “ho urly co mpensatio n in manuf acturing” is “less than 15% o f that elsewhere in East Asia” (excluding Japan), and well belo w that o f Mexico .53

T he Glo bal Reserve Army

In o rder to develo p a f irmer grasp o f this issue it is crucial to lo o k bo th empirically and theo retically at the glo bal reserve army as it appears in the current histo rical co ntext—and then bring to bear the entire Marxian

critique o f imperialism. Witho ut such a co mprehensive critique, analyses o f such pro blems as the glo bal shif t in pro ductio n, the glo bal labo r arbitrage, deindustrializatio n, etc., are mere partial o bservatio ns suspended in mid- air.

T he data o n the glo bal wo rkf o rce co mpiled by the ILO co nf o rms clo sely to Marx’s main distinctio ns with regard to the active labo r army and the reserve army o f labo r. In the ILO picture o f the wo rld wo rkf o rce in 2011, 1.4 billio n wo rkers are wage wo rkers—many o f who m are precario usly emplo yed, and o nly part- time wo rkers. In co ntrast, the number o f tho se co unted as unemplo yed wo rldwide in 2009 co nsisted o f o nly 218 millio n wo rkers. (In o rder to be classif ied as unemplo yed, wo rkers need to have actively pursued jo b searches in the previo us f ew weeks). T he unemplo yed, in this sense, can be seen as co nf o rming ro ughly to Marx’s “f lo ating” po rtio n o f the reserve army.

A f urther 1.7 billio n wo rkers are classif ied to day as “vulnerably emplo yed.” T his is a residual catego ry o f the “eco no mically active po pulatio n,” co nsisting o f all tho se who wo rk but are no t wage wo rkers—o r part o f the active labo r army in Marx’s termino lo gy. It includes two catego ries o f wo rkers: “o wn– acco unt wo rkers” and “co ntributing f amily wo rkers.”

“Own- acco unt wo rkers,” acco rding to the ILO, enco mpasses wo rkers engaged in a co mbinatio n o f “subsistence and entrepreneurial activities.” T he urban co mpo nent o f the “o wn- acco unt wo rkers” in third- wo rld co untries is primarily made up o f wo rkers in the inf o rmal secto r, i.e. street wo rkers o f vario us kinds, while the agricultural co mpo nent co nsists largely o f subsistence agriculture. “T he glo bal inf o rmal wo rking class,” Mike Davis o bserved in Planet of the Slums, “is abo ut o ne billio n stro ng, making it the f astest- gro wing, and mo st unprecedented, so cial class o n earth.”54

T he seco nd catego ry o f the vulnerably emplo yed, “co ntributing f amily wo rkers,” co nsists o f unpaid f amily wo rkers. Fo r example, in Pakistan “mo re than two - thirds o f the f emale wo rkers that entered emplo yment during 1999/00 to 2005/06 co nsisted o f co ntributing f amily wo rkers.”55

T he “vulnerably emplo yed” thus includes the greater part o f the vast po o ls o f underemplo yed o utside o f f icial unemplo yment ro lls, in po o r co untries in particular. It ref lects the f act that, as Michael Yates writes, “In mo st o f the wo rld, o pen unemplo yment is no t an o ptio n; there is no saf ety net o f unemplo yment co mpensatio n and o ther so cial welf are pro grams. Unemplo yment means death, so peo ple must f ind wo rk, no matter ho w o nero us the co nditio ns.”56 T he vario us co mpo nents o f vulnerably emplo yed wo rkers co rrespo nd to what Marx described as the “stagnant” and “latent” po rtio ns o f the reserve army.

Additio nally, many individuals o f wo rking age are classif ied as no t belo nging to the eco no mically active po pulatio n, and thus as eco no mically inactive. Fo r the prime wo rking ages o f 25– 54 years this adds up, glo bally, to 538 millio n peo ple in 2011. T his is a very hetero geneo us gro uping including university students, primarily in wealthier co untries; the criminal element engendered at the bo tto m o f the capitalist eco no my (what Marx called the lumpenpro letariat); disco uraged and disabled wo rkers, who have been marginalized by the system; and in general what Marx called the pauperized po rtio n o f the wo rking class—that po rtio n o f wo rking age individuals, “the demo ralized, the ragged,” and the disabled, who have been almo st co mpletely shut o ut o f the labo r f o rce. It is here, he argued, that o ne f inds the mo st “precario us…co nditio n o f existence.” Of f icially designated “disco uraged wo rkers” are a signif icant number o f wo uld- be wo rkers. Acco rding to the ILO, if disco uraged wo rkers are included in Bo tswana’s unemplo yment rate in 2006 it nearly do ubles f ro m 17.5 percent to 31.6 percent.57

If we take the catego ries o f the unemplo yed, the vulnerably emplo yed, and the eco no mically inactive po pulatio n in prime wo rking ages (25– 54) and add them to gether, we co me up with what might be called the maximum size of the global reserve army in 2011: so me 2.4 billio n peo ple, co mpared to 1.4 billio n in the active labo r army. It is the existence o f a reserve army that in its maximum extent is mo re than 70 percent larger than the active labo r army that serves to restrain wages glo bally, and particularly in the po o rer co untries. Indeed, mo st o f this

reserve army is lo cated in the underdevelo ped co untries o f the wo rld, tho ugh its gro wth can be seen to day in the rich co untries as well. T he breakdo wn in percentages o f its vario us co mpo nents can be seen in Chart 2.

Chart 2. T he Glo bal Wo rkf o rce and the Glo bal Reserve Army

No tes: T he Pro po rtio n o f “vulnerably emplo yed” and “unemplo yed” were estimated based o n percentages f ro m the “Glo bal Emplo yment Trends” repo rts cited belo w. T he chart includes to tal wo rld po pulatio n (15 years and o ver) excluding the eco no mically inactive po pulatio n less than 25- and greater than 54- years o f age.

So urces: Internatio nal Labo ur Of f ice (ILO), “Eco no mically Active Po pulatio n Estimates and Pro jectio ns (5th editio n, revisio n 2009),” LABORSTA Internet (Geneva: Internatio nal Labo ur Organisatio n, 2009); ILO “Glo bal Emplo yment Trends,” 2009, 2010 and 2011 (Geneva: Internatio nal Labo ur Of f ice).

T he eno rmo us reserve army o f labo r depicted in Chart 2 is meant to capture its maximum extent. So me will no do ubt be inclined to argue that many o f the wo rkers in the vulnerably emplo yed do no t belo ng to the reserve army, since they are peasant pro ducers, traditio nally tho ught o f as belo nging to no n- capitalist pro ductio n— including subsistence wo rkers who have no relatio n to the market. It might be co ntended that these po pulatio ns are alto gether o utside the capitalist market. Yet, this is hardly the viewpo int o f the system itself . T he ILO classif ies them generally, alo ng with inf o rmal wo rkers, as “vulnerably emplo yed,” reco gnizing they are eco no mically active and emplo yed, but no t wage wo rkers. Fro m capital’s develo pmental standpo int, the vulnerably emplo yed are all potential wage wo rkers—grist f o r the mill o f capitalist develo pment. Wo rkers engaged in peasant pro ductio n are viewed as f uture pro letarians, to be drawn mo re deeply into the capitalist mo de.

In f act, the f igures we pro vide f o r the maximum extent o f glo bal reserve army, in an attempt to understand the really- existing relative surplus po pulatio n, might be seen in so me ways as underestimates. In Marx’s co nceptio n, the reserve army also included part- time wo rkers. Yet, due to lack o f data, it is impo ssible to include this element in o ur glo bal reserve army estimates. Further, f igures o n the eco no mically inactive po pulatio n’s share o f the reserve army include o nly prime age wo rkers between 24 and 54 years o f age witho ut wo rk, and exclude all o f tho se ages 16– 23 and 55– 65. Yet, f ro m a practical standpo int, in mo st co untries, tho se in these ages to o need and have a right to emplo yment.

Despite uncertainties related to the ILO data, there can be no do ubt abo ut the eno rmo us size o f the glo bal reserve army. We can understand the implicatio ns o f this mo re f ully by lo o king at Samir Amin’s analysis o f “Wo rld Po verty, Pauperizatio n, and Capital Accumulatio n” in Monthly Review in 2003. Amin argued that “Mo dern capitalist agriculture—enco mpassing bo th rich, large- scale f amily f arming and agribusiness co rpo ratio ns—is no w engaged in a massive attack o n third wo rld peasant pro ductio n.” Acco rding to the co re capitalist view pro po unded by the WT O, the Wo rld Bank, and the IMF, rural (mo stly peasant) pro ductio n is destined to be transf o rmed into advanced capitalist agriculture o n the mo del o f the rich co untries. T he 3 billio n plus rural wo rkers wo uld be replaced in the ideal capitalist scenario , as Amin puts it, by so me “twenty millio n new mo dern f armers.”

In the do minant view, these wo rkers wo uld then be abso rbed by industry, primarily in urban centers, o n the mo del o f the develo ped capitalist co untries. But Britain and the o ther Euro pean eco no mies, as Amin and Indian eco no mist Prabhat Patnaik po int o ut, were no t themselves able to abso rb their entire peasant po pulatio n within industry. Rather, their surplus po pulatio n emigrated in great numbers to the Americas and to vario us co lo nies. In 1820 Britain had a po pulatio n o f 12 millio n, while between 1820 and 1915 emigratio n was 16 millio n. Put dif f erently, mo re than half the increase in British po pulatio n emigrated each year during this perio d. T he to tal emigratio n f ro m Euro pe as a who le to the “new wo rld” (o f “temperate regio ns o f white settlement”) o ver this perio d was 50 millio n.

While such mass emigratio n was a po ssibility f o r the early capitalist po wers, which mo ved o ut to seize large parts o f the planet, it is no t po ssible f o r co untries o f the glo bal So uth to day. Co nsequently, the kind o f reductio n in peasant po pulatio n currently pushed by the system po ints, if it were ef f ected f ully, to mass geno cide. An unimaginable 7 percent annual rate o f gro wth f o r f if ty years acro ss the entire glo bal So uth, Amin po ints o ut, co uld no t abso rb even a third o f this vast surplus agricultural po pulatio n. “No amo unt o f eco no mic gro wth,” Yates adds, will “abso rb” the billio ns o f peasants in the wo rld to day “into the traditio nal pro letariat, much less better classes o f wo rk.”

T he pro blem o f the abso rptio n o f the massive relative surplus po pulatio n in these co untries beco mes even mo re apparent if o ne lo o ks at the urban po pulatio n. T here are 3 billio n plus peo ple who live in urban areas glo bally, co ncentrated in the massive cities o f the glo bal So uth, in which peo ple are cro wded to gether under increasingly ho rrendo us, slum co nditio ns. As the UN Human Settlements Pro gramme declared in The Challenge of the Slums: “Instead o f being a f o cus o f gro wth and pro sperity, the cities have beco me a dumping gro und f o r a surplus po pulatio n wo rking in unskilled, unpro tected and lo w- wage inf o rmal service industries and trade.”

Fo r Amin, all o f this is tied to an o verall theo ry o f unequal exchange/imperialist rent. T he “co nditio ns go verning accumulatio n o n a wo rld scale…repro duce unequal develo pment. T hey make clear that underdevelo ped co untries are so because they are superexplo ited and no t because they are backward.” T he system o f imperialist rent asso ciated with such superexplo itatio n, reaches its mature f o rm and is universalized with the develo pment o f “the later capitalism o f the generalized, f inancialized, and glo balized o ligo po lies.”58

Prabhat Patnaik has develo ped a clo sely related perspective, f o cusing o n the reserve army o f labo r in The Value of Money and o ther recent wo rks. He begins by questio ning the standard eco no mic view that it is lo w labo r pro ductivity rather than the existence o f eno rmo us labo r reserves that best explains the impo verishment o f co untries in the glo bal So uth. Even in eco no mies that have experienced accelerated gro wth and rising pro ductivity, such as India and China, he argues, “labo ur reserves co ntinue to remain no n- exhausted.” T his is because with the high rate o f pro ductivity gro wth (and labo r displacement) asso ciated with the shif t to ward pro ductio n o f high- techno lo gy go o ds, “the rate o f gro wth o f labo ur demand…do es no t adequately exceed the rate o f gro wth o f labo r supply”—adequately enough, that is, to draw do wn the labo r reserves suf f iciently, and thus to pull wages up abo ve the subsistence level. An illustratio n o f the pro ductivity dynamic and ho w it af f ects labo r abso rptio n can be seen in the f act that, despite ro ck- bo tto m wages in China, Fo xco nn is planning to intro duce a millio n ro bo ts in its plants within three years as part o f its strategy o f displacing wo rkers in simple assembly o peratio ns. Fo xco nn currently emplo ys a millio n wo rkers in mainland China, many o f who m assemble

assembly o peratio ns. Fo xco nn currently emplo ys a millio n wo rkers in mainland China, many o f who m assemble iPho nes and iPads.

Patnaik’s argument is clarif ied by his use o f a dual reserve army mo del: the “precapitalist- secto r reserve army” (inspired by Luxemburg’s analysis) and the “internal reserve army.” In essence, capitalism in China and India is basing its expo rts mo re and mo re o n high- pro ductivity, high- techno lo gy pro ductio n, which means the displacement o f labo r, and the creatio n o f an expanding internal reserve army. Even at rapid rates o f gro wth theref o re it is impo ssible to abso rb the precapitalist- secto r reserve army, the o utward f lo w o f which is itself accelerated by mechanizatio n.59

Aside f ro m the direct benef its o f eno rmo usly high rates o f explo itatio n, which f eed the eco no mic surplus f lo wing into the advanced capitalist co untries, the intro ductio n o f lo w- co st impo rts f ro m “f eeder eco no mies” in Asia and o ther parts o f the glo bal So uth by multinatio nal co rpo ratio ns has a def latio nary ef f ect. T his pro tects the value o f mo ney, particularly the do llar as the hegemo nic currency, and thus the f inancial assets o f the capitalist class. T he existence o f an eno rmo us glo bal reserve army o f labo r thus f o rces inco me def latio n o n the wo rld’s wo rkers, beginning in the glo bal So uth, but also af f ecting the wo rkers o f the glo bal No rth, who are increasingly subjected to neo liberal “labo ur market f lexibility.”

In to day’s phase o f imperialism—which Patnaik identif ies with the develo pment o f internatio nal f inance capital —“wages in the advanced co untries canno t rise, and if anything tend to f all in o rder to make their pro ducts mo re co mpetitive” in relatio n to the wage “levels that prevail in the third wo rld.” In the latter, wage levels are no higher, “than tho se needed to satisf y so me histo rically- determined subsistence requirements,” due to the existence o f large labo r reserves. T his lo gic o f wo rld explo itatio n is made mo re vicio us by the f act that “even as wages in the advanced co untries f all, at the prevailing levels o f labo r pro ductivity, labo r pro ductivity in third wo rld co untries mo ves up, at the prevailing level o f wages, to wards the level reached in the advanced co untries. T his is because the wage dif f erences that still co ntinue to exist induce a dif f usio n o f activities f ro m the f o rmer to the latter. This double movement means that the share of wages in total world output decreases,” while the rate o f explo itatio n wo rldwide rises.60

What Patnaik has called “the parado x o f capitalism” is traceable to Marx’s general law o f accumulatio n: the tendency o f the system to co ncentrate wealth while expanding relative (and even abso lute) po verty. “In India, precisely during the perio d o f neo liberal ref o rms when o utput gro wth rates have been high,” Patnaik no tes,

there has been an increase in the pro po rtio n o f the rural po pulatio n accessing less than 2400 calo ries per perso n per day (the f igure f o r 2004 is 87 percent). T his is also the perio d when hundreds o f tho usands o f peasants, unable to carry o n even simple repro ductio n, have co mmitted suicide. T he unemplo yment rate has increased, no twithstanding a massive jump in the rate o f capital accumulatio n; and the real wage rate, even o f the wo rkers in the o rganized secto r, has at best stagnated, no twithstanding massive increases in labo r pro ductivity. In sho rt o ur o wn experience belies Keynesian o ptimism abo ut the f uture o f mankind under capitalism.61

In the advanced capitalist co untries, the no tio n o f “precario usness,” which Marx in his reserve army discussio n emplo yed to describe the mo st pauperized secto r o f the wo rking class, has been redisco vered, as co nditio ns o nce tho ught to be co nf ined to the third wo rld, are reappearing in the rich co untries. T his has led to ref erences to the emergence o f a “new class”—tho ugh in reality it is the gro wing pauperized secto r o f the wo rking class— termed the “precariat.”62

At the bo tto m o f this precariat develo ping in the rich co untries are so - called “guest wo rkers.” As Marx no ted, in the nineteenth century, capital in the wealthy centers is able to take advantage o f lo wer- wage labo r abro ad either thro ugh capital migratio n to lo w- wage co untries, o r thro ugh the migratio n o f lo w- wage labo r into rich co untries. Altho ugh migrant labo r po pulatio ns f ro m po o r co untries have served to restrain wages in rich co untries, particularly the United States, f ro m a glo bal perspective the mo st signif icant f act with respect to wo rkers migrating f ro m So uth to No rth is their lo w numbers in relatio n to the po pulatio n o f the glo bal So uth.

Overall the share o f migrants in to tal wo rld po pulatio n has sho wn no appreciable change since the 1960s. Acco rding to the ILO, there was o nly “a very small rise” in the migratio n f ro m develo ping to develo ped co untries “in the 1990s, and…this is acco unted f o r basically by increased migratio n f ro m Central American and Caribbean co untries to the United States.” T he percentage o f adult migrants f ro m develo ping to develo ped co untries in 2000 was a mere 1 percent o f the adult po pulatio n o f develo ping co untries. Mo reo ver, tho se migrants were co ncentrated amo ng the mo re highly skilled so that “the ef f ect o f internatio nal migratio n o n the lo w- skilled labo ur f o rce” in develo ping co untries themselves “has been negligible f o r the mo st part…. Migratio n f ro m develo ping to develo ped co untries has largely meant brain drain…. In sho rt,” the ILO co ncludes, “limited as it was, internatio nal migratio n” in the decade o f the 1990s “served to restrain the gro wth o f skill intensity o f the labo ur f o rce in quite a large number o f develo ping co untries, and particularly in the least develo ped co untries.” All o f this drives ho me the key po int that capital is internatio nally mo bile, while labo r is no t.63

If the new imperialism has its basis in the superexplo itatio n o f wo rkers in the glo bal So uth, it is a phase o f imperialism that in no way can be said to benef it the wo rkers o f the glo bal No rth, who se co nditio ns are also being dragged do wn—bo th by the disastro us glo bal wage co mpetitio n intro duced by multinatio nals, and, mo re f undamentally, by the o veraccumulatio n tendencies in the capitalist co re, enhancing stagnatio n, and unemplo yment.64

Indeed, the wealthy co untries o f the triad (the United States, Euro pe, and Japan) are all bo gged do wn in co nditio ns o f deepening stagnatio n, resulting f ro m their incapacity to abso rb all o f the surplus capital that they are generating internally and pulling in f ro m abro ad—a co ntradictio n which is manif ested in weakening investment and emplo yment. Financializatio n, which helped to bo o st these eco no mies f o r decades, is no w arrested by its o wn co ntradictio ns, with the result that the ro o t pro blems o f pro ductio n, which f inancial bubbles served to co ver up f o r a time, are no w surf acing. T his is manif esting itself no t o nly in diminishing gro wth rates, but also rising levels o f excess capacity and unemplo yment. In an era o f glo balizatio n, f inancializatio n, and neo liberal eco no mic po licy, the state is unable ef f ectively to mo ve in to co rrect the pro blem, and is increasingly geared simply to bailing o ut capital, at the expense o f the rest o f so ciety

T he imperial rent that these co untries appro priate f ro m the rest o f the wo rld o nly makes the pro blems o f surplus abso rptio n o r o veraccumulatio n at the center o f the wo rld system wo rse. “Fo reign investment, f ar f ro m being an o utlet f o r do mestically generated surplus,” Baran and Sweezy f amo usly wro te in Monopoly Capital, “is a mo st ef f icient pro cess f o r transf erring surplus generated f ro m abro ad to the investing co untry. Under these circumstances, it is o f co urse o bvio us that f o reign investment aggravates rather than helps to so lve the surplus abso rptio n pro blem.”65

T he New Imperialism

As we have seen, there can be no do ubt abo ut the sheer scale o f the relative shif t o f wo rld manuf acturing to the glo bal So uth in the perio d o f the internatio nalizatio n o f mo no po ly capital since the Seco nd Wo rld War—and accelerating in recent decades. Altho ugh this is o f ten seen as a po st- 1974 o r a po st- 1989 pheno meno n, Hymer, Magdo f f , Sweezy, and Amin captured the general parameters o f this bro ad mo vement in accumulatio n and imperialism, asso ciated with the develo pment o f multinatio nal co rpo ratio ns (the internatio nalizatio n o f mo no po ly capital) as early as the 1970s. Largely as a result o f this epo chal shif t in the center o f gravity o f wo rld manuf acturing pro ductio n to ward the So uth, abo ut a do zen emerging eco no mies have experienced pheno menal gro wth rates o f 7 percent o r mo re f o r a quarter century.

Mo st impo rtant amo ng these o f co urse is China, which is no t o nly the mo st po pulo us co untry but has experienced the f astest gro wth rates, reputedly 9 percent o r abo ve. At a 7 percent rate o f gro wth an eco no my do ubles in size every ten years; at 9 percent every eight years. Yet, the pro cess is no t, as mainstream eco no mics o f ten suggests, a smo o th o ne. T he Chinese eco no my has do ubled in size three times since 1978, but wages remain at o r near subsistence levels, due to an internal reserve army in the hundreds o f millio ns.

China may be emerging as a wo rld eco no mic po wer, due to its sheer size and rate o f gro wth, but wages remain amo ng the lo west in the wo rld. India’s per capita inco me, meanwhile, is o ne- third o f China’s. China’s rural po pulatio n is estimated at 45– 50 percent, while India’s is aro und 70 percent.66

Ortho do x eco no mic theo rists rely o n an abstract mo del o f develo pment that assumes all co untries pass thro ugh the same phases, and eventually mo ve up f ro m labo r- intensive manuf acturing to capital- intensive, kno wledge- intensive pro ductio n. T his raises the issue o f the so - called “middle- inco me transitio n” that is suppo sed to o ccur at a per capita inco me o f so mewhere between $5,000 and $10,000 (China’s per capita inco me at current exchange rates is abo ut $3,500). Co untries in the middle- inco me transitio n have higher wage rates and are f aced with unco mpetitiveness unless they can mo ve to pro ducts that capture mo re value and are less labo r- intensive. Mo st co untries f ail to make the transitio n and the middle- inco me level ends up being a develo pmental trap. Based o n this f ramewo rk, New Yo rk University eco no mist Michael Spence argues in The Next Convergence that China’s “labo r- intensive expo rt secto rs that have been a majo r co ntributo r to gro wth are lo sing co mpetiveness and have to be allo wed to decline o r mo ve inland and then eventually decline. T hey will be replaced by secto rs that are mo re capital, human- capital, and kno wledge intensive.”67

Spence’s o rtho do x argument, ho wever, denies the reality o f co ntempo rary China, where the latent reserve army in agriculture alo ne amo unts to hundreds o f millio ns o f peo ple. Mo ving to ward a less labo r- intensive system under capitalism means higher rates o f pro ductivity and techno lo gical displacement o f labo r, requiring that the eco no my abso rb a mo unting reserve army by co nquering ever- larger, high- value- capture markets. T he o nly cases where anything resembling this has taken place—aside f ro m Japan, which f irst emerged as a rapidly expanding, militarized- imperialist eco no my in the early twentieth century—were the Asian tigers (So uth Ko rea, Taiwan, Singapo re, and Ho ng Ko ng), which were able to expand their external expo rt markets f o r high value- capture pro ductio n in the glo bal No rth during a perio d o f wo rld eco no mic expansio n (no t the deepening stagnatio n o f to day). T his is unlikely to pro ve po ssible f o r China and India, which must f ind emplo yment between them f o r so me 40 percent o f the wo rld’s labo r f o rce—and to a mo unting degree in the urban industrial secto r. Unlike Euro pe during its co lo nial perio d the emigratio n o f large po o ls o f surplus labo r as an escape valve is no t po ssible: they have no where to go . China’s capacity to pro mo te internal- based accumulatio n (no t relying primarily o n expo rt markets), meanwhile, is hindered under to day’s capitalist co nditio ns by this same reserve army o f lo w- paid labo r, and by rapidly rising inequality.

All o f this suggests that at so me po int the co ntradictio ns o f China’s unprecedented accumulatio n rates co mbined with massive labo r reserves that canno t readily be abso rbed by the accumulatio n pro cess— particularly with the gro wing shif t to high- techno lo gy, high- pro ductivity pro ductio n—are bo und to co me to a head.

Meanwhile, internatio nal mo no po ly capital uses its co mbined mo no po lies o ver techno lo gy, co mmunicatio ns, f inance, military, and the planet’s natural reso urces to co ntro l (o r at least co nstrain) the directio n o f develo pment in the So uth.68

As the co ntradictio ns between No rth and So uth o f the wo rld system intensif y, so do the internal co ntradictio ns within them—with class dif f erences widening everywhere. T he relative “deindustrializatio n” in the glo bal No rth is no w to o clear a tendency to be alto gether denied. T hus the share o f manuf acturing in U.S. GDP has dro pped f ro m aro und 28 percent in the 1950s to 12 percent in 2010, acco mpanied by a dramatic decrease in its share (alo ng with that o f the OECD as a who le) in wo rld manuf acturing.69 Yet, it is impo rtant to understand that this is o nly the tip o f the iceberg where the gro wing wo rldwide destabilizatio n and o verexplo itatio n o f labo r is co ncerned.

Indeed, o ne sho uld never f o rget the mo ral barbarism o f a system that in 1992 paid Michael Jo rdan $20 millio n to market Nikes—an amo unt equal to the to tal payro ll o f the f o ur Indo nesian f acto ries invo lved in the pro ductio n o f the sho es, with wo men in these f acto ries earning o nly 15 cents an ho ur and wo rking eleven- ho ur days.70 Behind this lies the internatio nal “so urcing” strategies o f increasingly mo no po listic multinatio nal

co rpo ratio ns. T he f ield o f o peratio n o f Marx’s general law o f accumulatio n is no w truly glo bal, and labo r everywhere is o n the def ensive.

T he answer to the challenges f acing wo rld labo r that Marx gave at the Lausanne Co ngress in 1867 remains the o nly po ssible o ne: “If the wo rking class wishes to co ntinue its struggle with so me chance o f success the natio nal o rganisatio ns must beco me internatio nal.” It is time f o r a new Internatio nal.71

No tes

1. ↩ Stephen Herbert Hymer, The Multinational Corporation (Cambridge: Cambridge University Press, 1979), 41, 75, 183.

2. ↩ Hymer, The Multinational Corporation, 81, 86, 161, 262– 69. 3. ↩ Gary Geref f i, The New Offshoring of Jobs and Global Development, ILO So cial Po licy Lectures,

Jamaica, December 2005 (Geneva: Internatio nal Institute f o r Labo ur Studies, 2006), http://ilo .o rg, 1; Peter Dicken, Global Shift (New Yo rk: Guilf o rd Press, 1998), 26– 28.

4. ↩ T ho rstein Veblen already understo o d this in the 1920s. See his Absentee Ownership and Business Enterprise in Recent Times (New Yo rk: Augustus M. Kelley, 1964), 287.

5. ↩ See Paul M. Sweezy, Four Lectures on Marxism (New Yo rk: Mo nthly Review Press, 1981), 64– 65; Michael E. Po rter, Competitive Strategy (New Yo rk: T he Free Press, 1980), 35– 36.

6. ↩ Ajit K. Gho se, No maan Maji, and Christo ph Ernst, The Global Employment Challenge (Geneva: Internatio nal Labo ur Organisatio n, 2008), 9– 10. On depeasantizatio n see Farshad Araghi, “T he Great Glo bal Enclo sure o f Our Times,” in Fred Magdo f f , Jo hn Bellamy Fo ster, and Frederick H. Buttel, eds., Hungry for Profit (New Yo rk: Mo nthly Review Press, 2000), 145– 60.

7. ↩ Jo hn Smith, Imperialism and the Globalisation of Production (Ph.D. T hesis, University o f Shef f ield, July 2010), 224.

8. ↩ Stephen Ro ach, “Ho w Glo bal Labo r Arbitrage Will Shape the Wo rld Eco no my,” Global Agenda Magazine, 2004,http://eco critique.f ree.f r; Jo hn Bellamy Fo ster, Harry Magdo f f , and Ro bert W. McChesney, “T he Stagnatio n o f Emplo yment,” Monthly Review, 55, no . 11 (April 2004): 9– 11.

9. ↩ See Jo hn Bellamy Fo ster, Ro bert W. McChesney, and R. Jamil Jo nna, “T he Internatio nalizatio n o f Mo no po ly Capital,” Monthly Review 63, no . 2 (June 2011): 1– 23.

10. ↩ T ho mas L. Friedman, The World is Flat (New Yo rk: Farrar, Straus, and Giro ux, 2005). Friedman wro ngly claims that his “f lat wo rld hypo thesis” was f irst advanced by Marx. See 234– 37.

11. ↩ Paul Krugman, Pop Internationalism (Cambridge, Massachusetts: MIT Press, 1996), 66– 67. On the absurdity o f expecting wage dif f erences between natio ns simply to ref lect pro ductivity trends see Marx, Capital, vo l. 1, (Lo ndo n: Penguin, 1976), 705.

12. ↩ On f ears o f an end to glo bal labo r arbitrage see “Mo ving Back to America ,” The Economist, May 12, 2011, http://eco no mist.co m.

13. ↩ Karl Marx, Capital, vo l. 1, 798. Immediately af ter the quo ted passage Marx added the f o llo wing qualif icatio n: “Like all o ther laws, it is mo dif ied in its wo rkings by circumstances, the analysis o f which do es no t co ncern us here.” It sho uld be added that Marx used “abso lute” here in the Hegelian sense, i.e., in terms o f abstract.

14. ↩ Harry Magdo f f and Paul M. Sweezy, Stagnation and the Financial Explosion (New Yo rk: Mo nthly Review Press, 1987), 204. By 2010, OECD unemplo yment had gro wn by 38 percent, reaching 48.5 millio n perso ns. (“Unemplo yment, Emplo yment, Labo ur Fo rce and Po pulatio n o f Wo rking Age [15- 64],” OECD.StatExtracts, [OECD, Geneva, 2011], retrieved September 24, 2011.)

15. ↩ T he co ncept o f “imperialist rent” is develo ped by Samir Amin in The Law of Worldwide Value (New Yo rk:

Mo nthly Review Press, 2011) and is discussed f urther belo w.

16. ↩ See, f o r example, the discussio n in Antho ny Giddens, Capitalism and Modern Social Theory (Cambridge: Cambridge University Press, 1971), 55– 58. Giddens o f f ers a half - hearted and co nf used def ense o f Marx which is f ull o f misco nceptio ns.

17. ↩ Jo hn Strachey, Contemporary Capitalism, 101; Marx, Capital, vo l. 1, 929. Strachey also quo tes o n the same page the passage f ro m The Communist Manifesto where Marx and Engels write, “T he mo dern labo urers…instead o f rising with the pro gress o f industry, sinks deeper and deeper belo w the co nditio ns o f existence o f his o wn class. He beco mes a pauper, and pauperism develo ps mo re rapidly than po pulatio n and wealth.” Karl Marx and Frederick Engels, The Communist Manifesto (New Yo rk: Mo nthly Review Press, 1964), 23. At f irst sight this seems to suppo rt Strachey’s po int (tho ugh taken f ro m an early and no n- eco no mic wo rk). Ho wever, as Hal Draper po ints o ut: “T his may so und as if the class o f pro letarians, as such, is inevitably pauperized. T his language ref lected the so cialistic pro paganda o f the day; later in Capital I (Chap. 25), Marx made clear that the pauper layer is ‘the lo west sediment o f the relative surplus po pulatio n.’” Hal Draper, The Adventures of the Communist Manifesto (Berkeley: Center f o r So cialist Histo ry, 1998), 233.

18. ↩ Ro man Ro sdo lsky, The Making of Marx’s ‘Capital’ (Lo ndo n: Pluto Press, 1977), 307. 19. ↩ Fredric Jameso n, Representing Capital (New Yo rk: Verso , 2011), 71. 20. ↩ Marx, Capital, vo l. 1, 799. 21. ↩ Marx, Capital, vo l. 1, 764, 772, 781– 94; Marx and Engels, The Communist Manifesto, 7; Paul M. Sweezy,

The Theory of Capitalist Development (New Yo rk: Mo nthly Review Press, 1970), 87– 92.

22. ↩ Marx, Capital, vo l. 1, 792. 23. ↩ Karl Marx, “Wage- Labo ur and Capital,” in Wage-Labour and Capital/Value, Price and Profit (New Yo rk:

Internatio nal Publishers, 1935), 45; Sweezy, The Theory of Capitalist Development, 89.

24. ↩ Marx, Capital, vo l. 1, 763, 776– 81, 929. 25. ↩ Marx, Capital, vo l. 1, 794– 95; David Harvey, A Companion to Marx’s Capital (Lo ndo n: Verso , 2010), 278,

318.

26. ↩ Marx, Capital, vo l. 1, 795– 96. 27. ↩ Marx, Capital, vo l. 1, 590– 99, 793– 77. 28. ↩ Marx, Capital, vo l. 1, 797– 98. 29. ↩ Engels deserves credit f o r having intro duced the reserve army co ncept into Marxian theo ry, and

makes it clear that what demo nstrates the reserve- army o r relative surplus- po pulatio n status o f wo rkers is the f act that the eco no my draws them into emplo yment at business cycle peaks. See Frederick Engels, The Condition of the Working Class in England (Chicago : Academy Chicago Publishers, 1984), 117– 22, and Engels on Capital (New Yo rk: Internatio nal Publishers, 1937), 19.

30. ↩ Karl Marx, Capital, vo l. 3 (Lo ndo n: Penguin, 1981), Capital, vo l. 2 (Lo ndo n: Penguin, 1978), 486– 87, and Capital, vo l. 1, 769– 70; Ro sa Luxemburg, The Accumulation of Capital—An Anti-Critique , and Niko lai Bukharin, Imperialism and the Accumulation of Capital (New Yo rk: Mo nthly Review Press, 1972), 121.

31. ↩ Marx, Capital, vo l. 3, 363. 32. ↩ Karl Marx and Frederick Engels, Collected Works (New Yo rk: Internatio nal Publishers, 1975), 422. 33. ↩ Karl Marx, Theories of Surplus Value, (Mo sco w: Pro gress Publishers, 1971), part 3, 105– 6; Capital, vo l.

3, 344– 46; David Ricardo , On the Principles of Political Economy and Taxation (Cambridge: Cambridge University Press, 1951), 135– 36; Jo hn Stuart Mill, Essays on Some Unsettled Questions in Political Economy (Lo ndo n: Lo ngmans, Green, and Co ., 1877), 1– 46: Ro sdo lsky, The Making of Marx’s ‘Capital’, 307– 12. A wide- ranging analysis/debate regarding unequal exchange o ccurred within Marxism in the

1970s. See Arghiri Emmanuel, Unequal Exchange (New Yo rk: Mo nthly Review Press, 172); Samir Amin, Imperialism and Unequal Development (New Yo rk: Mo nthly Review Press, 1977), 181– 252. So me Marxist theo rists still deny that the rate o f surplus value is higher in the periphery than in the center. See Alex Callinico s, Imperialism and Global Political Economy (Lo ndo n: Po lity, 2009), 179– 81; and Jo seph Cho o nara, Unraveling Capitalism (Lo ndo n: Bo o kmarks Publicatio ns, 2009), 34– 35. Fo r a co ntrary view, see Sweezy, Four Lectures on Marxism, 76– 77.

34. ↩ Ro sa Luxemburg, The Accumulation of Capital (New Yo rk: Mo nthly Review Press, 1951), 361– 65. 35. ↩ Marx, Capital, vo l. 3, 344. 36. ↩ T he term “glo balizatio n” was f irst co ined in the 1930s. But the f irst article to use the co ncept in its

mo dern eco no mic sense, acco rding to the Oxford English Dictionary, was Fo uad Ajami, “Co rpo rate Giants: So me Glo bal So cial Co sts,” International Studies Quarterly 16 , no . 4 (December 1972): 513. Ajami intro duced the term in a paragraph in which he was addressing Marxian no tio ns o f “co ncentratio n and centralizatio n”—and in particular Paul Baran and Paul Sweezy’s Monopoly Capital (New Yo rk: Mo nthly Review Press, 1966), which had po inted to the multinatio nal co rpo ratio n as a manif estatio n o f the gro wth o f mo no po listic pro ductio n at the wo rld level. Altho ugh critical o f Baran and Sweezy’s analysis f o r its Marxian basis, Ajami (a mainstream po litical scientist no w af f iliated with the Ho o ver Institutio n and the Co uncil o n Fo reign Relatio ns) nevertheless saw what he called “the do minatio n o f multinatio nal giants and the glo balizatio n o f markets” as emerging o ut o f the same kinds o f develo pments—with respect to the tendency to internatio nal o ligo po ly—that Baran and Sweezy had raised. Iro nically, Ajami f ailed to no tice that o ther theo rists he drew upo n in his article in co ntradistinctio n to Baran and Sweezy —Stephen Hymer, Michael Tanzer, Bo b Ro wtho rn, and Herbert Schiller—were also Marxian and radical po litical eco no mists, and in the case o f the f irst two , autho rs o f articles in Monthly Review.

37. ↩ Richard J. Barnet and Ro nald E. Müller, Global Reach (New Yo rk: Simo n and Schuster, 1974), 213– 14, 306.

38. ↩ Fo ster, McChesney, and Jo nna, “T he Internatio nalizatio n o f Mo no po ly Capital,” 5– 9. 39. ↩ “Mo ving Back to America.” 40. ↩ Dale Wen, China Copes with Globalization (Internatio nal Fo rum o n Glo balizatio n, 2005), http://if g.o rg;

Martin Hart- Landsberg, “T he Chinese Ref o rm Experience,” The Review of Radical Political Economics 43, no . 1 (March 2011): 56– 76; Minqi Li, “T he Rise o f the Wo rking Class and the Future o f the Chinese Revo lutio n,” Monthly Review 63, no . 2 (June 2011): 40.

41. ↩ It sho uld be no ted that the term “superexplo ited” appears to have two clo sely related, o verlapping meanings in Marxist theo ry: (1) wo rkers who receive less than the histo rically determined value o f labo r po wer, as it is def ined here; and (2) wo rkers who are subjected to unequal exchange and o verexplo ited, primarily in the glo bal So uth. In Amin’s f ramewo rk, ho wever, the two meanings are united. T his is because the value o f labo r po wer is determined glo bally, while actual wage rates are determined natio nally, and are hierarchically o rdered due to imperialism. In the glo bal So uth theref o re wo rkers normally receive wages that are less than the value o f labo r po wer. T his is the basis o f imperial rent. See Amin, The Law of Value and Historical Materialism, 11, 84. Jo hn Smith and Andy Higginbo tto m have develo ped a similar appro ach to superexplo itatio n based o n Marx. See Jo hn Smith “Imperialism and the Law o f Value,” Global Discourse, 2, no . 1 (2011), http://glo bal- disco urse.co m.

42. ↩ Charles J. Whalen, “Sending Jo bs Of f sho re f ro m the United States,” Intervention: A Journal of Economics 2, no . 2 (2005): 35. Quo ted in Smith, The Internationalisation of Globalisation, 94.

43. ↩ William Millberg, “Shif ting So urces and Uses o f Pro f its,” Economy and Society 37, no . 3 (August 2008): 439; Judith Banister and Geo rge Co o k, “China’s Emplo yment and Co mpensatio n Co sts in Manuf acturing T hro ugh 2008,” U.S. Bureau o f Labo r Statistics, Monthly Labor Review (March 2011): 44. It is co mmo n f o r co mmentato rs to ref er to glo bal supply chains as glo bal value chains, based o n the co ncept o f value

added. (See, f o r example, Michael Spence and Sandile Hlatshwayo , The Evolving Structure of the American Economy and the Employment Challenge, Co uncil o n Fo reign Relatio ns Wo rking Paper, March 2011, http://cf r.o rg). T his leads to the no tio n that the value added is much higher in high techno lo gy pro ductio n engaged in the No rth than in the labo r- intensive pro ductio n no w increasingly lo cated in the So uth. Ho wever, mo re value- added in this sense simply means higher relative prices and higher inco me. It do es no t tell us where the value is pro duced but simply who gets it (via mo no po ly po wer, imperial rent, etc.). We theref o re avo id the value chain termino lo gy in this paper, and we ref er, when necessary, to “high- value- capture” rather than “high- value” links in the glo bal supply chain. T he “value capture” term and a general critique o f value- chain theo ry are presented in Jo hn Smith, Imperialism and the Globalisation of Production, 254– 60, and “Imperialism and the Law o f Value.”

44. ↩ Yuqing Xing and Neal Detert, How the iPhone Widens the United States Trade Deficit with the People’s Republic of China, ADBI Wo rking Paper, Asian Develo pment Bank Institute (December 2010; paper revised May 2011); David Barbo za, “Af ter Spate o f Suicides, Techno lo gy Firm in China Raises Wo rkers’ Salaries ,” New York Times, June 2, 2010, http://nytimes.co m; Fo ster, McChesney, and Jo nna, “T he Internatio nalizatio n o f Mo no po ly Capital,” 17. It sho uld be no ted that the assembly in China o f iPho ne parts and co mpo nents that are pro duced elsewhere (heavily in o ther East Asian co untries) is actually the do minant pattern o f East Asian pro ductio n. Acco rding to the Asian Develo pment Bank, China is “the assembly hub f o r f inal pro ducts in Asian pro ductio n netwo rks.” Asian Develo pment Bank, Asian Development Outlook, 2008 (Manila, Philippines), http://adb.o rg, 22; Martin Hart- Landsberg, “T he U.S Eco no my and China,” Monthly Review 61, no . 9 (February 2010): 18.

45. ↩ Banister and Co o k, “China’s Emplo yment and Co mpensatio n,” 49. 46. ↩ U.S. Bureau o f Labo r Statistics, “Internatio nal Co mpariso ns o f Ho urly Co mpensatio n Co sts in

Manuf acturing,” Table I, last updated March 8, 2011, http://bls.go v.

47. ↩ Vikas Bajaj, “Bangladesh, With Lo w Pay, Mo ves In o n China,” New York Times, July 16, 2010, http://nytimes.co m.

48. ↩ Immelt quo ted in Millberg, “Shif ting So urces and Uses o f Pro f its,” 433. Fo r a po werf ul theo retical analysis in Marxian terms o f glo bal labo r arbitrage see Smith, Imperialism and the Globalisation of Production.

49. ↩ Jannik Lindbaek, “Emerging Eco no mies: Ho w Lo ng Will the Lo w- Wage Advantage Last?” Octo ber 3, 1997, http://actrav.itcilo .o rg.

50. ↩ W. Arthur Lewis, Selected Economic Writings (New Yo rk: New Yo rk University Press, 1983), 316– 17, 321, 348, 387– 90.

51. ↩ “T he Next China,” The Economist, July 29, 2010, http://eco no mist.co m. 52. ↩ Li, “T he Rise o f the Wo rking Class and the Future o f the Chinese Revo lutio n,” 40– 41, and The Rise of

China and the Demise of the Capitalist World Economy (New Yo rk: Mo nthly Review Press, 2008), 87– 92.

53. ↩ Yang Yao , “No , the Lewisian Turning Po int Has No t Yet Arrived,” Economist.com, July 16, 2010, http://eco no mist.co m; Stephen Ro ach, “Chinese Wage Co nvergence Has a Lo ng Way To Go ,” Economist.com, July 18, 2010, http://eco no mist.co m.

54. ↩ T heo Sparrebo o m and Michael P.F. de Gier, “Assessing Vulnerable Emplo yment,” Employment Sector Working Paper, no . 13 (Geneva: ILO, 2008), 7; James Petras and Henry Veltmeyer, Multinationals on Trial (Burlingto n, Vermo nt: Ashgate, 2007), 70; Mike Davis, Planet of Slums (Lo ndo n: Verso , 2006), 178.

55. ↩ Internatio nal Labo r Organizatio n, Key Indicators of the Labour Market (Geneva: ILO, 2009), chapter 3- 3; Sparrebo o m and de Gier, “Assessing Vulnerable Emplo yment,” 11.

56. ↩ Michael Yates, “Wo rk is Hell,” May 21, 2009, http://blo g.cheapmo telsandaho tplate.o rg. 57. ↩ ILO, Key Indicators, chapter 1- C, and chapter 5.

58. ↩ Samir Amin, “Wo rld Po verty, Pauperizatio n and Capital Accumulatio n,” Monthly Review 55, no . 5 (Octo ber 2003): 1– 9, and The Law of Worldwide Value, 14, 89, 134; Prabhat Patnaik, “T he Myths o f Capitalism,” MRzine, July 4, 2011, http://mrzine.mo nthlyreview.o rg; United Natio ns, World Economic and Social Survey (New Yo rk: UN, 2004), 3; Yates, “Wo rk is Hell”; Davis, Planet of Slums, 179; United Natio ns Human Settlements Pro gramme, The Challenge of the Slums (Lo ndo n: Earthscan, 2003), 40, 46.

59. ↩ Prabhat Patnaik, The Value of Money (New Yo rk: Co lumbia University Press, 2009), 212– 15; “A Perspective o n the Gro wth Pro cess in India and China,” International Development Economics Associates, T he IDEAs as Wo rking Paper Series, Paper no . 05/2009, http://netwo rkideas.o rg, abstract, 4; Lee Chyen Yee and Clare Jim, “Fo xco nn to Rely Mo re o n Ro bo ts; Co uld Use 1 Millio n in 3 Years,” Reuters, August 1, 2011, http://reuters.co m.

60. ↩ Prabhat Patnaik, “No tes o n Co ntempo rary Imperialism,” MRzine, December 20, 2010, http://mrzine.mo nthlyreview.o rg; “Capitalism and Imperialism,” MRzine, June 19, 2011, http://mrzine.mo nthlyreview.o rg; “Labo ur Market Flexibility,” MRzine, May 9, 2011, http://mrzine.mo nthlyreview.o rg; and “Co ntempo rary Imperialism and the Wo rld’s Labo ur Reserves,” Social Scientist 35, no . 5/6 (May- June 2007): 13.

61. ↩ Prabhat Patnaik, “T he Parado x o f Capitalism,” MRzine, Octo ber 22, 2010, http://mrzine.mo nthlyreview.o rg.

62. ↩ Fo r example, Guy Standing, The Precariat: The New Dangerous Class (New Yo rk: Blo o msbury Academic, 2011). On the current ro le o f the reserve army o f labo r at the center o f the capitalist system see Fred Magdo f f and Harry Magdo f f , “Dispo sable Wo rkers; To day’s Reserve Army o f Labo r,” Monthly Review 55, no . 11 (April 2004): 18– 35.

63. ↩ Gho se, et. al., The Global Employment Challenge, 45– 49. 64. ↩ On the interrelatio n o f these two negative elements af f ecting emplo yment in the advanced capitalist

co untries see Fo ster, “T he Stagnatio n o f Emplo yment.”

65. ↩ Baran and Sweezy, Monopoly Capital, 107– 8. 66. ↩ Michael Spence, The Next Convergence (New Yo rk: Farrar, Straus, and Giro ux, 2011), 19– 23, 48, 53–

54, 85– 86, 107.

67. ↩ Spence, The Next Convergence, 100– 3, 194– 98. 68. ↩ Samir Amin, Capitalism in the Age of Globalization (New Yo rk: Z ed, 1977), 4– 5. 69. ↩ Lo uis Uchitelle, “Is Manuf acturing Falling Of f the Radar?” New York Times, September 11, 2011,

http://nytimes.co m.

70. ↩ Walter LaFeber, Michael Jordan and the New Global Capitalism (New Yo rk: W.W. No rto n, 1999), 106– 7, 14– 48.

71. ↩ Samir Amin, “T he Demo cratic Fraud and the Universalist Alternative,” Monthly Review 63, no . 5 (Octo ber 2011): 44– 45, The World We Wish to See (New Yo rk: Mo nthly Review Press, 2008).