21 October 2003
The UK is de-industrialising at a rapid rate, yet the bulk of its exports are manufactured goods. As it’s cheaper to export manufacturing to ‘developing’ countries, UK factories are closing down, and newer, more efficient and cheaper plants are being built abroad.
Initially, UK workers’ skills get passed on to workers say from India. But very soon, India will reach a critical mass of skills needed to design and build newer and better plants for themselves. In time, Indian-owned factories will be competing with UK-owned companies that have effectively become nothing more than marketing and distributing companies; the middle man, taking a rake-off because currently it has direct access to the domestic market and the competing Indian company doesn’t. But check out Sony or Samsung, or Mecer. All started out by building for US and UK companies that had exported manufacturing to Japan, South Korea and Taiwan respectively.
Currently, the only advantage to export manufacturing is the cost of labour, but if you look at wage rates in South Korea for example, they are not high as in the West but they’re higher than China, Indonesia or El Salvador. Already ‘Asian Tiger’ manufacturers’ are following the same path and exporting production to keep costs down.
Eventually, wages rates could level out globally amongst manufacturing countries as workers organise and as standards of living rise. There would be no advantage to exporting manufacturing. The problem for Britain (and other developed states like the US) is when that happens the UK won’t have any manufacturing capacity or more importantly, the skills, left.
The essential problem these new kinds of capitalist formations have, is that because they don’t actually produce anything – yet extract a level of profit as if they did – they act as parasites on the real economy, which even to maintain a service industry requires high level local manufacturing skills in order to function. Not everything can be imported, because you got to have something to export in order to pay for the imports. We’ve already exported our intellectual capital, so unless we become a total service economy (whatever that is), we’re in big trouble.
It’s obvious that just as Marx predicted, we need an international division of labour, so that a balance can be struck between importers and exporters. In other words, rather than dozens of manufacturing countries competing by producing the same products, assign different kinds of production based upon an international division of labour.
The irony of ‘globalisation’ is that it inexorably propels anarchic capitalism toward the rational international distribution of production, just as the rise of information technology has integrated globally distributed production and distribution in order to reduce costs (eg Supply Chains, cf Stafford Beer).
There is a further irony inherent in the way information technology and global corporations have evolved in that they now more resemble the state-owned behemoths of the former socialist states, but of course the profits are now privately appropriated. The difference being the introduction of processes such as ‘supply chains’ and ‘just-in-time’ production and delivery which has solved the problem of the disjuncture between the market (demand), production and distribution.
The socialist ‘command’ economies were hampered by the increasing complexity of production brought about by an explosion of ‘choice’ and were simply unable to match production to consumption, not only in terms of the types and design of products but also, delivery. Hence in the former Soviet Union for example, watch factories turned out millions of watches of different designs but only one design was popular, with the result that warehouses were full of unsold watches but there were none in the shops. The system itself created ‘shortages’, effectively a form of economic schlerosis that eventually extended to the entire system.
Whether one blames the lack of a ‘market’ that adjusts production to ‘demand’ or simply the lack of a ‘real time’ system of production and distribution that is able to respond to sales, is a moot point. In any case, under capitalism sales are determined more by marketing and advertising, especially when we move into the domain of conspicuous consumption without which capitalism couldn’t survive.
In the long run it all points to a global glut of production that given the vast imbalance between the rich and poor worlds, either the rich world is forced to consume ever higher quantities of consumer goods and all that that implies for a sustainable future, or a more rational distribution of economic capacity and hence wealth, on a global scale.
However, there’s no likelihood of such a system evolving while a handful of giant corporations control global markets and whilst production remains essentially anarchic and arbitrary. I merely make the point to highlight the need for the removal of capitalism. Just a thought…