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Changing Global Production
Structures
Ravi Srivastava
Three related changes in the global production structure under
discussion:
• Tertiarisation (or quaternarisation) of the world economy.
o Already dominant in 1970 (52 % of world GDP& 68 % in 2005..
o Between 2005 and 2008 value added has been slower in the service sector than in
agriculture and industry.
o Blurring of distinction between manufacturing and services.
•
Increase “disintegration” or “fragmentation” of production and rise of Global
Production Networks.
o Lead firms in global production networks outsource lower value-added activities.
o Consequences changes in the structure of foreign trade and shift in a range of
manufacturing and modern services towards the emerging economies.
o MNEs are estimated to account for two-thirds of world trade and intra-firm trade.
But very few large MNEs are still located in the emerging economies.
•
Shift in the share of World GDP towards Asia.
o Share of Asia in world production grew from 15.5 to 28.5 per cent between 1970
and 2008 at the expense of Europe and North America.
Issues raised here:
• One of the issues raised in the literature in the context of the
current transformation of the global economy is the possibility of
economic and social “upgrading” in the emerging economies. i.e.
the possibility of the “High Road” versus “Low Road” to capitalism
• This issue is mostly discussed in the context of the Global
Production Networks.
• However, in large economies (specifically India), the nature of
capitalist transformation cannot be conflated to GPNs. There is a
significant presence of domestic production structures catering to
domestic demand.
• From the perspective of labour in the emerging economies, one of
the significant changes in the global scenario is the extreme limits
on labour making a transition to the “high road” due to its
overwhelming flexibilisation and informalisation.
• These limits are placed by capital, both of the global and domestic
variety, and through its influence on state ideologies,
• But we argue that social and economic policies can create
possibilities of upgrading labour and these possibilities have
increased since the current crisis.
Conditions of reproduction of labour
• Evidence suggests general “downgrading’ of the conditions
of labour via greater flexibilisation in all respects, greater
informalisation, and stricter conditions of work.
• This is true in almost all emerging economies, including
India and China.
• In these countries, almost the entire sectoral shift from
agriculture to non-agriculture – has been in the continued
context of informalisation (either shift to the informal
sector or to informal employment).
• The greater flexibilisation and informalisation of work and
labour co-exists with lower share of wages in value added,
higher inequalities and premium on certain specific skills.
• But there could be fluctuations in the remuneration to
wage labour due to changes in the conditions of demand
and supply.
• The impetus to informalisation and new forms of
flexibilisation comes largely from the globalised segments
of economy (i.e. the export oriented sectors facing global
competition.
• Hence issues of a “Race to the Bottom”.
• China till the recent past is a clear case in point.
• In India, also, in the case of the apparel industry
(considered to be a low skill sector) there have been
consistent demands from the industry for social
downgrading of labour.
• Vigorously sustained by a state under the influence of
neoliberalism through lack of regulation, suitable urban
and migration policy, privatization etc.
• The downgrading of labour persists even in the globalised
segments which have experienced economic upgrading or
which are supposedly at intermediate or high skill levels,
although the levels may be less than other sectors.
Recent evidence in India in a high growth regime
• Overall reduction in the percentage of the nonagricultural wage/salaried workforce receiving
any form of social security.
 The percentage of wage workers outside
agriculture receiving some fell from 32.6 % in
1999-00 to 28.6 % in 2004-5 and further to 26.4
% in 2009-10.
 Some increase in social security coverage in
larger proprietorship based firms, while the
percentage of workers covered declined in both
public limited companies and the government
sector.
• Consistent decline in proportion of such workforce with formal
job contracts.
 In 2004-05, 73.2 % wage employees outside agriculture were
without any formal contract. This increased to 77.3 % in 2009-10.
 Even among regular wage or salaried workers, 59.2 % such wage
employees were without any formal contract. This increased to
63.2 % in 2009-10.
 This increase was experienced across the board, across all
enterprise types, and across both the unorganized and organized
sectors
• High incidence of informalisation even in sectors such as ICT,
although lower than the average for other sectors.
 In 2004-05, 40.1 5 ICT workers without social security, compared
to 69 5% for other sectors;
 42 % ICT workers without any formal contract, compared to 74%
for workers in other sectors.
Possibilities of economic upgrading (taking the “High Route”)
• One can argue that lack of social upgrading feeds into the
“low road” and that social upgrading can provide an
impetus to productivity based growth (NCEUS view and its
focus on a “Social Floor”).
• Conversely, economic upgrading needed to sustain
improvements in working conditions.
• Different trajectories across emerging economies.
• The GPN literature sketches an upgrading trajectory from
simple assembly - to original equipment manufacturing to
original design manufacture to original brand manufacture.
• In India, limited upgrading co-existing with no upgrading in
the rest of the sector and overwhelming dominance of the
“low route”.
• Larger conditions of global capitalist production are
depressing the conditions of reproduction of petty
commodity production, both in agriculture and outside it.
By way of conclusion
• To reiterate: one of the big structural changes in the global
production systems is a blocked transition for labour.
• Unlike the first and the second industrial divides, flexibility has
radically limited the possibility of labour making a transition to a
formal status.
• Nonetheless, there are relevant differences in the experience of
some of the major emerging economies (esp. Brazil, China) which
show that there is scope for domestic policy to address issues of
economic as well as social upgrading and bring about an
improvement in the conditions of the working people.
• With the onset of the economic crisis, there has been some
delegitimisation of neoliberal orthodoxies and greater focus on the
improvement of skills, incomes and social protection at the bottom
of the pyramid.
• This has somewhat increased the possibility of introduction of
policies which can bring about positive change.