1.2 Offshore fragments of industry
The rise of global factories in the 1970s owed much to the rapid improvement in transport and communications technologies which took place at that time and which made it possible to keep in touch with, and control, production processes in different parts of the world. Just as significant was the fragmentation of industrial production whereby parts of the manufacturing process could be relocated over vast distances. Sewing in garment and footwear production, for instance, was among the first activities to be relocated to East Asian destinations, as was the assembly work in electronics and toys. Production in both these cases could easily be transferred offshore, in contrast to, say, those tasks which required complex and specialist technologies or expensive capital investment to set up a factory outlet. Interestingly, it would have taken little in the way of investigative zeal to piece together the emerging geography of this new low-cost landscape. A quick glance at the label inside a pair of sports trainers or at the side of a glossy Matchbox toy would have revealed the whereabouts of its offshore production. Japan figured prominently in those days, as did Taiwan and South Korea, and a map of offshore locations targeted by Western firms could have been quickly drawn on such a basis. Such a map would have revealed what became known at the time as the new international division of labour (see Figure 1).
Defining the new international division of labour
The new international division of labour (NIDL) took its name from the fact that, in contrast to what had gone before, firms from the Western, industrialised countries, especially the USA and in Europe, started to invest directly in the ‘Third World’, as it was then called. Whereas poorer, ‘Third World’ countries had previously mostly exported raw materials and minerals, now they became involved in exporting manufactured products. Through a process of foreign direct investment, Western firms established increasing numbers of branch plants in the poorer economies of the global ‘periphery’. At the same time, factories in the core, industrial nations closed and workers were laid off, resulting in a process known as ‘deindustrialisation’. The loss of manufacturing jobs in the ‘core’ economies, however, was mirrored by the growth of manufacturing jobs at the global ‘periphery’ (although the two were not always directly related) – in economies which subsequently became known as the Newly Industrialising Countries (NICs). The ‘Asian Tigers’, namely Hong Kong, Taiwan, Singapore and South Korea, were a significant part of the NICs, as were Mexico and Brazil. Figure 6 shows the changing distribution of world manufacturing between the ‘core’ and the ‘periphery’ from the 1950s on. Note how the proportion of manufacturing in the developing countries increased from the 1970s through to the end of the twentieth century.
What such a map would have failed to reveal, however, was the changing nature of the connections put in place by Western firms as they shifted work around the globe. It is often assumed that when Western firms, or any firm for that matter, reach out across borders to establish a factory outlet here, an assembly plant there or a subsidiary in some far-off location, they do so through directly investing and thereby wholly owning such facilities. In the 1970s and 1980s, among the low-cost manufacturing overseas operations, this was indeed often the case, but increasingly Western firms started to conduct their business at-a-distance through a variety of indirect means, of which subcontracting became the principle arrangement. Subcontracting is a way of putting out work to partner firms on a defined, contractual basis, where the tasks involved are specified precisely, as are the turnaround times and the quality of the finished goods. As a business arrangement, it is more flexible than owning factories overseas and more enforceable than a straightforward market exchange relationship.