The Global Assembly The Global Assembly LineLine

Volkswagen’s Global Volkswagen’s Global Assembly LineAssembly Line

What is the What is the “Global Assembly Line?”“Global Assembly Line?”

• Multinational or transnational Multinational or transnational corporations (MNCs or TNCs)corporations (MNCs or TNCs)

• ““Economic globalization”Economic globalization”• Enabled by modern ICTsEnabled by modern ICTs

– ““just in time production”just in time production”– Back offices in foreign countriesBack offices in foreign countries

• ““Export Processing Zones”Export Processing Zones”• Multiple locationsMultiple locations

– ““Global Assembly Line”Global Assembly Line”

Commodity ChainsCommodity Chains

• Production contractorsProduction contractors– Factories not owned by retailerFactories not owned by retailer

• Foreign Direct Investment (FDI)Foreign Direct Investment (FDI)

Foreign Direct Investment Foreign Direct Investment (FDI)(FDI)

• Investing directly in production in Investing directly in production in another country, either by another country, either by buying a buying a company there or establishing new company there or establishing new operations of an existing businessoperations of an existing business..

• Done mostly by Done mostly by companiescompanies (as (as opposed to financial institutions, opposed to financial institutions, which prefer indirect investment which prefer indirect investment abroad such as buying shares of abroad such as buying shares of stock or public bonds.stock or public bonds.

                                     

Global Global FDI FDI trendstrends

FDI and tradeFDI and trade

• Complementary with tradeComplementary with trade– Factory can serve surrounding regionFactory can serve surrounding region– Services need to be located abroadServices need to be located abroad

• Alternative to trade:Alternative to trade:– Avoid barriers to trade Avoid barriers to trade – ““Transfer pricing”Transfer pricing”

Global Growth in Export Global Growth in Export Processing Zones (2001)Processing Zones (2001)

RegionRegion(No. of EPZs)(No. of EPZs)

Key Countries Key Countries (No. of EPZs)(No. of EPZs)

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

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

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

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

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

Oceania (2)Oceania (2) Fiji (1)Fiji (1)

Total (633)Total (633)

Average wages of workers who made Suburbans in the late 1990’s

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

Basic Premise: Basic Premise: Difference in Wage RatesDifference in Wage Rates

The Cost of a ShoeThe Cost of a Shoe

Labor costs of a $100 shoeLabor costs of a $100 shoe

•40 cents40 cents

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

Thailand• 1994 – Vietnam• 2000-China

Globe-trotting Nike: Globe-trotting Nike: “downward leveling”“downward leveling”

Industrial relocation decisions: Industrial relocation decisions:

non-labor factorsnon-labor factors

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

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

How How global global are are MNC’s?MNC’s?

Global Production: Social Global Production: Social IssuesIssues

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

and Lack of Participation/Democracy in and Lack of Participation/Democracy in Decision makingDecision making

• Child Labor Child Labor http://www.ilo.org/public/english/standarhttp://www.ilo.org/public/english/standards/decl/intro/ilo_movie/index.ds/decl/intro/ilo_movie/index.htmhtm

Economic success storiesEconomic success stories

• NICS: Newly Industrialized NICS: Newly Industrialized CountriesCountries

• ““Asian Tigers”Asian Tigers”– SingaporeSingapore– Hong KongHong Kong– TaiwanTaiwan– South KoreaSouth Korea– MalaysiaMalaysia– ThailandThailand

• Korea videoKorea video

Korea: Creation of New Korea: Creation of New Comparative AdvantageComparative Advantage

• ““DDevelopmentalist evelopmentalist state”/sometimes authoritarianstate”/sometimes authoritarian

• StrategyStrategy– Major land reform in the rural areasMajor land reform in the rural areas– Started with Import Substitution Started with Import Substitution

Industrialization (ISI)Industrialization (ISI)– Moved to Export Oriented Moved to Export Oriented

Industrialization (EOI)Industrialization (EOI)– Numerous subsidies for EOI Numerous subsidies for EOI

industrializationindustrialization

Korea: Creation of New Korea: Creation of New Comparative AdvantageComparative Advantage

• Cultural and political strategiesCultural and political strategies– Created strong national identity of Created strong national identity of

independenceindependence– Workplace culture: teamworkWorkplace culture: teamwork– Suppression of labor unions and social Suppression of labor unions and social

movementsmovements

• High levels of US Foreign Aid High levels of US Foreign Aid (geopolitical motivations in region)(geopolitical motivations in region)

• More recently: democratic reformsMore recently: democratic reforms

• What is globalization?/ How should it be What is globalization?/ How should it be conceptualized? conceptualized?

• Is it really that new?Is it really that new?• How does contemporary globalization How does contemporary globalization

change politics?change politics?– state power?state power?– other scales of power and sovereigntyother scales of power and sovereignty

• How can globalization be democratized?How can globalization be democratized?• Where is global change going?Where is global change going?

The Globalization Debate: The Globalization Debate: key questionskey questions

The Globalization DebateThe Globalization Debate

• AgreementAgreement on changes in on changes in interconnectednessinterconnectedness

• DisagreementDisagreement on how to characterize on how to characterize the process and the power relations: the process and the power relations: – Conceptualization: how do we think Conceptualization: how do we think

about/imagine it?about/imagine it?– at which scale?at which scale?– Over what time frame?Over what time frame?– Impacts?Impacts?– Trajectories? Where is global change headed?Trajectories? Where is global change headed?

Alternative Alternative PerspectivesPerspectives

• The Hyperglobalist PerspectiveThe Hyperglobalist Perspective

• The Skeptical PerspectiveThe Skeptical Perspective

• The Transformationalist The Transformationalist PerspectivePerspective

Hyperglobalist ThesisHyperglobalist Thesis

• A Global Age: McDonaldizationA Global Age: McDonaldization– New Unprecedented Era in which global New Unprecedented Era in which global

interconnectivity will dominate political interconnectivity will dominate political relationsrelations

• It’s about the economy, stupid!It’s about the economy, stupid!– Global capitalism/International division of Global capitalism/International division of

labor labor

• Reduction of State SovereigntyReduction of State Sovereignty– ““Borderless World” (Ken Ohmae)Borderless World” (Ken Ohmae)– ““Hollowing out of the State”Hollowing out of the State”

Hyperglobalist ThesisHyperglobalist Thesis

• Both supporters and critics are in Both supporters and critics are in agreement that globalization is the agreement that globalization is the driving phenomenon in the world driving phenomenon in the world todaytoday

Hyperglobalist Hyperglobalist BoostersBoosters

• Problems, yes; but whole world will Problems, yes; but whole world will improve economically, politically and improve economically, politically and sociallysocially– Free trade raises all shipsFree trade raises all ships– Trickle down of economic prosperityTrickle down of economic prosperity– Will promote democratizationWill promote democratization– Will promote social equalityWill promote social equality– World will become more peaceful and World will become more peaceful and

cooperativecooperative

Hyperglobalist CriticsHyperglobalist Critics

• CriticsCritics: Globalization creates uneven : Globalization creates uneven development; need to consider social development; need to consider social and political aspects of development and political aspects of development too. too. – Increasing inequalities Increasing inequalities

• inside countries inside countries • internationallyinternationally

– Increasing homogeneity of cultureIncreasing homogeneity of culture– Monopolization of public space by private Monopolization of public space by private

interestsinterests– Reduction in the democratic processReduction in the democratic process

The Skeptics ThesisThe Skeptics Thesis

• Globalization is a myth or a Globalization is a myth or a discoursediscourse– Global corporation is a mythGlobal corporation is a myth– No real new international No real new international

division of labordivision of labor– World is actually less World is actually less

interdependentinterdependent• It’s a project of the It’s a project of the

West/powerful countriesWest/powerful countries

The Skeptics ThesisThe Skeptics Thesis

• State is still a player: “National State is still a player: “National Interest”Interest”

• Regionalization and Fragmentation Regionalization and Fragmentation – Three major trading blocks linked to Three major trading blocks linked to

national governments remain national governments remain powerful: North America, Europe and powerful: North America, Europe and Asia-PacificAsia-Pacific

– Economic marginalization leads to Economic marginalization leads to fragmentation and growth of fragmentation and growth of fundamentalismfundamentalism

61% MFG - 77% EXPORTS

Transformationalist Transformationalist ThesisThesis

• New architecture of world orderNew architecture of world order• New patterns of stratification among New patterns of stratification among

political actorspolitical actors– State, NGOs, Civil Society, State, NGOs, Civil Society,

Transnational and Global GovernanceTransnational and Global Governance• No clear end point: open ended, non No clear end point: open ended, non

teleologicalteleological• New opportunities New opportunities • State becomes a catalyzer State becomes a catalyzer

Doreen Massey: Doreen Massey: Globalization SkepticGlobalization Skeptic

• Professor of Geography at Open Professor of Geography at Open University, LondonUniversity, London

• Theorization of Space and Place Theorization of Space and Place constructed through networks of powerconstructed through networks of power

• Hettner Lecture:Hettner Lecture: “Imagining Globalization” “Imagining Globalization”• http://www.uni-heidelberg.de/media/http://www.uni-heidelberg.de/media/

geographie/Hettner1998.htmlgeographie/Hettner1998.html