The shift of the world's manufacturing base from developed to developing economies in the 1970s heralded the beginning of a new global division of labour and the rise of global factories to produce for Western markets. The search for ever-cheaper labour sources undertaken by multinational firms established a new geography of low-cost manufacturing operations which, to this day, remains controversial.
The rise of subcontracting as the most flexible arrangement between international firms and their offshore producers in places such as East Asia steadily became something of the norm for the global factory business. One consequence was to further fragment offshore production, giving rise to a greater sense of distance between retailers and the working lives of those who endure poor conditions and minimal wages to produce the goods they sell.
For Krugman and Wolf, the exploitation of poorer countries' cheap labour sources is hailed as a positive outcome, even when undertaken in sweatshop conditions. They claim that it gives the poorer countries a competitive edge which, over time, can lift their people out of poverty and move them further along the path of economic development and wealth creation.