Global Economy in Historical Context

• Early Patterns of Global Finance and Trade, largely supported state building, war making, and colonization.– 14th C.-Florentine Merchant Banks (Peruzzi Company)

• Financed Trade with Asia• “Supercompany”: also produced cloth transnationally

– 16th -18th C.-• Antwerp, Belgium financial center• Bank of England financed Britains war with France• British and Dutch East India Companies• Hudson Bay Company

– 18th C.-Amsterdam and London are global cities

Global Economy in Historical Context: 1850-WWII

• MNCs establish colonial operations– Extractive and Primary Industries; Mining, Logging– Agriculture: Plantations and Ranches; Fruit and Tea – Oil companies emerge – MNCs import textiles and decimate indigenous

industries

• Industrial Age: 1870-1914– Classical Gold Standard Period: Skeptics argue that this

was the only truly globalized era.– Telegraph drastically improves communication

Global Economy in Historical Context: Interwar Years

• Interwar years: Global Monetary Disorder– Collapse of the Gold Standard– German Hyperinflation– Domestic investments predominate

• Trade protectionism and cartels dominate remaining international business

• Soviet Union withdraws from int’l market

Global Economy: The Bretton Woods Years

• 1944 Meeting in Bretton Woods, New Hampshire• Marshall Plan• IMF: short term loans, also administered global

financial order– Compromise between free trade and social democrats

– Discrepancies between European and developing world

• World Bank: Infrastructural Development• GATT: General Agreement on Tariffs and Trade

Global Economy: Development 1950’s-1960’s

• Decolonization: finished by early 1960’s: however global capital is afraid of conflict and turmoil

• Marshall plan is completed, IMF and World Bank turn to new independent states.

• “Progress, modernization, infrastructure”• Development embedded in Cold War

conflicts; used as geopolitical strategy

Global Economy: Big Changes in the 1970’s

• 1971: Nixon delinks dollar from gold standard floating exchange rates

• OPEC cartel quadruples oil prices”petrodollars”

• US/Euro Banks have $50 billion to loan

• Developing countries receive this boon in the forms of government and private loans

Global Economy: Neoliberal 1980’s

• Early 1980’s-Debt crisis begins: world wide interest rates soar/ global recession/fall in commodity prices

• IMF imposes Structural Adjustment Policies (SAPs) to justify additional loans.

• “Green Revolution,” Industrial Agriculture and commodity “dumping” drive small farmers out of business

• Rural-Urban Migration in Developing World• IMF riots• 1989-Fall of USSR and end of Cold War• Market economy is the only game in town

Global Economy in the 1990’s

• Structural Adjustment continues and critique intensifies

• Global Assembly Line-MNC’s• Export Processing Zones• “Free” Trade and Financial Flows• Industrial/Export Agriculture• Internal and External Migration continues• Rise of the Megacity and the Informal Economy• Rise of Transnational Communities

The Global Assembly Line

VW’s Global Assembly Line

1. U.S. 2. Japan 3. Germany

23. Turkey 24. General

Motors 28. Ford Motors 29. Norway 30. Mitsui & Co. 33. Mitsubishi 34. Royal Dutch

Shell

35. Itochu 36. Saudi Arabia 37. Exxon 38. Wal-mart 39. Greece 47. Israel 48. General

Electric 57. Ireland

Country v. Corporate Economic Size: World Ranks-GDP and Sales

The Rise of Multinationals

• Overheads

Differences in Wage Rates

Average 1996 wages of workers who make Suburbans

U.S. $18.96/hr. Mexico $1.54/hr.

# of Suburbans producedMexico 80,400U.S. 83,000

Comparative Wage Rates: US/Mexico

The Cost of a Shoe

• Early 1960s - Oregon• 1967 – Japan• 1972 - S. Korea and Taiwan• 1986 – Indonesia, China and

Thailand• 1994 - Vietnam

Globe-trotting Nike

Industrial relocation: non-labor factors

• Government incentives and regulations– Provision of infrastructure (Export Processing

Zones)– Reduced cost of land, water, electricity– Tax breaks and tariff reductions– Lower environmental pollution standards– Lower health and safety standards

Global Growth in EPZs

Region(No. of EPZs)

Key Countries (No. of EPZs)

Latin America and the Caribbean (240)         Central America and Mexico (148)         Caribbean (51)         South America (41)

Mexico (107) Honduras (15)Costa Rica (9) Dominican Republic (35)Colombia (11) Brazil (8)

Europe and NIS (81) Slovenia (8) Bulgaria (8)

Asia and Near East (264) Turkey (11) Philippines (35) Indonesia (26) Jordan (7) China (124)

Africa (47) Kenya (14) Egypt (6)

Oceania (2) Fiji (1)

Total (633)

Map of world trade interconnectedness

Exports -1982 36 %1994 50 %

Imports –1982 31 %

1994 42 %

Intra-Firm Transfers -U.S. Corporations Data

61% MFG - 77% EXPORTS

Global Production: Social Issues

• Health and Safety of Workers• Coercive Working Conditions• Anti Union Environment• Government Involvement in Coercion and Lack of

Participation/Democracy in Decisionmaking• Child Labor

http://www.ilo.org/public/english/standards/decl/intro/ilo_movie/index.htm

Blue Jeans in Torreon

Torreon, Coahila, Mexico

Blue Jeans in Torreon

• Shifting Power: better local development?• Commodity chain approach

– Production, Marketing, also Social Movements, Governments

• Gereffi, 2001: “By focusing on the chain or organizational network as the unit of analysis, rather than the firm, interesting questions about power, governance and the dynamics of chains emerge.”

Maquiladora Growth

Industry Statistics - Mexico

The Maquiladora Industry in Mexico, January 1994-1999 Border Region

# Employees Jan '94

# Employees Jan '99

# Maquilas Jan '94

# Maquilas Jan '99

Baja California

111,728 217,366 822 1,090

Sonora 43,670 85,646 182 252

Chihuahua 166,134 274,998 305 379 Coahuila 47,830 99,604 185 268

Tamaulipas 100,027 152,276 293 351 Subtotal Border States

469,389 829,890 1,787 2,340

Other States 77,044 230,327 370 803 Total 546,433 1,060,217 2,157 3,143

Source: In: Coalition for Justice in the Maquiladoras, Annual Report 1999

Table 1. Apparel industry indicators for Torreon /La Laguna

Table 2. Main clients for Torreon apparel exports

Pre-Nafta Manufacturer Dominated Assembly Network in Torreon

Post Nafta Full Package Networks in Torreon

US¯Torreon apparel commodity chain

activities and location.

Top 10 apparel manufacturers in Torreon, Mexico¯¯July 2000

Maquila Solidarity Network Critique

• “Toxic Fashions” and “Blue jean blues” require toxic chemicals

• Mercerization: Sulphur, caustic soda, acid

• Tinting and Overdyes-manually crunched, rubbed and sponged

• Bleaching and Stonewashing: Amylase, Laccase

• Drying and Baking: Toxic fumes from ovens

• Pollution of water Supplies

Code Initiatives in North

• UK: Ethical Trading Initiative (ETI)• US:

• Fair Labor Association (FLA)• Workers Rights Consortium (University Clothing)

• US/Europe: SA 8000 (Social Accountability 8000)

• WRAP (Worldwide Responsible Apparel Production) Lower Standards

Changing Labor Conditions?-upside

• Labor “shortages” due to more skilled labor• High turnover- Labor wars• Higher wages• Upscale labels promote improved working

condition• New factories are often better than US apparel

factories• Codes of Conduct displayed (but in English!!)

Changing Labor Conditions?-downside

• Concentration of Ownership in few extended families

• Men more readily promoted to management positions

• Mexican Government has reduced the power of unions to a minimum

• Higher wages must be seen in context of 1994 devaluation of peso decline in living standards over last 5 years

Steps to Socially Just Production

• “Network of Central American Women in Solidarity with Maquila Workers” negotiate code of conduct with Nicaraguan Labor Ministry

Torreon Chamber of Commerce

http://www.torreon.gob.mx/index2.htm