Living in a globalised world
Living in a globalised world

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Living in a globalised world

1.6 Defining global markets

Global markets for manufactured goods, as opposed to, say, primary commodities such as oil and timber, arose largely in the second half of the twentieth century as trade between countries intensified. The lowering of transport costs and the relative fall in trade barriers enabled firms in one country to compete with a domestic rival in another. The supply of manufactured goods across the globe as a result of worldwide demand, principally from the affluent economies, thus heightened competition between firms across, rather than within, national borders. The ability to access global markets through a firm's cross-border activities on a subcontract basis, in that sense, represents an extension of the global trading system. As part of the new international division of labour there is now a global market for material and component parts as well as finished goods. In each case, the uneven geography of labour costs in manufacturing forms part of a firm's decision about where to source these different elements. Table 1 gives an indication of the variations in labour costs across a range of countries.

Table 1: Labour costs per worker in manufacturing, 2000: selected countries

Country Labour force (million) Labour cost per worker in manufacturing (US$ per year) Value added1 per worker in manufacturing (US$ per year)
China 756.8 729 2885
India 450.8 1192 3118
USA 144.7 28,907 81,353
Indonesia 101.8 3054 5139
Brazil 79.7 14,134 61,595
Russian Federation 111 1528 n.d.
Bangladesh 69.2 671 1711
Japan 68.3 31,687 92,582
Germany 40.9 33,226 79,616
Mexico 40.4 7607 25,931
Thailand 36.8 3868 19,946
Philippines 31.9 2450 10,781
Turkey 31.3 7958 32,961
UK 29.9 23,843 55,060
Ethiopia 27.6 1596 7094
France 26.7 n.d. 61,019
Italy 25.7 34,859 50,760

Note: n.d.=no data.

1Value added measures the estimated monetary value added to goods by the labour of each worker over a year.

Source: adapted from Castree et al., 2004, p. 10, Table 1, based on World Bank data.

Those very same global market forces are also held responsible for why firms such as Nike and Gap have continuously shifted their assembly work from one country to the next since the 1970s. Faced with price competition in their own retail markets, the big retailers responded to rising wages in places such as Hong Kong, Taiwan and South Korea by switching production to the Philippines, Malaysia and Thailand and, later, to China, Vietnam and Cambodia, in their quest to reduce operating costs. The failure to meet the turnaround times specified in a contract or to adjust to the fluctuation in orders demanded by a contractor, or simply rising wage costs, could all equally trigger the search for a new, more competitive location. While some work in the footwear and electronics industries required a level of expertise not easily maintained by constantly switching suppliers, the basic nature of much clothing and textile production made it particularly vulnerable to the threat of relocation on the basis of cost. In response to clear market signals, many multinational firms simply took advantage of the uneven geography of economic development, as it was at the time. But they were not alone in doing so.

By the end of the 1990s, these multinational firms had been joined by successful Hong Kong and Taiwanese trading companies and sourcing agents who themselves moved work and contracts ‘offshore’ to mainland China, Cambodia and other parts of East Asia to lower costs. Of the 3000 clothing factories currently operating in Guangdong Province, a region just across what was until 1997 the international border between China and Hong Kong, it is estimated that around half are run by Hong Kong manufacturers (Liu, 2003). For firms, whether big or small, wherever they originate, the process of moving jobs around the globe in this way is now claimed as a run-of-the-mill aspect of globalisation. The process of outsourcing may have started with shirts and shoes, calculators and cuddly toys, but it now encompasses anything from microwaves, software design, computer programming, accountancy and insurance underwriting to clinical pathology services. So, what started out as a movement offshore of Western industrial jobs has, it would seem, turned into a global demand from countries such as India and China to act as outsourcing centres for manufacturing and service work of all kinds, from many different countries, including just about anything that can be sent down a wire (see HSBC, 2003; Indian Chamber of Commerce, 2004).

On this account, urban locations such as Hyderabad, Bangalore and Mumbai in India and Guangzhou, Shanghai and Shenzhen in China are not merely the offshore targets of Western outsourcing demands; rather, firms from these countries are accelerating the process by exploiting their own comparative, geographical advantages. If work moves from Singapore, the UK or the USA to India and China because the know-how, skills and human resources are available there for a fraction of the cost back ‘home’, that is precisely because Asian entrepreneurs are actively seeking to capture the work from abroad. They may still be largely producing goods and services for distant users, but they do so as part of a global contractual business that fragments both production and responsibility across borders, between Asian and non-Asian firms alike.

It is difficult to know for sure what this movement of work so far and, in some cases, so quickly, will mean for the livelihoods of workers in the poorer regions of Asia. One claim, however, is that the exploitation of their cheap labour resources offers developing economies the chance to move on to the first rung of the development ladder and the possibility of moving beyond factory and, indeed, office sweatshops to a more sustained form of wealth creation.

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