The Globalisation of Production

1
The Globalisation of Production
2
Introduction

• The Colonial International Division of Labour
  Colonies export raw materials, import the cores
  manufactures
• Terminology TNC vs. MNC? Foreign Direct
  Investment (FDI) vs. Portfolio Investment?
• New International Division of Labour a
  relocation of some production to the Third World.
  Advanced industrial countries concentrate on more
  profitable activities.

3
The Rise of the TNC

• Technological Change Increased costs of RD
  need for access to overseas markets to increase
  sales.
• Communications and Transport Reduction in
  costs. TNCs can be in constant contact with their
  subsidiaries.
• Finance Integrated financial markets enable
  globalised production
• Political Global context of US hegemony,
  liberal global order. Rise of Third World
  nationalism, developmental projects,
  export-processing zones.

4
The Politics of Global Production

• Neoclassical economics Global production
  increased efficiency, national economic
  performance is improved
• Dependency Theory Triple Alliance of TNCs,
  local companies, and state elites. Supports
  authoritarianism.
• Lobbying by TNCs, harmful to democracy.
• Labour abuses (often indirectly through
  subcontracting networks).

5
Why are Third World governments now more
favourable to TNCs?

• Ascendance of neoliberal ideology, and structural
  adjustment.
• Key ingredients of economic growth concentrated
  in TNCs.
• Success of FDI increasingly judged in terms of
  contribution to comparative advantage.
• Third World more experienced in managing
  relationship with TNCs.

6
The Crisis of Fordism

• The rigidity of Fordism made it unable to cope
  with cyclical recession
• Post-Fordism stresses flexibility
• Piore and Sabel flexible specialisation
  flexible production is more humane and efficient
  small and medium enterprises are more
  competitive it can easily adapt to changing
  market demand.

7
Examples of Post-Fordist Production (1)

• Italian industrial districts New York garment
  districts. Networks amongst small and medium
  enterprises. Firms focus on niche markets.
  Cohesion of the industry based on community,
  based on politics, religion or ethnicity.

8
Examples of Post-Fordist Production (2)

• Japanese lean production. Fordism was adapted to
  Japanese conditions in post-war era.
• Pro-company enterprise unions. Core and
  supplementary labour force.
• Wide range of products for relatively small
  domestic market.
• Long-term supply and subcontracting networks.

9
Toyota

• Just-in-time system. Components are delivered
  just before assembly. Toyota can quickly respond
  to changing market. Workers are more skilled.
• Importance of geographical proximity of
  suppliers.
• Consequently, low level of FDI in Japanese car
  manufacturing (except in response to
  protectionism elsewhere).

10
Globalisation of Production vs. Post-Fordism

• Are these two views contradictory?
• Footloose TNCs vs. geographical proximity of
  post-Fordist production.
• Uneven globalisation of production between
  1991-93, 31 of FDI went to Third World. But,
  18.8 to Southeast Asia, 9.8 to Latin America
  and Caribbean, 1.8 to Africa. Much of Third
  World is marginalised.

11
Global Commodity Chains

• Producer-driven commodity chains usually
  involves large TNCs in heavy or high-tech
  industries. Less likely to be globally dispersed.
• Buyer-drive commodity chains usually
  labour-intensive consumer goods. Tiered networks
  of Third World subcontractors. More globally
  dispersed.

12
Various Roles in Production Networks

• Primary product networks
• Export-processing assembly
• Component-supply subcontracting
• Original equipment manufacturing
• Original Brandname manufacturing

13

• Jinbao electronics, Taiwan. Carries out original
  equipment manufacturing for Sharp, in a factory
  in Thailand.
• Innovation behind the product, brand name, and
  marketing are Japanese, the components are made
  in Japan, procurement and administration are
  controlled from Taipei, the management of the
  plant is Taiwanese, the labour is Thai.
• Trade data shows that the production is Thai
  exports of electronic goods. For purchasers, the
  Sharp calculator appears Japanese. FDI statistics
  show a Taiwanese investment.

14
Conclusion

• The post-war era has seen the rise of the TNC. A
  number of writers also speak of a post-Fordist
  era of flexible specialisation and localised
  production.
• Both the view of globalisation of production
  and post-Fordism should not be exaggerated.
  They ignore specificities of different
  industries and products.
• Analysis of actual production chains can provide
  a more nuanced view of transformations of
  production.