Exporting jobs or watching them disappear ?
Relocation, employment and accumulation in the world economy
Jayati Ghosh
Centre for Economic Studies and Planning
School of Social Sciences
Jawaharlal Nehru University
New Delhi 110 067
[email : jayati@ndf.vsnl.net.in]
Draft paper for discussion at
IDPAD Conference on
“Globalisation, structural change and income distribution”
Chennai, 14-17 December 2000
1
I
The issue of the international relocation of manufacturing production is
one which has received and continues to attract a great deal of attention from
not just economists but policy makers, trade unions and other analysts across
the world. There is a widespread perception that the past decade in particular
has seen a significant shift in the structure of international manufacturing
production, such that developing countries now account for nearly a quarter of
world manufacturing goods exports, up from just over one-tenth two decades
ago.
Such relocation, which in turn is generally supposed to imply a net loss of
manufacturing jobs in the North and a net expansion of such jobs in the South,
has been seen as being driven by both by the movement of capital, as
multinational companies in particular move to areas characterised by cheaper
labour, and by trade liberalisation which has allowed manufactured goods
produced in Southern locations to penetrate Northern markets. It is recognised
that both of these processes have been greatly facilitated by technological
change which has allowed for the locational breakup of the productive process
and the separation of various elements of it with differing types of skill
requirement. This has enabled what Feenstra [1998] describes as “the
disintegration of production”, with the associated geographical separation of
different parts of the production process and increase in intra-industry trade.
This is obviously a matter of great economic and political relevance, and it
has defined much of the reaction by workers in the North, who see their
employment opportunities challenged by this “great sucking sound” of jobs
moving South, through investment and trade. Conversely, workers and other
groups in the South have been encouraged to view protectionist pressure in the
North as part of an attempt to prevent them from reaching the living standards
of the North through export-oriented employment. Quite often, such concerns
at either end , reflected in and emerging from the politics of the situations,
have also been mirrored in the work of economists.
2
Table 1 :
Share of developing countries in world manufacturing goods exports
Year
Per cent
1980
11.2
1990
17.2
1991
18.5
1992
19.2
1993
21.4
1994
22.3
1995
22.9
1996
23.2
1997
24.1
1998
23.7
1999
24.8
Source : World Trade Organisation
Relatively early work in searching for empirical substantiation of this
perception of the export of manufacturing jobs from North to South was found
in both conservative mainstream and progressive economics traditions, through
the writings of Beenstock [1985] and others at one end of the spectrum, and
Froebel, Heinrichs and Kreye [1980] at the other. The book by Adrian Wood
[1994] was followed by a substantial debate on the extent and implications of
such relocation for employment in both the North and the South. Wood’s
argument, which was in essence just an extension of the Heckscher-OhlinStolper-Samuelson results, was that the lowering of trade barriers and the
liberalisation of external trade would cause trade, and therefore production
patterns, to move along the lines determined by factor-endowment-based
comparative advantage, especially when labour is gradated into different
factors according to degree of skill. Wood argued that expansion of trade
effectively linked the labour markets of North and South more closely. This did
not necessarily bring about convergence in wages. But it did, according to him,
accelerate development in the South through substantial employment increases.
In the North, however, even though such trade has raised average living
standards, it has hurt unskilled workers and thrown them out of jobs.
Much of the discussion that followed [see Journal of Economics
Perspectives, 1995 and 1998, for example, as well as Freeman and Katz, 1995
and Leamer 2000] has focused on the effects of this process on Northern
workers, and the debate has been about the extent of the damage that is likely
to ensue as well as the best way of dealing with it (as in the strategies of
3
protectionism versus training to improve skills of unskilled and less skilled
workers). There has also been debate on not just the extent but also the causes
of job loss, and whether trade or technological change has played a greater
role. It has been argued by one strand of the literature [e.g. Leamer, 2000]
that technology must play the determining role in changing labour requirements
in overall production, since the total manufactured exports of all developing
countries are still quite small in relation to developed countries’ GDP. While
some have suggested that the two processes of technology and trade openness
are “observationally equivalent” and effectively work in tandem, Wood has
argued that labour-saving technological change in the North has itself been
induced as a response to trade competition from production using cheap labour
in the South.
Interestingly, the effects of such global integration on workers in
developing countries have generally been taken to be unambiguously positive, in
terms of increasing employment opportunities especially for less skilled
workers. This has been true even of economists from developing countries who
have otherwise questioned the supposition that there would be necessarily be
large negative effects on unskilled workers in the North. Of course, this is
implicit in the very idea of “exporting” jobs : if they are being exported from
the North, presumably they are being “imported” somewhere else, that is into
the South. Thus, if the North is a net loser of less skilled jobs in
manufacturing, then the presumption is that the South is a net gainer of such
jobs.
At one level, this is fairly easy to understand : clearly, if there are
production shifts in manufacturing and associated job losses in one part of the
world, it is likely that such jobs have moved elsewhere particularly if the
manufacturing production is increasingly located (at the margin) in that part of
the world. But while this may follow easily from the analytics, it sits uneasily
with the actual experience of the vast majority of developing countries, who
have experienced very substantial losses in manufacturing employment through
the process of greater openness and integration of capital markets through
finance and goods markets through trade. For them, the question would more
likely be, not how many manufacturing jobs have moved to them or how much net
expansion in manufacturing employment there is, but rather : where have all the
jobs gone ? Also, just as the trading pattern is supposed to have increased the
skill premium on labour in the North, it should have reduced it in the South, or
at least made unskilled/less skilled work more easy to find than before. This
too does not seem to conform to the experience of most developing countries.
4
In this paper, these issues are sought to be addressed through an
examination of patterns of manufacturing employment expansion in some of
what are seen as the more prominent and “dynamic” developing economics of the
recent past. In the next section, the major tendencies in terms of
manufacturing employment by sector are considered, with a view to considering
the extent to which there has actually been a net export of such jobs to
developing countries. In particular, expectations with regard to the employment
elasticity of manufacturing are examined in the light of the available evidence.
In the final section, there is an attempt to explain the observed patterns in
terms of a broader understanding of the dynamics of contemporary capitalism.
II
It is generally acknowledged that the increase in manufacturing
production, and manufacturing exports in particular, is confined to a small
handful of developing countries. Typically these countries have also been
beneficiaries of substantial foreign capital inflows in various forms, although it
remains a subject of debate whether this has been a cause or effect of high
rates of export growth. At any rate, it is these countries - mostly in East Asia
with a few in Latin America - which have been dominant in contributing both to
the increase in the share of developing countries in total world exports of
manufacturing goods, and in the higher rates of economic growth that have
been found in these developing country regions as compared to the rest of the
world.
Indeed, Ghose [2000] suggests that as few as 13 countries 1 explain
almost all the significant increase in developing country manufacturing exports
over the past two decades. Thus, the share of these countries in total
merchandise exports from developing countries increased from 33 per cent in
1980 to 72 per cent in 1996, while their share of manufactured exports of
developing countries went up from 73 per cent to 88 per cent over the same
period. They also commanded an increasing (and dominant) share of foreign
direct investment into developing countries, which almost doubled after 1970 to
reach 82 per cent in 1995.
Obviously, if the manufacturing jobs have been moving anywhere, then it
must have been to these locations, since they account for the lion’s share of
manufacturing exports of all developing countries. The stagnation or even
1 1These countries are Argentina, Brazil, China, Hong Kong China, India, Indonesia,
Malaysia, Mexico, the Philippines, Singapore, South Korea, Taiwan China and Thailand.
5
deindustrialisation that has been noted elsewhere would then appear to be a
reflection of the fact that the more traditional division of labour has not
changed for most of the other countries, in which export of primary
commodities serves to finance (albeit only partially) the import of manufactured
goods from more developed countries.
Table 2 : Growth of manufacturing employment, 1985-98
(UNIDO data)
compound
1985
1998
rate of
(000s)
(000s) growth per
annum
China
29743
61582
5.8
South Korea
2395
2615
0.7
Malaysia
473
1448
9
Philippines
618
968
3.5
Taiwan
2462
2373
-0.3
India
6469
9300
2.8
Argentina
1174.4
887.5
-2.1
Brazil
4187
3115
-2.2
Chile
185
325
4.4
Mexico
994
920
-0.5
Source : Calculated from UNIDO Country Industrial Statistics
Tables 2 and 3 provide some information on manufacturing employment in
some of the more significant developing countries, from two different sources :
UNIDO and ILO. It is clear that a few countries - notably People’s Republic of
China, Malaysia and Chile - did experience substantial increases in
manufacturing employment over the period from the early 1980s. However,
many of even the supposedly most dynamic developing countries experienced
only low to moderate employment growth in manufacturing, and for several especially Brazil - such employment declined in absolute numbers over the
period. In fact, compared to the expectations caused by the very significant
shift in terms of international manufacturing production that was evident from
Table 1, the increase in manufacturing employment, limited as it was to a few
countries, seems quite unimpressive.
Table 3:
Growth rates of paid employment in manufacturing
(ILO Data)
6
Country
PR China
Malaysia
Indonesia
Thailand
Philippines
South Korea
India
Sri Lanka
Brazil
Colombia
Mexico
Kenya
South Africa
Zimbabwe
Period
1985-94
1981-94
1980-89
1981-93
1981-93
1980-90
1980-90
1980-97
1985-98
1980-97
1985-98
1980-97
1980-93
1980-97
Annual rate of
growth
4.8
7.3
9.8
7.3
0.9
4.4
1.4
2.8
-6.8
0.4
2.9
2.5
-.1
1.3
Source : Calculated from ILO Yearbooks of Labour Statistics
Table 4, which shows evidence of employment growth in aggregate
industry rather than just manufacturing, once again suggests a similar picture of
rapid employment generation in only a tiny handful of countries. It is true that
Indonesia, Malaysia and Thailand exhibit very rapid rates of employment
expansion in manufacturing production, and a near 5 per cent rate of annual
increase in such employment in a manufacturing sector as large as that of China
must imply a fairly large number of jobs in the aggregate. But this increase in
only four countries occurs even as many of the supposedly most dynamic
exporters (such as South Korea and Taiwan China) show very low rates of
employment growth while in other countries it is moderate at best. In several
large semi-industrial economies such as Argentina, Brazil and South Africa,
industrial employment growth was actually negative in the 1990s. It is also
interesting that in some of the most prominent high exporting countries of the
recent past, such as PR China, the rate of employment expansion has
decelerated in the 1990s when manufacturing export growth supposedly peaked.
Note that these data refer to the “pre-crisis” period, so that the financial
crisis and subsequent recession cannot be held responsible for this.
7
Table 4 : Employment growth in industry
Annual rate of growth (%)
1980-90 1990-96
Argentina
0.9
-6.7
Brazil
2.3
-0.5
Chile
3.8
3.8
Colombia
2.1
3.3
Mexico
3.7
3.3
PR China
Indonesia
Malaysia
Philippines
South Korea
Taiwan
Thailand
6.9
4.4
4.8
2.5
4.9
4.2
6.4
2.8
6.8
6.6
5.1
0.9
0.1
7.6
India
Sri Lanka
-0.7
3.4
1.5
3.4
Kenya
2.9
1.4
South Africa
1.9
-19.6
Zimbabwe
2
6.5
Source : ILO Key Indicators of Labour Market
The point is, of course, that such data refer to total manufacturing or
industrial employment, rather than simply the export oriented manufacturing
job creation alone. They therefore reflect the fact that just as there are some
jobs being created by export expansion, there are other jobs being lost because
of import penetration consequent upon trade liberalisation. This is an issue that
we will return to subsequently : suffice it to say at this point that for the
developing country concerned, obviously the concern is with net job creation or
destruction. And here, even for the small and highly favoured group of
successful manufactured goods exporters, the scale of employment expansion in
manufacturing does not in general appear commensurate with the increasing
shares in world trade. For the vast majority of developing countries which are
not covered in this paper, most studies have shown [UNCTAD 1999 summarises
several of these] that manufacturing employment has actually stagnated or
shrunk over the past decade.
8
Most of the studies which take a factor-content approach to the effects
of trade (or indeed, to the analogous and associated effects of relocative FDI)
have emphasised that the process of job shift occurs through changing patterns
of production in both North and South, such that within particular
manufacturing sectors the more unskilled labour-intensive branches and
activities are taken up in developing countries and the more skilled-labour
intensive activities are absorbed by Northern production. [Wood, 1998;
Krugman, 2000] As a result, the expectation is that with greater openness and
more trade, the employment intensity of manufacturing production should rise in
the South (or at least in those economies where export-oriented manufacturing
production is significant) while it should fall in the North. [Indeed, Ghose, 2000,
using the UNIDO data set for the period 1980-96, arrives at just such a result.
He also finds that within Asian developing countries, export-oriented industries
show higher employment elasticities of manufacturing production than importcompeting industries.)
However, such an outcome is not obvious, since it would depend upon all or
most trade being determined along Heckscher-Ohlin lines, with all the
restrictive assumptions (constant returns to scale, perfect competition,
balanced trade, and so on) associated with those results. An examination of the
data from both ILO and UNIDO once again suggests that changes in the
employment elasticity of manufacturing production have varied significantly
across the relevant countries, and do not necessarily conform to the expected
pattern.
At this point it is necessary to record some important caveats with
respect to the data sets used. As most researchers in the area will know, the
cross-country data sets provided by a range of international organisations are
problematic and often highly suspect, and the basis for comparability is no
always clear. In the case of the employment data, and particularly when it comes
to working out employment elasticities of production or value added, the matter
is further complicated by several gaps in the time series and extrapolations
that have been inserted by the relevant organisation. The ILO sources tend to
be more consistent with respect to employment, but the value added data
implicit in their calculations may be more suspect. The UNIDO source not only
manages to produce employment data for several countries which are not to be
found in the national statistics (on the basis apparently of reporting by member
governments and extrapolation) but also somehow gets around the problem of
huge gaps in the time series for a very large number of countries. Nevertheless,
these are the data sets used here, not only because they are really all we have
for purposes of identifying larger trends and making international comparisons,
9
but because they are the sources that have generally been used in the
literature.
Table 5 presents calculations of the employment intensity of aggregate
manufacturing value added, based on ILO data, for selected developing and
developed countries. It is evident that the employment elasticities emerging
from this data set are all close to zero, and there is really little to choose
across such countries, nor is there any clear-cut evidence of increases in such
intensity in developing countries and declines in developed countries.
Table 5 : Employment elasticity of manufacturing production
(based on ILO data)
1980-90 1990-95
Indonesia
-0.005
0.001
South Korea
0.003
-0.0001
Taiwan
-0.003
0.004
India
-0.59
0.004
France
0.003
-0.02
Japan
0.003
-0.005
United Kingdom
0.007
-0.03
United States
-0.01
0.04
Source : Calculated from ILO Key Indicators of Labour Markets
A different source - the UNIDO data set - is brave enough to provide
information which can be used to calculate employment elasticities for a number
of countries over the period 1985-98, in other words the peak globalisation
phase. These employment elasticities have been calculated for some of the
countries which are routinely described as among the more successful of the
new manufacturing goods exporters, and are typically seen as the most
important destinations for the jobs which are supposedly being relocated to the
South.
Unfortunately, such data are not available for the largest and most
prominent of such economies - that of the People’s Republic of China. However,
they are to be found for many of the other major manufactured goods
exporters among developing countries, and the relevant calculations by country
and sector are presented in Table 6. What is striking - at least to this
researcher - is how low most of the employment elasticities appear to be. Even
more striking is the large number of negative elasticities that emerge,
10
especially - but not exclusively - in South America, and also for a range of
manufacturing sectors that are typically thought of a being “labour-intensive”.
It is also worth noting that the elasticities range very widely across developing
countries with otherwise similar characteristics.
Table 6 : Employment elasticity of manufacturing production
By manufacturing sector and country, 1985-1998
(based on UNIDO data)
Source : Calculated from UNIDO Country Industrial Statistics, 2000
South Korea
Employment
elasticity
Food products
Beverages
Textiles
Clothing
Leather products
Footwear
Industrial chemicals
Other chemicals
Plastic products
Glass & products
Metal products
Non-electrical machinery
Electrical machinery
Transport equipment
Prof & scientific equipment
0.05
-0.78
2.07
1.09
0.44
-0.49
0.35
0.09
0.74
0.15
0.67
0.99
0.05
0.52
-0.17
Malaysia
Annual growth
rate of
value added
5.1
5.1
-2.22
-4.19
-9.41
-9.41
13.13
13.13
5.79
7.15
4.33
8.25
10.67
10.36
4.85
Employment Annual growth
elasticity
rate of
value added
0.65
5.95
-0.09
6.17
0.44
12.55
1.36
3.82
-2.02
-8.75
-9.29
-1.14
0.97
9.79
2.49
4.63
Food products
Beverages
Textiles
Clothing
Leather products
Footwear
Wood products
Paper products
11
Industrial chemicals
Other chemicals
Rubber products
Plastic products
Glass & products
Metal products
Non-electrical machinery
Electrical machinery
Transport equipment
Prof & scientific equipment
12
0.83
0.65
0.45
1.24
0.97
0.69
0.82
0.76
0.78
3.22
9.54
10.8
16.85
13.39
11.95
18.39
17.81
21.13
16.09
4.24
Philippines
Food products
Beverages
Textiles
Clothing
Leather products
Footwear
Wood products
Paper products
Industrial chemicals
Other chemicals
Rubber products
Plastic products
Glass & products
Metal products
Non-electrical machinery
Electrical machinery
Transport equipment
Prof & scientific equipment
Taiwan
Employment Annual growth
elasticity
rate of
value added
0.25
9.22
-0.06
12.56
-0.54
3.32
0.47
9.22
0.89
10.76
0.78
9.22
-1.13
5.68
0.56
8.56
0.23
12.91
0.21
12.91
0.08
13.47
2.25
3.46
0.05
13.96
0.62
11.31
0.31
20.41
0.54
21.64
0.2
40.57
0.43
13.89
Employment Annual growth
elasticity
rate of
value added
-0.59
2.21
0.57
6.77
-38.5
0.12
0.75
-8.47
0.34
-7.47
1.2
-13.74
0.71
4.37
0.16
8.92
0.09
8.06
0.26
1.95
-0.92
-.51
8.82
4.56
-0.12
4.73
Food products
Beverages
Textiles
Clothing
Leather products
Footwear
Wood products
Paper products
Industrial chemicals
Other chemicals
Rubber products
Plastic products
Glass & products
13
Metal products
Non-electrical machinery
Electrical machinery
Transport equipment
Prof & scientific equipment
0.42
0.54
0.14
0.18
-0.75
Thailand
6.82
10.43
5.63
2.06
-2.85
Employment Annual growth
elasticity
rate of
value added
11.73
0.83
-0.6
15.32
8.03
0.62
54.13
0.62
0.43
17.29
0.29
17.33
0.43
11.8
0.83
7.24
0.51
12.71
1.82
12.71
-0.18
12.91
0.5
28.71
1.42
25.79
1.49
13.93
0.44
25.21
Food products
Beverages
Textiles
Clothing
Wood products
Paper & products
Industrial chemicals
Other chemicals
Rubber products
Plastic products
Glass & products
Metal products
Non-electrical machinery
Electrical machinery
Transport equipment
Indonesia
Employment Annual growth
elasticity
rate of
value added
0.41
15.25
0.54
15.41
0.91
9.04
0.9
20.96
1.03
19.65
4.28
10.38
1.98
4.47
1.02
14.93
1.15
8.79
0.47
8.59
Food products
Beverages
Textiles
Clothing
Leather products
Footwear
Wood products
Paper products
Industrial chemicals
Other chemicals
14
Rubber products
Plastic products
Glass & products
Metal products
Non-electrical machinery
Electrical machinery
Transport equipment
Prof & scientific equipment
India
Food products
Beverages
Textiles
Clothing
Leather products
Footwear
Wood products
Paper products
Industrial chemicals
Other chemicals
Plastic products
Glass & products
Metal products
Non-electrical machinery
Electrical machinery
Transport equipment
Prof & scientific equipment
Argentina
0.36
1.43
0.85
1.83
-1.05
1.55
1.51
-11.39
8.74
8.74
10.25
5.4
-10.99
10.27
4.96
-1.81
Employment Annual growth
elasticity
rate of
value added
-1.41
4.98
-4.93
4.98
-0.18
6.25
0.81
-2.8
0.95
-0.19
0.68
-2.8
-0.57
1.81
-1.1
7.06
-1.43
7.06
-0.98
7.55
-3.54
7.55
-0.18
8.99
1.78
1.77
-0.64
6.68
-0.31
10.41
-5.87
7.42
-2.05
5.97
Employment Annual growth
elasticity
rate of
value added
-0.66
4.03
-0.38
2.64
13
-0.54
-0.36
2.5
-1.3
1.87
-3.3
1.71
Food products
Beverages
Textiles
Clothing
Leather products
Footwear
15
Wood products
Paper products
Industrial chemicals
Other chemicals
Rubber products
Plastic products
Glass & products
Metal products
Non-electrical machinery
Electrical machinery
Transport equipment
Prof & scientific equipment
Brazil
-4.34
-0.65
-0.75
-0.8
-0.72
0.44
-1.56
-5.56
0.15
7.57
-2.3
0.06
1.51
4.11
4.71
2.23
8.47
6.25
1.67
1.24
-3.59
-0.35
2.07
-7.1
Employment Annual growth
elasticity
rate of
value added
-1.46
2.31
1.81
-2.55
4.31
2.46
-1.39
1.89
-3.32
1.14
-4.36
0.75
8.26
-1.02
-2.6
2.09
-1.27
1.86
Beverages
Textiles
Wood products
Paper products
Rubber products
Plastic products
Non-electrical machinery
Electrical machinery
Transport equipment
Chile
Employment Annual growth
elasticity
rate of
value added
1.25
4.0
0.78
5.91
0.84
-0.94
-0.78
-2.93
3.75
0.71
-6.11
-0.35
-0.95
-4.05
1.07
5.59
Food products
Beverages
Textiles
Clothing
Leather products
Footwear
Wood products
Paper products
16
Industrial chemicals
Other chemicals
Rubber products
Plastic products
Glass & products
Metal products
Non-electrical machinery
Electrical machinery
Transport equipment
Prof & scientific equipment
Mexico
Food products
Beverages
Textiles
Clothing
Footwear
Wood products
Paper products
Industrial chemicals
Other chemicals
Rubber products
Plastic products
Glass & products
Metal products
Non-electrical machinery
Electrical machinery
Transport equipment
Prof & scientific equipment
1.29
0.65
1.14
2.32
0.5
0.76
0.26
0.37
3.86
1.1
5.48
8.07
3.74
4.06
12.43
7.41
13.86
7.11
2.55
7.55
Employment Annual growth
elasticity
rate of
value added
-0.2
3.21
0.32
3.21
-3.4
1.81
-1.31
1.81
-5.18
1.81
-13.7
0.36
-0.86
2.86
-1.09
2.84
0.44
2.84
-1.03
2.84
0.41
2.84
-0.5
2.98
-0.25
6.03
-0.11
6.03
-0.51
-0.08
-0.08
6.03
-0.39
6.03
Some of these figures may also be slightly misleading. Thus, it turns out
that for South Korea, the only elasticities which are greater than unity are in
the textiles and clothing sectors, which are declining industries, and here the
result comes about because both value added growth and employment growth
have been negative over this period. The sectors which show the highest growth
rates of value added, on the other hand - industrial chemicals and other
17
chemicals (13 per cent annual rate of growth) show very low employment
elasticity. Similarly, electrical machinery has high value added growth but very
low employment elasticity. On balance, it does not appear surprising that
aggregate employment growth in industry or in manufacturing in South Korea
over this period has been low to moderate.
Within Asia, as we saw earlier, Malaysia appears to be something of a
“tiger” at least in terms of employment generation in manufacturing, showing
high aggregate rates of growth of manufacturing employment of around 7 per
cent per annum. However, as is clear from Table 6, this does not reflect high
elasticities of employment, which are fairly low in most sectors. Rather it is the
result of sheer output and value added growth, which is evidently very
impressive. The only two sectors which appear to combine high employment
elasticity with reasonably high rates of value added growth are plastic products
and professional and scientific equipment.
It is interesting that across the Asian countries considered here, with a
few manufacturing sectors in some countries as exceptions, the sectors that
have been growing rapidly in terms of value added are those with low
employment elasticity. Conversely, the sectors that generate more employment
at the margin are those that have not been growing very fast in terms of value
added. In some countries textiles and clothing are exceptions to this, in other
countries, this is not the case.
It is also interesting to note that the much-vaunted feminisation of
employment which is widely seen to accompany export-oriented production, has
actually been receding in many of the high-exporting countries of East Asia
over the 1990s. This process, which has been documented and explored in
Ghosh [1999] is one whereby there was a substantial increase in female share
of employment in many of these economies in the period 1980-92, and
subsequently female employment has tended to stagnate or even decline not
only as a share of total employment but even in absolute terms. The causes for
this process must be complex, but it is depressing to note that it has typically
accompanied legal attempts to improve the conditions of women’s work as well as
the reduction of gender wage-gaps in the Asian countries concerned. In other
words, as the relative position of women workers became less inferior, they
tended to become less attractive to employers seeking cheap and “flexible”
labour. This was also associated with technological changes which increased the
reliance on certain types of skilled labour as opposed to unskilled and semiskilled assembly line work. It may be worth bearing in mind that what appears to
18
have happened to women workers in East Asian export manufacturing can also
happen to all Southern workers as a group in the international economy.
In the countries of Central and South America that are considered here,
the picture is even starker. Across almost all sectors, employment elasticities
are at best very low and at worst quite substantially negative. Quite often,
when they are positive, they are associated with negative rates of value added
change. The only exception to this in Brazil comes in the wood products sector
(scarcely a cause for celebration given the established relationship of this
industry with the deforestation of the Amazonian rain forest). Even Chile,
which currently is seen as the “success story” of Latin America, shows high
employment elasticities in only a few sectors, and these are not necessarily
always combined with high growth rates of value added.
The details of specific countries and sub-sectors, while obviously of some
importance, are for present purposes less relevant than the main conclusion
that seems to emerge from an examination of these data. This is that the
general perception, among both economists and policy makers, that the recent
period has seen a significant expansion of manufacturing employment in
developing countries as a consequence of greater international trade
integration, does not appear to be warranted. Rather, the perception which is
more widespread among trade unions, workers and people in general in
developing countries, that job opportunities in manufacturing are not keeping
pace with the expansion in the labour force and may even be declining in the
aggregate, appears closer to the truth even in several of the most “dynamic”
exporting economies. In other words, despite the evidence on relocation of a
number of manufacturing industries and the increasing emphasis of
multinational companies on the acquisition and use of assets in developing
countries, in the net the North has not been exporting jobs to the South, or at
the very least, the South is not a net importer of manufacturing employment.
Instead, many manufacturing jobs may simply have disappeared somewhere in
between...
III
What explains this pattern, which at first sight appears completely
counterintuitive ? And where, indeed, have the manufacturing jobs gone ? Much
of the debate, especially in the North, has focused on the relative significance
of trade and technology, and attempts have even been made to quantify the
individual significance of each of these factors. Some of this discussion may
19
obscure the larger process, in terms of the pattern of evolution of capitalism as
a world system in the recent past, which has determined both of these
processes and made them closely interrelated. Certainly, as far as developing
countries are concerned, the dichotomy may not be a useful one, since it will be
argued in this paper that both processes (of patterns of trade and of
technological change) emerge from a more basic feature, namely the particular
tendency of accumulation and concentration which characterises this phase of
capitalist evolution.
There are three immediate causes for the evident trend that has been
described in the earlier section, that in the net, manufacturing employment in
the South has not grown as much as could be expected from the increase in the
Southern share of manufactured goods exports or the evidence of relocative
FDI. The first cause stems from the fact that external trade for any country
is obviously a two-way process. Just as the North has been importing more
manufactured goods from the South than before, so too have Northern
manufactured goods imports invaded Southern domestic markets. Indeed, over
the past decade, the South on the whole has had a negative trade balance with
the North, even in the realm of manufactured goods. There are therefore two
simultaneous processes of relocation occurring : one of certain types of goods
from Northern to Southern locations, and one displacing Southern domestic
production with Northern imports. This process has been dramatically
accentuated by the trade liberalisation measures which have been put into place
in almost all developing countries over the past decade.
The Northern perception has been that both forms of relocation in any
case shift labour-intensive employment to developing countries and capitalintensive employment to developed countries. This is not always, or even usually,
the case. Many of the newly deregulated imports into the South (produced, no
doubt, by capital-intensive techniques in the North) displace small-scale and
highly employment-intensive domestic producers who are equally unable to
compete in international markets. In most developing countries, the consequent
job losses have simply not been compensated for by expansion in export
employment, even where exports have grown significantly. Thus, the net
expansion in manufacturing employment becomes low or even negative because
of the effects of import penetration.
In this context it is worth noting that the single great exception to the
relative stagnation of manufacturing employment in the South is the People’s
Republic of China. This is a special case for many reasons, but also (in this
context) primarily because so much of its industry still remains under State
20
ownership and control and it has so far done much less in terms of import
liberalisation than other developing countries. In other words, even as there is a
substantial expansion in export-oriented employment, job losses elsewhere in
the economy have been contained to some extent because of employment in
state enterprises and relatively controlled import liberalisation which still
permits a range of domestic manufacturing to survive. Studies that extol
China’s success in increasing employment in manufacturing without taking
cognisance of this basic fact, may miss the point. It therefore follows that the
future course of manufacturing employment even in China is not clear, if indeed,
there is substantial import liberalisation as a result of joining the WTO, and if
the declared “reform” of state enterprises actually does take place.
The second factor in explaining the disappearance of manufacturing jobs
is the fallacy of composition in export expansion. This is of course something
that was well known in the development literature, but appears to have been
forgotten in all the heady excitement about “globalisation”. The idea that all
developing countries can use export expansion as the basis for more generalised
economic growth was seen to be obviously problematic in the case of primary
goods. But it was recently assumed that a more diversified export basket with
greater emphasis on manufactured goods would do away with that problem. The
experience of the 1990s shows that this is not the case. Thus, for example, the
significance of the Chinese devaluation of the renminbi in 1994, in subsequently
affecting the competitive exporting capacity of Southeast Asian economies and
thereby contributing to the slowdown in exports which became one of the
factors leading to crisis in the region in 1997, is now well known. The
concentration of Southeast Asian export growth in certain sectors such as
office equipment and consumer electronics meant that after 1996, the export
success of certain countries (notably China and the Philippines) was enough to
wipe out the export growth of almost all the other countries in the region, in
these sector. [Ghosh and Chandrasekhar, 2001] As pointed out in UNCTAD
[1999], more and more manufactured goods exports of developing countries are
beginning to display the characteristics of primary commodity exports, including
price volatility and low price and income elasticities of demand. It is this fallacy
of composition argument which at least partly explains the very limited number
of success stories in terms of net expansion in manufacturing employment, that
was indicated in the previous section, despite the very large number of
countries attempting to use export-orientation as the main basis for economic
expansion.
And then, of course, there is the entire issue of technological change
which is increasingly labour-saving in nature. There is no doubt that such
21
changes are indeed taking place. Of course, labour-saving technological change
is certainly not a new feature of capitalist investment and in fact is a basic
property of most capitalist innovation. But it does appear to have become much
more rapid and therefore more direct in its influence on employment, largely
because the growth in volume of output is typically not large enough to make up
for the decline in per unit labour use. It is important to remember that such
technological change is equally evident across all countries, developed and
developing. This is not only because to a very large extent the basic sources of
all new technology are still the northern centres of capitalism. It is also true
because the same forces which make capitalists seek labour-saving technology
in the North operate in the South as well, notwithstanding the lower real wages
that are commanded by workers in the South.
It is this aspect of technological change which reveals what may be the
deeper underlying cause of the processes that have been outlined in this paper.
Many of the processes that have been described in this paper reflect fairly
basic tendencies of capitalist accumulation, which have been evident to greater
or lesser degree throughout its history. The difference is that now they appear
in accentuated and accelerated form, thereby creating the impression of
something rather new and different. But in fact they are substantively the
same, and therefore this particular phase of capitalist evolution (which for
summary purposes I will describe as the “globalisation” phase) is in many ways a
recreation or an intensification of longer run tendencies of the system.
One of the most basic of such tendencies is that towards concentration
and centralisation. And it is no secret that the decade of globalisation has been
marked by some of the strongest and most sweeping waves of concentration of
economic activity that we have known historically. This has been ably
documented elsewhere [e.g. Epstein 2000] and is now so obvious that there is no
need to belabour the point. But what is important for present purposes is the
effect this wave of concentration and centralisation, which is taking place
internationally and within national boundaries as well, has on patterns of
manufacturing employment.
There are at least four significant ways in which the concentration
process negatively affects productive employment generation in the
manufacturing sector, and why it causes jobs to disappear in both North and
South. The first is the fact, first noted by Marx and then documented by Lenin,
but certainly just as relevant today, that periods of high concentration are also
periods of the intensification of competitive pressures. The intensification of
competition in turn means that the “normal” tendencies of capitalist
22
accumulation are sharpened and aggravated, including the pressure to find more
and more means of reducing labour costs, for example.
There is intensification of competition not only between capitals but also
between countries as a result of the concentration of international capital. This
is reflected in governments vying with each other to provide incentives for
capital that plays increasingly hard to get, by providing tax sops, fiscal carrots
including guaranteed rates of profit, as well as various other incentives. It also
means that workers are told to become “flexible” enough to make themselves
sufficiently attractive to be hired by choosy employers. It is precisely that
concentration of capital in relatively few hands that makes threats of
withdrawal so plausible and the need to placate such large capital more
imperative.
The third effect of concentration that has relevance for employment is
that it involves the amalgamation or destruction of smaller capitals. Thus, the
very processing of the big swallowing up the small, at both national and
international levels, tends to reduce employment. So the reorganisation and
restructuring of production takes the form of the decline in importance of
smaller more employment intensive manufacturing units and the growing
dominance of large players who employ much fewer people. Associated with this
are the well known stagnationist tendencies of monopoly capital, which also tend
to reduce employment indirectly through their effect on aggregate demand.
Finally, the concentration of finance capital, which plays such a dominant
role in the international economy today, also contributes to the overall
stagnationary tendencies in the manner outlined by Patnaik [2000], not least by
constraining the ability of nation states to intervene to shore up domestic
demand and provide more egalitarian distribution. This also inevitably affects
employment generation in a negative way.
The central argument of this paper can be briefly summarised as follows :
The perception that the Northern core capitalist countries have been
“exporting” jobs in the net to Southern countries is not borne out by a cursory
examination of employment trends in even the most dynamic of Southern
exporters taken as a group. While manufacturing jobs may have disappeared
from the North, they have not reappeared equivalently in the South. It is true
that there has been production (and employment) relocation in a number of
manufacturing sub-sectors which are typically described as more labourintensive. But in most countries this has been more than offset by decline in
other sectors of manufacturing that have been hit by import competition, or
23
the nature of the export-oriented manufacturing itself has been such that
employment elasticities of new production are low. As a result, the increase in
manufacturing employment has been confined to a very small subset of
countries, and even here many sectors do not show the expected dynamism in
employment generation.
It is further being argued that this pattern is the result of three
factors. First, the trade liberalisation which has exposed manufacturing
production in developing countries to import competition and thereby eroded a
large amount of traditional activity or recent import-substituting production,
much of which was relatively labour-intensive. Second, the problem of fallacy of
composition in exports, which has not allowed more than a minuscule number of
countries to benefit substantially from access to Northern markets. Third, the
pattern of technological innovation which has contributed in no small measure to
the low and declining employment elasticities of production in exporting sectors
as well as in other activities.
The position taken here is that all of these factors are themselves the
consequence of a larger process of national and international concentration and
centralisation of production. This works directly in a number of ways to reduce
the potential for employment expansion in developing countries. It involves the
assimilation or destruction of small capital that uses more labour per unit of
output, by larger capital that effectively reduces employment. It increases
competitive pressure - across countries and capitals - that increases the quest
for reducing labour costs in a variety of ways. It inhibits governments from
undertaking expenditures that could directly and indirectly increase
employment and economic activity in the system as a whole.
If this argument is correct, then both the pattern of trade and the
technology changes that have characterised the globalisation phase of
capitalism emanate from (and of contribute to) the basic process of
concentration of capital that has especially marked this phase. This means that
solutions to the problem of disappearing jobs in turn cannot be found in the
specifics of trading patterns or even forms of technological innovation, but in
the need to curb and contain the power of large capital.
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