WINNER OF THE PAUL A. BARAN – PAUL M. SWEEZY MEMORIAL AWARD Established in 2014, this award honors the contributions of the founders of the Monthly Review tradition: Paul M. Sweezy, Paul A. Baran, and Harry Magdoff. It supports the publication in English of distinguished monographs focused on the political economy of imperialism. It also applies to writings previously unpublished in English, and includes translations of new work first published in languages other than English. Please visit monthlyreview.org for complete details of the award. PRAISE FOR VALUE CHAINS “Demonstrates how global value chains are based upon, and deepen, the exploitation of labor by capital and the geographical transfer of value from global South to global North. Suwandi illuminates how lead firms use mechanisms of value chain governance to enhance the control of geographically distant labour. This work stands in, and contributes to, the monopoly capital tradition of Magdoff, Sweezy, and Foster. An important and valuable contribution to emancipatory social science.” —BENJAMIN SELWYN, Professor of International Development, Department of International Relations, University of Sussex, UK; author, The Struggle for Development “Uses the concept of labor-value chains and thoughtful empirical work to reveal the ways in which multinational corporations extract surplus from the global South at worker expense. In contrast to mainstream celebrations of capitalist globalization, Value Chains leaves no doubt that globalized production is best understood as a new form of imperialism.” —MARTIN HART-LANDSBERG, Professor Emeritus of Economics, Lewis and Clark College; author, Capitalist Globalization: Consequences, Resistance, and Alternatives “This is a marvelous, highly accessible book. It zeroes in on global value chains, the most important transformation of the neoliberal era, and weaves excellent theoretical insights and empirical research into a notable contribution to literature on global political economy and Marxist theories of imperialism.”—JOHN SMITH, author, Imperialism in the Twenty-First Century Value Chains The New Economic Imperialism INTAN SUWANDI MONTHLY REVIEW PRESS New York Copyright © 2019 by Intan Suwandi All Rights Reserved Library of Congress Cataloging-in-Publication Data available from the publisher ISBN paper: 978-158367-781-0 ISBN cloth: 978-1-58367-782-7 Typeset in Minion Pro and Brown MONTHLY REVIEW PRESS, NEW YORK monthlyreview.org 5 4 3 2 1 Contents Preface | 7 1. The Hidden Abode of Global Production | 13 2. Labor-Value Commodity Chains: Power and Class Relations in the World Economy | 42 3. Flexibility and Systemic Rationalization: Control in Labor-Value Commodity Chains | 68 4. “We’re Just a Seamstress”: Case Studies of Two Indonesian Companies | 98 5. The New Economic Imperialism: Looking through the Eyes of the Global South | 151 Appendix 1: Statistical Notes | 173 Appendix 2: Notes on the Methodology for the Case Studies | 177 Notes | 179 Index | 209 To Keagan Arkatedja, my fiery Red Preface AS A CHILD LIVING IN JAKARTA, Indonesia, in the late 1980s, I was familiar with the blatant inequalities that characterized the city. Mansions built right next to the slums were something familiar, although I lived in neither. The presence of poverty was everywhere. I remember vividly seeing an old man ridden with leprosy pulling a cart full of blocks of ice, every single morning on my way to school. Or a classmate, sitting right there next to me, wearing socks that were full of holes and a uniform with faded colors because it was really old. These experiences were enough to evoke questions about wealth and poverty early in my life. “Why are there the rich and the very poor in this country?” Later, in middle school—where kids from affluent families could buy Nike shoes or basketball shirts that were made not too far from where they lived by workers who were paid a fraction of the final price of these items—one of the first things we learned about Indonesia was that we were a part of the “third world.” Then the question developed into, “Why do we belong in the third world?” At that time, I couldn’t find a satisfying answer. Little did I know that this question would become the basis of more questions that later flourished and became the starting point of my studies. 8 VALUE CHAINS One of the answers I found after I emigrated to the United States was that we live in an imperialist economy that perpetuates inequalities on a global scale, largely through the exploitation and expropriation of the periphery by the core. Marxist political econ- omy has allowed me to examine this issue in depth with critical eyes, and myriad thoughts offered by critical and radical scholars, both from the Global North and the Global South, have provided me with resources to conduct my own research and formulate my own analyses. This book is a result of this long process of trying to understand how imperialist relations embedded in contemporary capitalism are sustained, perpetuating the division between the North and the South through the mechanisms of drain and value capture. The analysis may be theoretical at times, or it may use terms that are technical. But at its center is a narrative about real people whose lives are affected by the processes of globalized production in significant ways, especially workers who are controlled on the factory floors in the South through management practices gov- erned by capital’s interests. Within the complex configurations of the global chains of value, and behind the rhetoric of “decentral- ized” production networks, there lies the not-so-good “old” stories of exploitation and unequal exchange. But if the question concerns the working class, one may ask, why does my study focus on what the company executives from dependent suppliers have to say? Don’t they belong to the group whose allegiance is obviously to the Northern capital they serve? My answer is this: I believe that one needs to understand how capital works in order to defeat the system that has produced so much misery for so many people. You can’t fight something you don’t know well. And we can learn how this system works, its logic and requirements, from the individuals who make sure that it runs daily at the point of production, the “experts” who know the nooks and crannies, who juggle the demands given by their multina- tional clients and the need to directly control labor, often in order to meet those very demands. Dependent suppliers located in the PrEfACE 9 South can be viewed as a critical node within the global commod- ity chains characterized by arm’s length contracting. They give us a picture of how the chains work and reveal what forms of power relations exist in them. They also show us how to connect the dots between capital that rules from the metropolis and workers who toil in the industrial complexes in the periphery. This book offers a picture of the imperialistic relationship between the North and the South. I hope it is a solid one, but it is obviously not the picture. Nevertheless, even though this book does not focus on the other aspects of imperialism, including those that are intertwined with gender, race, militarism, and the environment, the discussion of the exploitation and expropriation of the periphery intersects with these aspects, and should create further conversations in relation to them. I also hope that this work can be connected to other works that have examined not only the question of imperialism but also the question of what the working class and oppressed peoples in the world have done, and can do, to liberate themselves from a system that both exploits and expropriates them. This book may not be a guide to how to end imperialism once and for all. The analysis I provide here, however, implies that capi- tal, the big power that controls the global chains of value, is not omnipotent. In today’s imperialist world economy, antagonistic class relations are as clear as ever, and ongoing struggles between capital and labor are something real. They occur everywhere. They are not a theoretical construct or mere Marxist jargon. This shows that changes are happening, that labor has never surren- dered to the miserable fate prescribed to them by capital. If the reality of imperialism is often denied in today’s world, the force of this denial always begins with those at the top of the global power hierarchy. The vast majority of people at the bottom are not fooled. They know what it is they continue to oppose. If I could time-travel to Jakarta, back to the years when I was in middle school, I might have to tell my younger self some depress- ing answers to her question about why her country belongs to the