Nowadays, businesses owned by the representatives of the so-called First World often try to persuade the public in their benevolence, respect to human rights, sustainability, etc. However, when their foreign production facilities are examined, it often comes to light that these companies engage in the harsh exploitation of workers overseas. For instance, it has been uncovered that the workers of the supply chain of Unilever (which, among others, is the owner of several major tea brands, including Lipton) work and live in inhumane conditions in India (Rowlatt & Deith, 2015). Another example: the supply chain of Apple profoundly uses child labor, the workers are often forced to work for 70 hours a week and more, etc. (Garside, 2013; Gibson, 2015; Deutsche Welle, 2015).
In this paper, the Marxist theory will be used to analyze the societal/structural reasons why companies transfer their production facilities to the so-called Third World countries, and why they neglect the interest of the workers there while not ignoring the interests of their employees from their home countries.
Internal Contradictions of Capitalism
Capitalism is the economic system that has as its basis the private ownership of the means of production and the utilization of these means to create goods and services that are later sold to bring profit to the owner of the means of production.
According to Karl Marx, capitalism has certain internal contradictions (as cited in Allan, 2011, pp. 111-112). The crux of the most significant of them is as follows. Businesses strive to make as much profit as possible. For this goal, they employ two key methods: they attempt to maximize the amounts of production and to minimize the expenses (which include the costs of labor). However, the working class, which constitutes the labor force, is also the main consumer of the products sold in the market.
Therefore, attempts to maximize profits have two main effects. First, the minimization of labor costs and the concentration of profits in the hands of business owners lead to the capital accumulation in the hands of business owners, and decreases in the income of the members of the working class; lower income of the working class (that is also the main consumer of goods and services) reduces the class’ total purchasing power.
Second, the products are also accumulated in the market, and the total production at some point exceeds the total demand. This results in a decrease in business profits, worker layoffs, and unemployment, as well as in further shrinkage of workers’ earnings and the total buying power of the working class (Marx, 2009). Thus, society arrives at the (intuitively absurd) situation when products and services are abundant, but most people, who are suffering from unemployment and often poverty, are unable to buy them.
Evading the Fallout of the Contradictions
There are some ways in which the problem can be temporarily solved or postponed inside the bounds of capitalism. (It is impossible to solve it permanently inside capitalism, for it is a result of its key principles.) First, the new economic cycle may start when the “renewed accumulation of capital” occurs (Allan, 2011, p. 112). Second, companies can sell commodities abroad, avoiding the problem of low demand in the home market. (Noteworthy, foreign markets can also become saturated.)
This influences the foreign policy of countries; importantly, the large capital often (if not always) has strong ties to the government (Marx, 2009; Zinn, 2015). The governments will attempt to seek external markets to enable the country’s industry to sell the abundant products there and postpone the economic depression. The corporations will also try to penetrate the foreign markets. Throughout American history, this led to the often imperialistic foreign policies aimed, among other goals, at gaining privileged access to foreign markets; and at decreasing the production capacity of the home manufacturers in the target markets, or at gaining ownership of these home manufacturing facilities. Noteworthy, imperialism is often ideologically supported by racism (Zinn, 2015).
The Resistance of Workers
There is also another aspect. In the pursuit of higher profits, businesses will always attempt to reduce the labor expenses (by lowering salaries, economizing on working conditions, etc., increasing the degree of exploitation). However, the workers may also be able to fight for their rights, for instance, by forming grassroots organizations such as labor unions. If the workers’ movement is strong enough, businesses may be forced to address their demands, simultaneously attempting to transfer production to regions where the workers’ movements are weak or absent to enjoy the benefits of lower labor costs.
Therefore, corporations from powerful countries (such as the U.S. or the wealthy countries of the EU) seek to transfer their production facilities to the countries of the so-called Third World, for the labor costs are lower there, and there are no substantial workers’ movements (Zinn, 2015). (In fact, all large corporations should wish to do so, but the companies from the powerful countries have more opportunities.)
Favorable Conditions for Foreign Production Facilities
Transferring production to a foreign country is especially profitable if that country’s government provides favorable conditions. For instance, it is possible to consider the example of China. It is governed by the Communist Party of China. Despite the name of the governing party, the economic system in China is capitalist, for there exists the private ownership of the means of production. However, the party/the authorities claim to represent the interest of the country’s workers, also spreading the corresponding ideology, and create impenetrable barriers for true workers’ organizations such as grassroots workers’ movements, rendering the workers unable to resist.
The party possibly enjoys benefits from the foreign businesses that own production facilities in China, which is also why they ignore the numerous cases of human rights abuse. Corporations, in turn, are happy to enjoy the benefits offered by the “cost-effective nations,” such as the possibility to neglect the quality of working conditions, the trifling labor costs, etc.
When workers lack effective means of resistance, businesses disregard their interests (Zinn, 2015). Thus, because the use of the “cost-effective nations” has a positive impact on their profits, and because the local workers are unable to protect their interests (or, as many people might say, “rights”), corporations care little for the problems caused by the use of child labor, for the inhumane working conditions, etc. They also care little for “human rights,” “sustainability,” and other issues represented by similar concepts and ideologemes. (This fact is evident from the above-mentioned abuse and exploitation of the workforce in India and China.)
However, these concepts and ideologemes are successfully utilized by enterprises in their home countries to convince the consumers of their beneficence and to disarm the workers’ movements that may challenge these corporations and decrease their profits. The fact that companies indeed do not care about the workers’ problems is evident from the abuse and exploitation of the workforce in India and China.
Thus, capitalism forces its agents to penetrate foreign markets not only to make more profits but also to avoid the saturation of home markets. First-world capitalists also move their production facilities to the third-world countries because workers there are unable to protect their interests (as in the examples with China and India), while the home workers created some means of self-protection throughout history.
Allan, K. (2011). A primer in social and sociological theory: Toward a sociology of citizenship. Thousand Oaks, CA: SAGE Publications. Web.
Garside, J. (2013). Child labour uncovered in Apple’s supply chain. The Guardian. Web.
Gibson, C. R. (2015). 12 horrifying photos of the tech industry Apple never wants you to see. Web.
Deutsche Welle. (2015). ‘Despicable’ conditions at Apple contractor in China. Deutsche Welle. Web.
Marx, K. (2009). Das Kapital: A critique of political economy. Volume I. Washington, DC: Regnery Publishing. Web.
Rowlatt, J., & Deith, J. (2015). The bitter story behind the UK’s national drink. BBC News. Web.
Zinn, H. (2015). A people’s history of the United States: 1942-present. New York, NY: HarperCollins Publishers. Web.