Sunday, August 07, 2016

Global Capitalism or World Socialism

The wealth of the world's richest 62 people, who between them have more wealth than half of the world's population, rose by 44% between 2010 and 2015. Over the same period the wealth of the bottom 50% of humanity fell by approximately 38%.

Very large numbers, perhaps the majority, of the world's labour force is poor. In 2010 there were approximately 942 million working poor (almost one in three workers globally living on under $2 a day). However, these figures are a significant underestimate.

The International Labour Organisation calculates poverty using the World Bank's 'purchasing power parity (PPP)' international poverty lines of $1 and $2 a day -- where $1 a day represents 'extreme poverty' and $2 a day simply 'poverty'. People who live above these poverty lines are held to be not poor. These wages do not cover their subsistence costs. In order to survive they have to work many additional hours, with negative consequences for their health. But according to the World Bank these workers are not poor.

Labour costs are reduced in at least three ways:
1) through outsourcing production from relatively expensive northern labour markets to relatively cheap southern labour markets;
2) by exerting downward cost pressures throughout the chain -- where supplier firms are pushed to undercut each other in order to receive or keep their contracts; and
3) by using these pressures to intimidate northern workers to accept pay cuts, or lose their jobs off-shore. Supplier firms respond to these overbearing pressures rationally, by slashing wage costs.

Under these conditions of intense intra-supplier competition and worker exploitation, trans-national corporations are able to capture the lion's share of the value created within these chains. It is not surprising, then, that employment for supplier firms in global supply chains is often predicated upon, and contributes to, the reproduction of mass poverty.

A well-known example of this dynamic -- of corporate value-capture and worker impoverishment -- is Apple's supply chain. Its profit for the iPhone in 2010 constituted over 58% of the device's final sale price, while Chinese workers' share was only 1.8%. In 2010, Foxconn, one of Apple's principal Asian suppliers, employed around 500,000 workers in its factories in Shenzhen and Chengdu. It rose to infamy that year following reports of 18 attempted suicides by workers, 14 of which were fatal. Foxconn employs a military-style labour-regime. At the start of the day managers ask workers 'how are you?' and staff must reply 'Good! Very good! Very, very good!' After that they must work in silence, monitored by managers and with strict limits on toilet breaks. Pay is very low, and overtime is often the only way that workers can earn enough to live on.

A similar dynamic operates in the global garment industry where approximately 30 million workers are employed. There are regular media reports about abusive working conditions in these industries, ranging from extremely low pay, to child labour and forced labour. Most horrifically, in Bangladesh in April 2013, 1,113 garment workers were killed and 2,500 injured following the collapse of Rana Plaza, an eight-storey building in which textile factories operated. In his overview of the apparel sector across 17 countries, John Pickles documents how, from the mid-2000s onwards, "wage levels were driven below subsistence costs." In India, Bangladesh and Cambodia, for example, basic wages as a percentage of living wages are 26%, 19% and 21% respectively. Overtime is a necessity as regular wages are insufficient to meet their daily needs. Most workers in the large Cambodian textile factories work between three and five hours overtime a day.

Wealth concentration and mass poverty are two sides of the same coin of global capitalism.