25 September 2011; 1st update: 8 October 2011

The so-called ‘old international division of labour’ reflected the colonial and immediate post-colonial realities that the industrialised societies of the West produced manufactured goods while the rest of the world tended to produce one or 2 primary products per country.

However, the neo-Marxists Folker Fröbel, Jürgen Heinrichs & Otto Kreye (1980) state that, from the 1970s onwards, there have been substantial movements of industrial capital from the ‘advanced’ industrialised world to the developing world. This movement has been driven by rising labour costs and high levels of industrial conflict in the West which reduced the profitability of transnational corporations (TNCs).  With globalisation, the tendency is for the Western industrial societies to export capital and expertise while poor countries provide cheap labour for manufacturing.

Many developing nations in the 1970s and 1980s set up export-processing zones (EPZs) or free-trade zones (FTZs) in which TNCs were encouraged to build factories for export to the West. At the time of writing there are some 800 EPZs or FTZs in the world. Even socialist Cuba has become part of one!

Developments in manufacturing have meant that labour could be partitioned into a range of unskilled tasks that could be done with minimal training while computer-controlled technology enabled production to be automatically supervised. Naomi Klein (2000) claims that, “…to lure TNCs into their EPZs, the governments of poor countries offer tax breaks, lax healthy & safety regulations and enforcement, a low minimum wage and the services of a military willing and able to crush about unrest. Integration with the local culture is kept to a bare minimum.”

This ‘new international division of labour’ (NIDL) is thought by hyperglobalists to benefit world consumers by enhancing competition and thus keeping the prices of goods reasonably low. However, Frobel, Heinrichs & Kreye view the NIDL as merely a new form of neo-colonial exploitation. As well as exploiting peasants to grow cash crops for Western consumption, they argue that TNCs are now exploiting wage labourers (especially women) throughout the world. Klein supports this view, adding that “…entire developing countries are being turned into industrial slums and low-wage labour ghettos.”

An example of such exploitation comes from Annie Phizacklea (1990) who notes British company Wearwell, based in London’ East End, was shipping out 15,000 readycut women’s and girls’ dresses per week to Cyprus. The company, owned by Turkish-Cypriot millionaire Asi Nadir, paid their Cypriot homeworkers – numbering between 500 to 1,000 - 22p per dress. The finished products were then shipped back to London for export mainly to Arab countries. Ironically, Wearwell, which declared a profit of £4,200,000 in 1982, has twice received the Queen’s Award for Exports!

Pessimisitic globalisers share such concerns. They point out that, as TNCs relocate production in their search for lower costs, the prospects for employment in the West decline. Wages in the UK will need to be sufficiently low for TNCs to perceive investment in the UK as an attractive option. In the long term EPZs benefit TNCs more than developing countries. Currently there are more than 70 countries seeking to make their EPZ more financially attractive than their neighbours’. Wayne Elwood (p62, 2001) comments: “Corporations have the upper hand, trading off one nation against another to see who can offer the most lucrative investment incentives. Tax holidays, interest-free loans, grants, training schemes, unhindered profit remittances and publicly-funded sewers, roads and utilities are among the mix of ‘incentives’ that companies now expect in return for opening up a new factory or office.”

Jeff Silverstein (1992) described EPZs in Mexico: “The companies, whose plants are known as ‘maquilndoras’ or simply ‘maquilas’, were enticed by a Mexican government that allowed foreign firms to import parts and raw materials duty-free, provided the finished product was exported. Since the programme was introduced in 1965, more than 2,000 manufacturing and assembly plants have been built along a 12-mile band on the Mexican side of the border, thriving on tariff exemptions and wage rates lower than  in Taiwan and Korea. The programme has pumped millions of dollars into the Mexican economy. But years of unchecked industrial growth have transformed the entire border region into an environmental nightmare, were companies operate outside the constraints of the US Environmental Protection Agency and the Occupational Safety & Health Administration….”

Women and Children

One result of the exploitation of cheap labour in poor countries has been the increasing employment of women. According to Swasti Mitter (1986), 80% of workers in the FTZs are women.

TNCs prefer to employ young female workers because they can be paid less and are perceived to be easier to control than male workers. Additionally, making them redundant, when the employer needs to shed jobs, is seen to be less of an issue as women can simply return to the household. (Partly TNCs can get away with this cavalier attitude towards laying off women because, in societies where there is still a very strong element of traditional PURPLE thinking, gender roles tend to be sharply defined and there is much resistance to the employment of women anyway as being the ‘breadwinner’ is generally seen to be the man’s role.)

Western stereotypes of the docility and dexterity of oriental women are said to be a factor in attracting TNCs to the Far East. Mitter cites examples of Asian  governments reinforcing this meme in their efforts to draw in foreign capital.

Child labour has similar advantages and is widely exploited in poor countries. The attraction of cheap child labour is all too tellingly indicated by this admission from the Director-General of the Pakistani Workers’ Education Programme: "There's little doubt that inexpensive child labour has fuelled Pakistan's economic growth. Entire industries have relocated to Pakistan because of the abundance of cheap child labour and our lax labour laws." ( ) Around the same time Caroline Lees & Simon Hinde (1996) reported on a particularly galling example of children being exploited in this way: “The children, often engaged in a modern form of slave labour, spend long hoursin workshops around Sialkot, a Punjabi town near the border with India…. Sialkot is the source of most of the world’s hand-stitched footballs, its produce snapped up by household names such as Adidas, Reebok and Mitre. Many of the children are unable to attend school because their families need the 10p an hour they earn…. Many of the children in the Sialkot workshops are bonded labourers, working to pay off loans taken out by their parents…. Mudassar, 11, has worked for two years making footballs alongside three of his brothers. ‘I wanted to go to school but I have to work so I will probably never g,.’ he said. Two-thirds of the 1,500 children in his village make footballs.”

The problem with cheap labour…?

Clearly the exploitation of cheap labour/vulnerable people in the developing world is a major problem. However, things are not quite as simple as is sometimes made out.

Firstly, the new division of labour had not replaced the old division. Although the old industrial societies have lost some manufacturing to the newly-industrialised countries (NICs), they still have important exporting industries. Additionally, poor countries are still focussed on producing  food and raw materials for the rich countries.

Secondly,much of the cheap labour carried out in poor countries involves little investment – especially if it is done in small workshops or at home. (One example of this is teleworking where the supposed call centre may be simply be in a shed – or it could even be a ‘virtual network’ linking people working from their own homes.) In such cases, there may be very little transfer of capital to the the poor country where the goods or services are produced

Thirdly, most transnational investment is between the rich countries. Europe and Japan and the United States are the main sources of international capital. There is tendency among these to invest in each other, rather than Africa, Latin America or the poor countries of Asia. In fact, from the 1960s thrgh to the late 1990s the share of global investment going to Africa and Latin America. Development in Asia took a different turn as investment (especially from Japan) fuelled the so-called ‘tiger economies of Singapore, Malaysia, South Korea, Thailand and Taiwan. However, John Allen (1995) notes the tigers were a very select group of Asian countries.

Fourthly, it’s worth remembering that the transnational movement of production can severely hurt the nation which is losing the work. It’s no coincidence that the US trade union movement bitterly opposed the North American Free Trade Agreement, negotiated by the US, Canada and Mexico in 1993, fearing it would lead to American manufacturers moving south of the border for cheaper wages, with the loss of many thousands of American jobs.

Finally, rich countries too attract capital by providing cheap labour. Eg: in the mid-1990s Korean capital was drawn into Britain, particularly Wales where the closure of steelworks and coal mines had depressed wages levels.