articulations of capital: global production networks and regional transformations

Articulations of Capital

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PublishedArticulations of Capital: Global Production Networks and Regional TransformationsJohn Pickles and Adrian Smith, with Robert Begg, Milan Buček, Poli Roukova and Rudolf Pástor

Metropolitan Preoccupations: The Spatial Politics of Squatting in BerlinAlexander Vasudevan

Everyday Peace? Politics, Citizenship and Muslim Lives in IndiaPhilippa Williams

Assembling Export Markets: The Making and Unmaking of Global Food Connections in West AfricaStefan Ouma

Africa’s Information Revolution: Technical Regimes and Production Networks in South Africa and TanzaniaJames T. Murphy and Pádraig Carmody

Origination: The Geographies of Brands and BrandingAndy Pike

In the Nature of Landscape: Cultural Geography on the Norfolk BroadsDavid Matless

Geopolitics and Expertise: Knowledge and Authority in European DiplomacyMerje Kuus

Everyday Moral Economies: Food, Politics and Scale in CubaMarisa Wilson

Material Politics: Disputes Along the PipelineAndrew Barry

Fashioning Globalisation: New Zealand Design, Working Women and the Cultural EconomyMaureen Molloy and Wendy Larner

Working Lives: Gender, Migration and Employment in Britain, 1945–2007Linda McDowell

Dunes: Dynamics, Morphology and Geological HistoryAndrew Warren

Spatial Politics: Essays for Doreen MasseyEdited by David Featherstone and Joe Painter

The Improvised State: Sovereignty, Performance and Agency in Dayton BosniaAlex Jeffrey

Learning the City: Knowledge and Translocal AssemblageColin McFarlane

Globalizing Responsibility: The Political Rationalities of Ethical ConsumptionClive Barnett, Paul Cloke, Nick Clarke and Alice Malpass

Domesticating Neo‐Liberalism: Spaces of Economic Practice and Social Reproduction in Post‐Socialist CitiesAlison Stenning, Adrian Smith, Alena Rochovská and Dariusz Świątek

Swept Up Lives? Re‐envisioning the Homeless CityPaul Cloke, Jon May and Sarah Johnsen

Aerial Life: Spaces, Mobilities, AffectsPeter Adey

Millionaire Migrants: Trans‐Pacific Life LinesDavid Ley

State, Science and the Skies: Governmentalities of the British AtmosphereMark Whitehead

Complex Locations: Women’s Geographical Work in the UK, 1850–1970Avril Maddrell

Value Chain Struggles: Institutions and Governance in the Plantation Districts of South IndiaJeff Neilson and Bill Pritchard

Queer Visibilities: Space, Identity and Interaction in Cape TownAndrew Tucker

Arsenic Pollution: A Global SynthesisPeter Ravenscroft, Hugh Brammer and Keith Richards

Resistance, Space and Political Identities: The Making of Counter‐Global NetworksDavid Featherstone

Mental Health and Social Space: Towards Inclusionary Geographies?Hester Parr

Climate and Society in Colonial Mexico: A Study in VulnerabilityGeorgina H. Endfield

Geochemical Sediments and LandscapesEdited by David J. Nash and Sue J. McLaren

Driving Spaces: A Cultural‐Historical Geography of England’s M1 MotorwayPeter Merriman

Badlands of the Republic: Space, Politics and Urban PolicyMustafa Dikeç

Geomorphology of Upland Peat: Erosion, Form and Landscape ChangeMartin Evans and Jeff Warburton

Spaces of Colonialism: Delhi’s Urban GovernmentalitiesStephen Legg

People/States/TerritoriesRhys Jones

Publics and the CityKurt Iveson

After the Three Italies: Wealth, Inequality and Industrial ChangeMick Dunford and Lidia Greco

Putting Workfare in PlacePeter Sunley, Ron Martin and Corinne Nativel

Domicile and DiasporaAlison Blunt

Geographies and MoralitiesEdited by Roger Lee and David M. Smith

Military GeographiesRachel Woodward

A New Deal for Transport?Edited by Iain Docherty and Jon Shaw

Geographies of British ModernityEdited by David Gilbert, David Matless and Brian Short

Lost Geographies of PowerJohn Allen

Globalizing South ChinaCarolyn L. Cartier

Geomorphological Processes and Landscape Change: Britain in the Last 1000 YearsEdited by David L. Higgitt and E. Mark Lee

ForthcomingSmoking Geographies: Space, Place and TobaccoRoss Barnett, Graham Moon, Jamie Pearce, Lee Thompson and Liz Twigg

Home SOS: Gender, Injustice and Rights in CambodiaKatherine Brickell

Pathological Lives: Disease, Space and BiopoliticsSteve Hinchliffe, Nick Bingham, John Allen and Simon Carter

Work‐Life Advantage: Sustaining Regional Learning and InnovationAl James

Rehearsing the State: The Political Practices of the Tibetan Government‐in‐ExileFiona McConnell

Body, Space and AffectSteve Pile

Making Other Worlds: Agency and Interaction in Environmental ChangeJohn Wainwright

Transnational Geographies of the Heart: Intimacy in a Globalising WorldKatie Walsh

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Articulations of Capital

Global Production Networks and Regional Transformations

John Pickles and Adrian Smith, with Robert Begg, Milan Buček, Poli Roukova and Rudolf Pástor

This edition first published 2016© 2016 John Wiley & Sons, Ltd

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Library of Congress Cataloging‐in‐Publication Data

Pickles, John, author.Articulations of capital : global production networks and regional transformations / John Pickles and Adrian Smith, with Robert Begg, Milan Buček, Poli Roukova and Rudolf Pástor. pages cm – (RGS-IBG book series) Includes bibliographical references and index. ISBN 978-1-118-63271-0 (cloth) – ISBN 978-1-118-63290-1 (paper)1. Economic geography. 2. Globalization–Economic aspects. 3. Clothing trade–Bulgaria. 4. Clothing trade–Slovakia. I. Smith, Adrian, author. II. Begg, Robert Burns, author. III. Buček, M. (Milan), author. IV. Roukova, Poli, author. V. Pástor, Rudolf, author. VI. Title. VII. Series: RGS-IBG book series. HC244.P49135 2015 332′.042–dc23

2015022959

A catalogue record for this book is available from the British Library.

Cover image: Front cover image © John Pickles

Set in 10/12pt Plantin by SPi Global, Pondicherry, India

1 2016

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Contents

Series Editors’ Preface viiList of Figures viiiList of Tables xiPreface and Acknowledgements xiiAbbreviations xxi

Part One Articulating Capital in Global Production Networks 1

1 Articulations of Capital 3

2 Economic Geography, Conjuncture and the Dynamics of Capital 23

Part Two Working off the Past: Context and Complexity in Apparel Global Production Networks 53

3 Working in the Post‐Socialist Apparel Economy 55

4 Managing Europe’s Golden Bands: Trade Policy and the Regulation of Production Networks (with Robert Begg) 86

5 Transformations, Legacies and Networks: The State and Market Globalizations (with Robert Begg and Milan Bucek) 104

Part Three Industrial Dynamics, Regionalization and the Conjunctural Economy of Global Production Networks 135

6 Theorizing Transition and the Dynamics of Capital: The Diverse Trajectories of Post‐socialist Firms (with Robert Begg, Milan Buček, Poli Roukova, and Rudolf Pástor) 137

vi contents

7 Border Reconfigurations and the Frontiers of Capital (with Robert Begg, Milan Bucek, and Rudolf Pástor) 162

8 Regionalization and the Palimpsests of Production: Delocalization, Legacies and Firm Differentiation (with Robert Begg and Poli Roukova) 182

9 The Cultural Economies of Post‐Socialism: Ethnicity, Garage Firms and Regional Markets (with Robert Begg and Poli Roukova) 214

Part Four Conclusion 237

10 Conclusion 239

Appendix 1 Firm-level Restructuring in the Slovak Textiles and Clothing Sector, 2004–2013 253

Appendix 2 Key to Figure 9.14 Dimitrovgrad Market, 2011 257References 260Index 281

Series Editors’ Preface

The RGS‐IBG Book Series only publishes work of the highest international standing. Its emphasis is on distinctive new developments in human and physical geography, although it is also open to contributions from cognate disciplines whose interests overlap with those of geographers. The Series places strong emphasis on theoretically‐informed and empirically‐strong texts. Reflecting the vibrant and diverse theoretical and empirical agendas that characterize the contemporary discipline, contributions are expected to inform, challenge and stimulate the reader. Overall, the RGS‐IBG Book Series seeks to promote scholarly publications that leave an intellectual mark and change the way readers think about particular issues, methods or theories.

For details on how to submit a proposal please visit:www.rgsbookseries.com

David FeatherstoneUniversity of Glasgow, UK

Tim AllottUniversity of Manchester, UK

RGS‐IBG Book Series Editors

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List of Figures

1.1 Eastern and Central Europe. 51.2 The apparel production system. 111.3 Producer‐driven and buyer‐driven value chains. 122.1 Two circuits of capital in sub‐contracting apparel production

networks. 292.2 Types of economic upgrading in global apparel value chains. 323.1 Average net monthly wages, 2013, by country. 623.2 Clothing employment in East‐Central Europe, 1989–2010. 663.3 Clothing employment as a percentage of total manufacturing

employment in East‐Central Europe, 1989–2010. 673.4 Share of EU15 apparel imports by macro‐region,

1995–2012. 683.5 Apparel exports from selected ECE suppliers to EU15

markets, 1995–2012. 693.6 The changing position of apparel suppliers to the EU15

market, 1995, 2005 and 2012. 704.1 Unit values of EU apparel imports. 935.1 The structure of coercive bargaining in the socialist

enterprise. 1075.2 The social wages and community investments of socialist

enterprises. 1085.3 Map of Slovakia. 1115.4 Employment in the Slovak apparel industry, 1970–2011. 1125.5 OZKN apparel factory in the mid‐1990s. 1125.6 Map of Bulgaria. 1145.7 Apparel employment in Bulgaria, 1980, 1985–2012. 1155.8 International Fair Plovdiv. 1185.9 International Fair Plovdiv, International Exhibition of Textile,

Clothing and Leather Goods, 2004. 119

list of figures ix

5.10 Apparel machinery at the International Fair, Plovdiv, International Exhibition of Textile, Clothing and Leather Goods, 2004. 120

5.11 Student design work, International Fair, Plovdiv, International Exhibition of Textile, Clothing and Leather Goods, 2004. 120

5.12 Bulgaria domestic brands, Sofia. 1225.13 Fashion show for domestic brands, Plovdiv, Bulgaria. 1235.14 Transfer of branded design into domestic technical apparel

and ready‐mades. 1245.15 Value added in the Slovak apparel industry, 1995–2011. 1255.16 Employment in Bulgarian textiles and apparel, 1980–2012. 1286.1 Ideal‐typical forms of firm transformation in the East

European apparel industry. 1436.2 Production line at a German‐Slovak joint

venture, Prešov. 1486.3 Trajectories of transformation: Pierre. 1516.4 Trajectories of transformation: Makyta. 1526.5 Trajectories of transformation: I‐Tran. 1536.6 Trajectories of transformation: Lifeline. 1546.7 Lifeline retail store in eastern Slovakia. 1556.8 Fast fashion domestic orientation of Lifeline stock. 1556.9 Ideal‐typical forms of firm transformation in the Bulgarian

apparel industry: garage firms of Haskovo. 1577.1 Slovakia’s balance of trade in textiles and apparel with

Ukraine, 2000–2012. 1687.2 Slovak apparel imports from Ukraine, 1999–2012. 1697.3 Slovak‐Ukraine cross‐border production complex. 1718.1 Apparel employment as a percentage of total manufacturing

employment, 2012. 1898.2 Absolute change in apparel employment by obstina and

planning region, 2010–2012. 2018.3 Quantity of apparel product sold by product category,

2008–2012. 2028.4 Sold value of Bulgarian manufactured apparel by product

category, 2008–2012. 2038.5 Bulgarian manufactured apparel unit value of sold product by

product category, 2008–2012. 2048.6 Production networks in Artex Bulgaria’s regional production

system. 2069.1 Town and village population in Kardzhali by obstina (county),

1965–1992. 2169.2 The Mir apparel enterprise, 1994. 2179.3 Apparel employment as a percentage of total manufacturing,

Haskovo oblast, 1996–2012. 218

x list of figures

9.4 Apparel employment as percentage of total manufacturing employment, 2012. 218

9.5 Garage firms, Haskovo, 2013. 2209.6 Ground‐floor and second‐floor garage firms, Haskovo, 2004. 2209.7 Garage workshop delivery van, Haskovo, 2013. 2219.8 Garage firms investing in housing, Haskovo 6, 2004 and 2013. 2239.9 ‘Djenny’: garage firm branding, 2013. 2249.10 Dimitrovgrad Market as transnational petty producer retail

and wholesale network hub. 2259.11 Clothing stall at Dimitrovgrad Market, 2004. 2269.12 Clothing and logistics integrated in the Dmitrovgrad

Market, 2004. 2269.13 Dimitrovgrad Market, 2013. 2289.14 Dimitrovgrad Market, 2011, stall layout. 228

3.1 Forms of outsourcing in the ECE apparel industry 593.2 The relationship between relative position and absolute

growth of apparel exports from selected ECE countries to EU15 markets, 1995, 2005 and 2012 71

3.3 Minimum insurable earnings by categorized occupation in Bulgaria 2013 75

4.1 Trade regimes, GPN structure, geographies of production, and employment consequences 90

4.2 Four phases of quota integration into the Agreement on Textiles and Quotas 91

5.1 The development of the textile and apparel industry employment in Slovakia as a share of industrial employment, 1989–2012 128

7.1 The three most important 4‐digit apparel exports from Slovakia to the EU15, 1995, 2000, 2005, 2010 and 2013 165

7.2 Regional average monthly wage levels in selected branches of the Slovak economy, 2013 177

8.1 Economic involution and employment decline, Kardzhali, 1991–1998 186

8.2 Change in manufacturing employment by selected branch, 1992–1998 187

8.3 Diverse apparel firm types in south central Bulgaria 1908.4 Apparel employment by obstina, Kardzhali oblast, 1998 1978.5 Ethnicity and unemployment in Kardzhali oblast, 1999 1989.1 Selected characteristics of Haskovo garage firms, 2008 222

List of Tables

Preface and Acknowledgements

Articulations of Capital weaves together three primary threads of conceptual and empirical research. First, it is concerned with the geographies of contemporary economic change, particularly with the ways in which late twentieth‐century and early twenty‐first‐century rounds of globalization have been scripted in terms of post‐national spatial formations. As economic geographers we are, first and foremost, concerned with the ways in which what Peter Dicken calls “the global shift” is variously scripted through spatialized concepts such as footloose capital, slippery space, chain dynamics and network forms of integration. These emerging geographies and scriptings have important implications for the ways in which we understand contemporary spatial divisions of labour and the regional futures they portend, particularly for the employed and unemployed in communities throughout Europe.

Second, the book is grounded in the geographies of global value chains and global production networks. Each of these bodies of research – in conversation with each other – has opened up new ways of understanding the changing social composition and geographies of the global economy. We are particularly interested in the ways in which the study of inter‐firm chains and networks enable and limit possibilities for thinking about capital–labour relations in a globalizing economy and their effects on the structures and practices of regional production systems. We focus on the detailed practices of the social economy in order to unpack chain and network analytics and the emerging multiplication of labour’s forms under contemporary global capitalism.

Third, this is a work of methodology and social theory. The book makes three related epistemological moves. In the first, we are committed to regional analysis, grounded theory and actually occurring economic prac-tices. The result is recognition of the value and necessity of abstract con-cepts, but with a deep suspicion of the generic concept divorced from the

preface and acknowledgements xiii

specificities of the concrete. Ours is a regional analysis that seeks to practise what Gilles Deleuze and Félix Guattari called “subtraction”, stepping down a level to the constitutive elements of any particular concept. In this sense, Articulations of Capital is an economic geography of context and conjuncture, and the multiplicities of opportunities and constraints they allow. In the second, we develop a theory of the global and regional economy in which our focus is increasingly on the multiplication of labour and its corresponding spatial divisions. Here we explore the ways in which the expansion of global production networks and the integration of the apparel industry in East‐Central Europe was one way in which new multiplications of labour were elaborated in the context of transformations to post‐socialism. In the third epistemological move, we de‐centre the geographies of European economic transformation by gradually refocusing our analysis of post‐socialism away from its more common passive ren-dering (as a region to which external forces impose agendas) to one in which we interrogate post‐socialism in terms of its dynamic and productive capacities and effects in shaping the outcomes of economic integration. Articulations of Capital is therefore about the changing economic geographies of post‐socialist Europe and the many ways in which those transformations have shaped, and have been shaped by, the institutions, economies and livelihoods of people in the region.

Our analysis has involved a quarter century of research on the economic geographies and political economies of East Central European transforma-tions and twenty years research on the global apparel industry. For one of us (John), 1986 to 1989 was a period of international exchanges with Hungarian, Bulgarian, Czechoslovak, and Russian scholars first in the USA and then in Hungary, Czechoslovakia and Bulgaria. In November 1989, we were on a study tour of Bulgaria when the environmental movement coor-dinated mass demonstrations in Sofia against the Zhivkov regime, and after similar movements had fundamentally changed the political lives of Central European countries. Between 1991 and 1993, the other of us (Adrian) lived just outside the town of Martin in Czechoslovakia, teaching geography, experiencing the tumultuous changes transforming the lives of people and places under‐going “post‐socialist” change, and subsequently completing a PhD thesis on the political economy of industrial restructuring and regional development in what had become the independent Slovak state in 1993. From these beginnings we have become devoted scholars of post‐socialist transformations and critics of the simple logics of transition, with all they entail for theories of history, culture and politics. Our work together, and in collaboration with our collaborators on this book, began in earnest in the mid‐1990s, not least with the publication of our edited collection, Theorising Transition, which attempted to map a critical political economy to the geog-raphies, cultures and regional dynamics of change in post‐socialism. This developed further in the late 1990s and early 2000s when we began to work

xiv preface and acknowledgements

more intensively on the dynamics and restructuring of the apparel industry in the region in comparative perspective.

This long period of research and writing together has attempted to develop forms of grounded theory; theoretically informed empirical research based on detailed field research in the region. We focus primarily on Bulgaria and Slovakia. These two country cases were chosen to reflect their different stages of involvement in export production, the importance of the apparel sector to national and regional economies in each country, different forms of market integration and product specificity, and distinct impacts of European Union (EU) enlargement policies. In each country, the most important apparel‐producing areas were selected for study: the two capital city regions of Sofia and Bratislava, two older producing regions (Plovdiv, Bulgaria and Trenčín, Slovakia), and two more economically marginal regions (Kurdjali/Haskovo in southern Bulgaria and Prešov, East Slovakia) (Figures 5.3 and 5.6). The research has spanned extensive annual fieldwork and on‐going col-laborations with many colleagues in these regions as well as research visits to Brussels to interview European Commission personnel, European trade union organizations and European industrial association representatives, and interviews with apparel buyers and retailers in the EU. Fieldwork took place over varying periods of time in 2003, 2004, 2008, 2012, 2013 and 2014. The research in Bulgaria and Slovakia involved an extensive number of interviews with firm managers and other company personnel, trade unions representatives, workers, government agencies, and professional associa-tions, as well as a survey of 311 apparel firms. Over this time, we have carried out over one hundred in‐depth semi‐structured interviews with managers, trade unionists, workers, industry professionals and buyers, and national and EU‐level policy‐makers, combined with follow‐up surveys and data collec-tion from factories. Managers in several of the key firms were interviewed several times over this period, allowing for a longitudinal analysis of firm strategies and trajectories of firm development in some of the most significant apparel firms in each region. We attempted to include all of the key former state‐owned enterprises in each region in our research and to undertake follow‐up in‐depth longitudinal interviews with a sub‐sample of key firms mostly, but not only, from those involved in the initial survey. In the text which follows, our convention in naming firms is that we do so where we have secured the permission of managers or where the firm is no longer in existence (normally due to bankruptcy and closure). In all other cases we name the location of the firm and the approximate form (e.g. joint venture, etc.) in order to avoid explicitly identifying the company.

In the years since the late 1980s, we have benefitted enormously from the support and friendship of like‐minded colleagues. Throughout, Robert Begg, Milan Buček, Poli Roukova, and Rudolf Pástor have been our constant co‐researchers/authors, interlocutors, colleagues and friends. Much of the work in the book is based on detailed fieldwork on which we worked together

preface and acknowledgements xv

in various combinations. It also partly draws on and extensively updates and reworks material we have co‐written with them, some of which has been published previously although very significantly reworked, theorized more extensively and thoroughly updated here. Where we have co‐authored material in the chapters with them we indicate which are co‐authored by whom. Articulations of Capital is, then, a thoroughly collaborative project which could not have been possible without any of its authors.

We have also benefitted from working closely with colleagues and the institutions that were our hosts and supporters. In Sofia, we have depended on the support, friendship, and intellectual insights of colleagues at the Department of Geography, Kliment Ohridiski University, particularly Anton Popov, Stelian Dimitrov, Stefan Stefanov, Katya Mileva and their colleagues in the Department of Geography. Poli Roukova has been our colleague and collaborator throughout and Stefan Velev, Rumi Dobrinova, Didi Mikhova, Mariana Nikolova, Zoya Mateeva, Maxi Emilova, Christa Petkova, Angel Sharenkov among others at the Institute of Geography of the Bulgarian Academy of Sciences have always been supportive and welcoming of our visits and questions. They too, along with Aneta Spendzhatova of the Department of Political Science at UNC Chapel Hill, provided invaluable support and research assistance in Bulgaria. The Academy of Sciences, the Institute of Geography (now a part of the National Institute of Geophysics, Geodesy and Geography) was a generous host for all our projects. We have worked with the Institute under several of its directors as it has adjusted to circumstances since 1989. We are grateful for the help of Directors Petr Popov, Georgi Georgiev, Stefan Velev, Mariyana Nikolova, and Boian Koulov.

Grisha Gradev, from the independent trade union KNCB, and now at the ETUI and the ITUC in Brussels, has been a source of great insights into the broader dynamics of labour and governance. We are also grateful to Krastyo Petkov and his many colleagues in the KNCB central and regional offices for their willingness to meet and discuss developments with us during many visits. Grisha and Krastyo were always willing interlocutors, introducing us to the intricacies of post‐socialist Bulgarian labour politics and the struggles over the institutions and resources of the country after 1989, as well as the broader labour movement in the post‐socialist world. We were introduced to both by Mieke Meurs from American University, who was a constant field companion through the 1990s and early 2000s. From her and her colleagues at the Institute of Anthropology in the Academy of Sciences, and from Barbara Cellarius and Chad Staddon, we learned the value of thinking more seriously about the interrelations between agrarian production systems and the organization of export manufacture.

In Slovakia, our collaboration has been anchored around our co‐authors for several chapters of the book, Milan Buček and Rudolf Pástor, at the University of Economics in Bratislava. They have provided friendship,

xvi preface and acknowledgements

intellectual insight as well as great hospitality throughout our long‐standing collaboration. They have made both intellectual work and fieldwork a true delight. In 2013–2014, John received support through the UNC Pogue Distinguished Research Award, and was the Nadácia VÚB Distinguished Visiting Professor in the Department of Public Administration and Regional Development in the Faculty of National Economy at the University of Economics in Bratislava, Slovakia, and later the Distinguished Visiting Fellow for the Faculty of Humanities and Social Sciences, Queen Mary University of London. We have also benefitted from the friendship and assistance of colleagues at the University of Prešov, particularly Rector René Matlovič, at Comenius University, Bratislava, at the Institute of Geography of the Slovak Academy of Sciences, and other collaborations with Petr Pavlínek of Charles University, Prague.

Our research on Bulgaria emerged out of a series of East Central European scholar exchange programmes with Russia, Hungary, and Bulgaria. Organized by Ron Abler at the National Science Foundation and Andrew Isserman at the Regional Research Institute at West Virginia University, the American‐Bulgarian Seminar on Regional Economic Development and Environmental Management (October 1987), the US‐USSR Seminar on Regional Economics and Planning (May 1988), the Bulgarian‐US Seminar on Regional Development and Environmental Management, hosted by the Institute of Geography at the Bulgarian Academy of Sciences (October 1989), and the Seminar on Restructuring and Regional Developmen, hosted by the Centre for Regional Studies at the Hungarian Academy of Sciences (May 1990) provided early forums for scholarly exchanges among senior and junior researchers aimed at building long‐lasting collaborative research links and projects to study the changes that followed 1989. A MacArthur Foundation Award supported extensive annual field research in the early 1990s and was the stimulus to the initial discovery of apparel workshop rebound in the small villages of southern Bulgaria in the mid‐1990s. Krassimira Paskaleva, Phillip Shapira, Boian Koulov, and Didi Dimitrina (ne‐Mikhova) among others were our research collaborators. In Slovakia, our research developed out of earlier collabora-tive research activity, in part initially funded by the Nuffield Foundation and the U.K. Economic and Social Research Council. The latter involved collaborations with Mick Dunford, Jane Hardy, Ray Hudson, Al Rainnie and David Sadler.

In 1998, Theorising Transition was published as a result of a growing sense among us and many of our colleagues that transitology was too quickly and easily becoming a new common sense with its commitments to liberal individualism, market optimism, and post‐communist euphoria. The many years of working on late apartheid transformations and the prospects of framing a post‐apartheid dispensation in the late 1980s and 1990s had particularly attuned John to the ways in which the built

preface and acknowledgements xvii

environment and the lives that inhabit it constitute deep legacies that continue to shape change. Similarly, at this time Adrian was studying the state socialist era armaments industry in Martin, Czechoslovakia, devel-oped as part of the Soviet bloc’s defence industries and facing 1989 with an uncertain future. He was particularly interested in how what Burawoy and Lukács (1992) called the “radiant past” continued to shape the forms, dynamics and trajectories of political‐economic transformation and regional development.

Between 2002 and 2009, our research was funded by awards from the United States National Science Foundation; “Reconfiguring Economies, Communities, and Regions in Post‐Socialist Europe: A Study of the Apparel Industry” (award number BCS/SBE 0225088) and “The Geographical Consequences of the End of Quota Constrained Trade in the Global Apparel Industry” (award number BCS‐0551085) in collabo-ration with Gary Gereffi and Meenu Tewari. Our work on regionalization in the apparel industry was the primary focus of the international conference on Global Apparel we organized at the University of North Carolina at Chapel Hill, October 15–16 2004. The conference was spon-sored by the Center for Slavic, East European and Eurasian Studies, the Center for European Studies, the European Union Center, the Carolina Asia Center, the University Center for International Studies and the U.S. National Science Foundation. Robert Jenkins and Jeremy Pinkham at the Center for Slavic, East European and Eurasian Studies, Ruth Mitchell‐Pitts at the Center for European Studies, and Niklaus Steiner at the University Center for University Studies were particularly helpful in helping us organize the conference. Jamie Peck helped shepherd the subsequent publication of some of those papers in a special issue of Environment and Planning A in 2006.

In our interviews in Brussels in 2003, 2004, 2012 and 2014, we were helped by individuals at the Directorate Generals of the European Commission (particularly, DG Trade and DG Enterprise and Industry), the European Textile and Apparel Confederation (EURATEX), the European Association of Fashion Retailers (AEDT) and the European Trade Union Institute (ETUI).

From 2009 to 2012, the Capturing the Gains Research Network was an important venue for the development of many of our ideas on the contem-porary dynamics of apparel. Funded by the UK ESRC and DFID, and directed by Stephanie Barrientos at the University of Manchester and Gary Gereffi at Duke University, the Network held several workshops and confer-ences each year for four years. Stephanie Barrientos, Michelle Christian, Neil Coe, Barbara Evers, Gary Gereffi, Shane Godfrey, Martin Hess, Peter Knorringa, Joonko Lee, Frederick Mayer, Will Milberg, Khalid Nadvi, Dev Nathan, Nichola Phillips, Anne Posthuma, Arianna Rossi, Cornelia Staritz and Meenu Tewari among others, were constant interlocutors on the

xviii preface and acknowledgements

project. Tim Sturgeon, Jenn Bair, Raphie Kaplinksy and Mike Morris participated in several of these meetings and were always productive in their contributions.

Graduate and undergraduate students have been active participants in this and related research. We particularly want to acknowledge the stim-ulation and contributions of Dennis Arnold, Valentin Bohorov, Annelies Goger, Michelle Gregory, Tu Lan, Steven Lin, Natalie Teague, Shengjun Zhu at the University of North Carolina at Chapel Hill and Maureen McDorman at the University of Kentucky. Data updates have been provided by Shengjun Zhu.

Many of the figures and maps were expertly produced by Ed Oliver of the School of Geography at Queen Mary University of London. With his characteristic calmness, professionalism and skill, Ed responded to our many requests for revision and adjustment, often in short time scales, and we are very gratefully to him for making this book a better book. We are also grateful to Leon Pickles for his work on Figures 8.3, 8.4, and 8.5.

Articulations of Capital has benefitted greatly from editors’ and reviewers’ comments on our previously published papers. These have been thor-oughly reworked, updated and restructured for this book. We acknowledge the journals and publishers, as well as the editors and anonymous reviewers, for their support throughout. Parts of Chapter Three have been signifi-cantly updated and revised, incorporating new empirical material and wider arguments, from Pickles and Smith (2010). Parts of Chapter Four draw on, revise and significantly update with new material work published in Pickles (2013) and Begg et al. (2003). Parts of Chapter Six incorporate significantly updated, restructured and revised material from Pickles et al. (2006), including new interview material and other data, as well as wider arguments. Parts of Chapter Seven are significantly revised and updated, to incorporate new interview and other data, from Smith et al. (2008b), as well as incorporating new conceptual material and frameworks. We are also grateful to Pion Ltd. London (www.pion.co.uk and www.envplan.com) for permission to use Figure 6.1 which is a significantly revised and updated version of that appearing in Pickles, J., Smith, A., Buček, M., Begg, R. and Roukova, P. (2006) “Upgrading, changing competitive pressures and diverse practices in the East and Central European apparel industry”, Environment and Planning A, 38: 2305–324. In 2014, Towards Better Work: Understanding Labour in Apparel Global Value Chains, co‐edited by Arianna Rossi (Better Work, ILO), Amy Luinstra (Sustainable Business, International Finance Corporation), and John Pickles, was published jointly by Palgrave Macmillan and the International Labour Organization. It allowed us to work with some of the most recent research developed by researchers and practitioners, and to engage more directly with ILO and World Bank policy‐makers in the process. Neil Coe and anonymous reviewers provided help-ful, careful yet incisive comments on an earlier version of the manuscript.

http://www.pion.co.uk

http://www.envplan.com

preface and acknowledgements xix

We are very grateful to them for helping us sharpen and clarify our arguments, to Neil for his stewardship of our manuscript through the review process, and to Jacqueline Scott at Wiley‐Blackwell in the produc-tion phase.

Parts of the book have also been presented and benefitted from a series of discussions with colleagues at universities, conferences, and workshops. These include the 2012 IMPACTT London conference; presentations at the Annual Conference of the Royal Geographical Society (with the Institute of British Geographers) in Belfast in 2002, European Urban and Regional Studies conferences in Barcelona (2002) and Vienna (2010), the Annual Meetings of the Association of American Geographers in New Orleans in 2003, the ESRC research seminar on “Rethinking Economies: Clusters, Network Organisation and the Informal Economy”, Bologna in 2006, the International Conference on The Changing Geography of Production in Labour‐Intensive Industries, Kraków, Poland, in 2007, the International Seminar in the series of “Seminars of the Aegean”, Crete‐Chania, Greece in 2007, the 3rd Central European Conference in Regional Science, Košice, Slovakia, in 2009, the ESRC workshop on “Working for export markets: labour and livelihoods in global production networks”, University of Sussex in 2010, the Winter Seminar, High Tatras, Slovakia, in 2014, the Bulgarian annual geographers conference in 2008 and 2012, the Committee of the Regions’ second forum on “Industrial Competitiveness: Global Challenges, Regional Responses”, Brussels, in 2013, the European Trade Union Institute and Czech Government International Symposium on Foreign Direct Investment, Prague, in 2015, and university seminar and colloquia presentations at the Pennsylvania State University, the Appalachian Research Center at the University of Kentucky, the University of Economics in Bratislava, the University of Zurich, the University of Birmingham, and the School of Slavonic and East European Studies, London.

We are also extremely grateful to Larry Grossberg at UNC Chapel Hill and Liam Campling at Queen Mary University of London who have been collaborators during and beyond this research and provided inci-sive and helpful comments on earlier drafts of parts of the book. Their friendship and comradeship continue to enhance our intellectual lives. Ray Kiely, Al James, Roger Lee and Jane Wills at Queen Mary University of London have each provided intellectual ideas and discussion which have helped shape the writing of this book. Altha Cravey, Elizabeth Havice, Betsy Olson and Alvaro Reyes at UNC Chapel Hill have been generous with their time and their comments have helped sharpen sev-eral crucial arguments.

Finally, thanks and our love go to Lynn and Leon, and to Angela, Alex, Dom, and Theo, who have all lived through and with our fascination with apparel and with Eastern and Central European transformations. Our commitment to this work increasingly seems to be an act of historical

xx preface and acknowledgements

significance (if that), but we remain convinced that the questions of post‐socialist transformations are crucial to understanding the lives people in ECE and those in Western Europe live today, and the possibilities of framing a geography of responsibility attentive to the deep relational structures of contemporary economic life.

John Pickles, Chapel Hill

Adrian Smith, Brighton

Abbreviations

ACFTA ASEAN‐China Free Trade AgreementACP African, Caribbean, and the PacificAGOA Africa Growth and Opportunity ActASEAN Association of South East Asian NationsATC Agreement on Textiles and ClothingATOP Association of Textile and Clothing Producers, SlovakiaBAAPTE Bulgaria Association of Apparel and Textile Producers

and ExportersBCS Behavioural and Cognitive SciencesBGMEA Bangladesh Garment Manufacturers and Exporters

AssociationBICS Brazil, India, China and South AfricaCAD‐CAM Computer Assisted Design‐Computer Assisted

ManufacturingCAFTA Central American Free Trade AgreementCASDEC Cambodia Skills Development CentreCBA Currency Board ArrangementCBI Caribbean Basin InitiativeCBTPA U.S.‐Caribbean Basin Trade Partnership ActCCC Clean Clothes CampaignCEE Central and Eastern EuropeanCGTC Cambodia Garment Training CentreCM Cut‐MakeCMEA Council for Mutual Economic Assistance (or COMECON)CMT Cut‐Make‐TrimCSR Corporate Social ResponsibilityDCFTA Deep and Comprehensive Free Trade AgreementDM DeutschmarkDOT Bangladesh Department of Textiles

xxii abbreviations

DR‐CAFTA Dominican Republic–Central America Free Trade Agreement

EBA Everything but ArmsEBRD European Bank for Reconstruction and DevelopmentEC European CommissionECE Eastern and Central EuropeECOWAS Economic Community of West African StatesEEC European Economic CommunityEPA Economic Partnership AgreementsEPOS Electronic Point of SalesEPZs Export Processing ZonesETI Ethical Trading InitiativeEU European UnionEU‐15 The 15 member states of the European Union (EU) as

of December 31, 2003, before the new member states joined the EU: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom

EU‐26 EU‐15 plus the new accession states: Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia

FDI Foreign Direct InvestmentFLA Fair Labor AssociationFOB Free on Board (or sometimes referred to as Freight on

Board)FTA Free Trade AgreementGATT General Agreement on Tariffs and TradeGCC Global Commodity ChainGDP Gross Domestic ProductGPN Global Production NetworkGRS Geography and Regional ScienceGSP Generalized System of PreferencesGVC Global Value ChainIDS Institute for Development StudiesIFA International Framework AgreementIFC International Finance CorporationILBFTA Indo–Sri Lanka Bilateral Free Trade AgreementILO International Labour OrganizationIMF International Monetary FundITC International Trade CentreITGLWF International Textile, Garment, and Leather Workers

FederationITUC International Trade Union Confederation

abbreviations xxiii

KNCB Confederation of Independent Trade Unions of Bulgaria (or CITUB)

LDCs Least Developed CountriesLICs Low‐Income CountriesMAK Österreichisches Museum für angewandte Kunst (Austrian

Museum of Applied Arts)Med‐12 Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta,

Morocco, the Palestinian Authority, Syria, Tunisia, and Turkey

MENA‐4 Tunisia, Morocco, Arab Republic of Egypt, and JordanMFA Multi‐Fibre ArrangementMFA/ATC Multi‐Fibre Arrangement/Agreement on Textiles and

ClothingMFN Most Favoured NationMRDC Ministry of Regional Development and Construction

(Bulgaria)NAFTA North American Free Trade AgreementNGO Non‐Governmental OrganizationNIEs Newly Industrialized EconomiesNSI National Statistical Institute (Bulgaria)OBM Original Brand Manufacturing (or Own Brand

Manufacturing)ODM Original Design ManufacturingOECD Organisation for Economic Co‐operation and

DevelopmentOEM Original Equipment Manufacturing (or Own Equipment

Manufacturing in ECE)OPT Outward Processing TradeOZKN Odevné závody kpt. Nálepku (Captain Nalepka Clothing

Factory, Slovakia)PV Passiven VeredelungsverkehrsQIZ Qualifying Investment ZoneROO Rules of OriginSAARC South Asian Association for Regional CooperationSADC Southern African Development CommunitySAFTA South Asian Free Trade AgreementSAPTA South Asian Preferential Trading AgreementSBE Social Behavioural and Economic SciencesSLAEA Sri Lanka Apparel Exporters AssociationSME Small and Medium EnterpriseSOE State‐Owned EnterpriseSSA Sub‐Saharan AfricanŠÚ SR Štatistický úrad Slovenskej republiky (Statistical Office of

the Slovak Republic)

xxiv abbreviations

T&G Textiles and GarmentsTCF Third Country FabricTPL Trade Preference LevelsTPP Trans‐Pacific PartnershipTZUM(ЦУМ) Tsentralen universalen magazin (Central Department Store)UFI Global Association of the Exhibition IndustryUK United KingdomUN Comtrade United Nations Commodity Trade Statistics DatabaseUNCTAD United Nations Conference on Trade and DevelopmentUNDP United Nations Development ProgrammeUSA United States of AmericaUSAID United States Agency for International DevelopmentUSAS United Students against SweatshopsUSITC U.S. International Trade CommissionVAT Value Added TaxVER Voluntary Export RestraintsWB World BankWRAP Worldwide Responsible Accredited ProductionWRC Worker Rights ConsortiumWTO World Trade Organization

Part OneArticulating Capital in Global Production Networks

Articulations of Capital: Global Production Networks and Regional Transformations, First Edition. John Pickles and Adrian Smith, with Robert Begg, Milan Buček, Poli Roukova and Rudolf Pástor.© 2016 John Wiley & Sons, Ltd. Published 2016 by John Wiley & Sons, Ltd.

Articulations of CapitalChapter One

Introduction

In the 1950s, the textile industry created a term – Orllegro – to describe a mythical fabric that had been re‐discovered and which, because of its tensile strength, flexibility and other qualities, would solve many problems in fabric design, opening a new future of economic dynamism and competitiveness for the industry and for consumers alike. Orllegro was a mythical term to describe a mythical fabric that ushered in a hoped‐for –but equally mythical – future (MAK Vienna 2014). In three important ways, Orllegro is an alle-gory for the recent story‐telling surrounding the global apparel industry and, in Eastern and Central Europe (ECE), its post‐socialist variant, which provides the focus for Articulations of Capital. First, the story of Orllegro reminds us of the crucial importance of textiles and apparel industries in the economic trajectories and employment geographies of any country; tex-tiles and apparel industries are ubiquitous and, despite predictions other-wise, continue to function in important ways even in some of the most high cost locations of the world economy. Second, Orllegro is an allegory of the role textiles and apparel industries play in shaping the production and trade systems of particular regions. They are literally and figuratively the warp and weft of regional economic development. Third, like Orllegro’s promise

4 articulations of capital

of a new future, textiles and apparel manufacture’s survival in an increasingly liberalized and competitive world is being discursively framed in terms of their ability to invent, innovate and upgrade their products, processes and functional capacities. If they do not, they wither and move to other loca-tions. Upgrading and delocalization thus increasingly chart the possible futures for regional apparel industries and employment. This is the kind of common‐sense discourse we analyse and question by examining the inter-weaving of employment, trade and innovation as state socialist and former state socialist industries have been re‐articulated with global production networks since the 1980s.

Over this period, the economic geographies of local and national production systems in ECE have been buffeted by, and responded to, various transformations in the political economy of Europe and beyond. Economic and political liberalization has transformed the European Union (EU), former state socialist economies in ECE and emerging economies globally. The reconfiguration of economic investments, trade patterns and the geographies of work have, in fundamental ways, shaped the valences and effects of globalization. In the process, regional livelihoods have been changed, once guaranteed jobs have vanished, whole villages and towns have become marginalized or re‐incorporated into global dynamics in new ways, and opportunity structures and constraints have emerged as fundamental aspects of generational and regional politics.

Articulations of Capital analyses the conditions and consequences of these shifts. Our focus is on two countries at the core of ECE apparel pro-duction networks, Slovakia and Bulgaria (Figure 1.1), and key producing regions in each country, but our analysis is wider, questioning some of the assumptions about these changing geographies. We ask how EU economic integration, trade liberalization and globalization have consolidated particular kinds of myths and stories about the global economy; myths and stories that now operate as forms of common sense. These forms of common sense increasingly come to play the role of truth and are deployed as discur-sive norms of regional economic development and “natural” drivers of the space economy.

At the heart of the story is the restructuring of the warp and weft of low‐wage apparel manufacturing and the knitting together of a narrative of regional and global shifts of which it is a part. At times, our narrative builds on the common sense that has come to mark the literatures on the global economy, particularly global value chain (GVC) and global production net-work (GPN) research (Smith et al. 2002; Henderson et al. 2002; Coe et al. 2004; Gereffi et al. 2005; Bair 2009b).1 At other times, we resist some of the central concepts of these approaches, particularly when they see low‐wage work as unskilled, outsourcing as wage‐driven, delocalization as a natural or necessary outcome of globalization, and Europe as a site in which apparel production can only be sustained temporarily until it is dislodged or dies.

articulations of capital 5

BlackSea

BalticSea

AdriaticSea

Rome

Berlin

Copenhagen

Stockholm

Sofia

Bucharest

Budapest

BratislavaVienna

Warsaw

Tallinn

Riga

Vilnius

Helsinki

Ljubljana

Prague

Zagreb

VATICAN

SANMARINO

Sarajevo

Podgorica

Tirana

Pristina

Skopje

Belgrade

Oslo

Chisinau

Kiev

Minsk

POLAND

GERMANY

AUSTRIA

HUNGARY

MOLDOVA

ROMANIA

BULGARIA

GREECETURKEY

ITALY

ALBANIA

SLOVENIA

CROATIA

SERBIA

MONTENEGRO

BOSNIA-HERZEGOVINA

Kosovo

CZECHREPUBLIC

SLOVAKIA

FINLAND

RUSSIA

BELARUS

UKRAINE

RUSSIA

ESTONIA

LATVIA

LITHUANIA

REPUBLIC OFMACEDONIA

National capital

International boundary

0

N

km

miles 3000

500

Figure 1.1 Eastern and Central Europe.


Our goal is to re‐think some of the central assumptions that underpin the ways in which “the” global economy is said to operate, particularly in low‐wage, labour‐intensive industries such as apparel. But this goal also requires a rethinking of the ways in which the existing geographies of post‐socialist Europe constitute both the regional terrain on which integration into global production networks became possible and the ways in which these regions are being restructured in the process. This is occurring in part as a result of explicit state policies, the implicit constraints and opportunities of trade policy, and the many ways in which people in post‐socialist countries are, themselves, re‐working their own conditions of existence.

If one of our primary targets is the political economy of contemporary labour‐intensive industries, another is the reframing of the geographies of globalization and global production networks. Perhaps more than any other industry, the global apparel industry epitomizes the truth of Schumpeter’s characterization of capitalism as an economic formation predicated on creative destruction and the constant birth and collapse of firms in a com-petitive economy. In contemporary theories of globalization, these birth and death stories are directly spatialized, as the competitive position of apparel production in one region or country is undercut by other lower‐cost or more efficient producers in other regions or countries. But creative destruction itself is too easily naturalized as firms, workers, states and notions of value are themselves decontextualized. Lost in the translation are the many ways in which notions of competitiveness, productivity and value are produced in specific times and places – at particular conjunctures – by concrete institutions and policies. For us, the dynamics of globalizing firms and industries are always articulated with other kinds of institutions, practices and geographies. Over against modernist histories of development, transition and capitalist expansion, we see in the contemporary transformations of capitalism more complex geographies that multiply economic practices in space, diversify the trajectories of regional development and create more differentiated, rather than homogeneous social spaces. This is a particularly important issue in dealing with the transformations of post‐socialist regions, which for so long have been read through the lens of transitology as passing from one stage of development to another. Our reading of post‐socialism is different and involves a more contextual and conjunctural analysis of the ways in which political, economic and social change occurs (Smith and Pickles 1998; Smith 2002; Wolfe and Pickles 2013. See also Iankova 2002).

Through the deconstruction of these forms of common sense we thus seek to spatialize the role of context and complexity in the analysis of global value chains and global production networks, and unpack post‐socialist apparel transformations as complex and over‐determined processes in particular places. In this introductory chapter we map out the core arguments of Articulations of Capital before turning to a brief overview of the structure and organization of the global apparel industry and an outline of the book.


Globalization, Post‐Socialist Liberalization and Structural Adjustment

Articulations of Capital is motivated by five primary questions. The first of these relates to the political economy and geographies of post‐socialism. How do the legacies and social structures of the command economy, industrial networks, pre‐existing trade relationships, labour organization and regional patterns and histories of ethnicity differentiate the emergence of globally‐oriented industries in state socialist and post‐socialist ECE from models of globalized industry found elsewhere in the world economy? That is, what difference does post‐socialism make to the operation and dynamics of globalizing industries, such as apparel? The fall of the Berlin Wall and the opening of the economies of ECE were key moments in the development of contemporary European economic and political space (Smith and Pickles 1998; Stenning and Hörschelmann 2008; Smith and Tímár 2010). The rupture of 1989 was a complex re‐organization of the existing relational geographies of two regional systems, post‐Second World War Communism to the East and Cold War Fordism to the West (Kaldor 1990). These two political economies of East and West were (and continue to be) linked symbolically and practically (Wolfe and Pickles 2013). The forms of apparel production networks which provide our focus were at the heart of these East–West inter‐dependencies. They were established through West European production contracting of apparel to command economy factories in ECE during the Cold War. By focusing on the role of these pre‐existing networks as they were extended and deepened after 1989, Articulations of Capital contributes to the critical re‐thinking of the geographies of post‐socialism and European macro‐regional integration both prior to and following the collapse of state socialism.

The second question refers to how we understand the scalar relations between global and local processes. How do the ways in which we conceive of global capital and global production networks, on the one hand, and local social formations of state socialism and post‐socialism, on the other, inform and alter our understanding of regional development outcomes in soci-eties undergoing rapid transformation? That is, what are the relationships between delocalization and regionalization in the transformations of post‐socialist economic spaces, and how does this dynamic destabilize discourses of footloose, low‐wage, low‐skill industries and stories of their eradication? The ruptural moment of post‐socialism was not only 1989. Others have variously located this moment in the emergence in the 1970s of a neo‐ liberalism that stimulated new geo‐economic logics and ideologies that first ran to the very core of West European political economies, with trade de‐regulation, adjustments to inflation, refiguring of competitiveness logics and expanded demands for reduced wage and materials costs in major


industrial countries of the North (Smith et al. 2008b; Peck 2010). As Gereffi (1994) and Dicken (2007) have variously shown, the changes of the 1970s led to a global shift in production as buyer‐driven and producer‐driven value chains outsourced production to emerging economies, in Eastern Europe, Mexico and Central America and Asia. The “Opening‐up” and “Reform” policies in China from the late 1970s and the opening of the command economies of ECE from the late 1980s increased competitive pressures on contracting for industrial goods and fuelled the cost‐driven outsourcing of production, particularly to Asia (Milberg and Winkler 2013). In ECE, shock therapy and structural adjustment ripped into the fabric of collectively‐owned and centrally planned production systems, both of which were rapidly made available to the political and economic redefinition of Europe (Gowan 1995; Pickles and Smith 1998; Smith 2002). The book thus examines how the particular configuration of the economic geogra-phies of macro‐regional production in ECE was, at the same time, part of these global reconfigurations of economic relations and their commitment to outsourcing. It was one part of a series of reconfigurations which included the following forms of apparel outsourcing or delocalization: (1) in coun-tries, where the search for lower cost production locations led to the estab-lishment of branch plant factories in peripheral regions and new spatial divisions of labour; (2) between countries within Western Europe and Southern Europe, as labour‐intensive activity was relocated (Fröbel et al. 1980; Lipietz 1987; Kalogeressis and Labrianidis 2009); (3) more recently within the wider European and Euro‐Mediterranean region, where outward processing custom arrangements (also known as outward processing trade (OPT), see Chapters Three and Four) enabled the development of assem-bly production networks in ECE from the late 1970s (Graziani 1998; Pellegrin 2001a; Begg et al. 2003; Pickles and Smith 2011); and (4) follow-ing the end of quota‐constrained trade under the World Trade Organisation’s phasing out of the Multi‐Fibre Arrangement (MFA), tendencies towards global delocalization that have led to further restructuring of regionalized production in Europe and its immediate neighbours.

The third question focuses on the ways in which global production networks have to be understood as always already embedded in particular contexts and social relations. To what extent and in what ways have the forms of local embeddedness of global production systems in ECE provided a basis for industrial and social upgrading and sustained relative competitiveness, and what are their consequences for regions and communities? That is, how have economic forces shaped, and in turn been shaped by, the actually existing everyday economies and lives of people in the region? Articulations of Capital shows how the rapid growth of assembly production did not emerge ab initio but as an integrated and regional production network devised to re‐organize patterns of circulation and capture value through the management of time; notably the turnover time of capital in the supply


chain, order‐time and lead‐time to market. There were strong fully‐integrated textile and apparel production systems throughout ECE prior to the collapse of state socialism, which provided the resources on which wider contracting systems were built and subsequently restructured. These pan‐European production systems were directed at the management of time and cost under very specific market and logistical conditions. With the recent economic crisis and the changing technical and logistical capacities of global producers (see Cowen 2014), these dynamics are currently in flux and the regional fortunes of many parts of ECE are insecure. Articulations of Capital therefore contributes to debates over the geography of global production networks by examining these spatio‐temporal dynamics and the ways in which they are territorially embedded (see also Neilson and Pritchard 2009). We provide an evaluation of the degree to which these dynamics are leading to complex geographies of upgrading and downgrad-ing for firms, workers and regions in ECE that eschew a common sense of a “race to the bottom” and point instead to differentiated forms of inclusion in and exclusion from global production networks. That is, we seek to understand the “stickiness” of industrial production networks in increas-ingly costly regional economies in ECE, where the dynamics of differential inclusion in increasingly more geographically extensive circuits of capital shape regional economic livelihoods and futures.

The fourth question concerns the disembedding effects of crisis. How are we to think about economic resilience and local forms of embeddedness in conditions in which crisis follows crisis, destabilizing many of the conditions and relations on which decisions are made and risk is managed? That is, what is the role of crisis and continuity in the ways we articulate theories of global production? The region has been deeply affected by the ruptures of 1989, the end of the Multi‐Fibre Arrangement in 2004, and the global financial crisis since late 2007 (see Smith and Swain 2010; Smith 2013; Myant and Drahokoupil 2013). Articulations of Capital addresses the ways in which the parallel processes of EU accession and integration into the global economy have also gone hand‐in‐hand with more recent cycles of devalorization and recession. It examines the almost permanent crises of contemporary capitalism and its emergent forms in the post‐socialist economies of ECE. Our aim is to read the ways in which the global and regional structures of European apparel production networks: (1) became reconfigured under market transitions in ECE and global liberalizations; (2) have witnessed a series of geographical shifts in activity over the last four decades; (3) have sustained many marginal regional economies in ECE during much of the deindustrialization and post‐socialist economic crisis in the 1990s; and (4) have attempted to cope with increasing competitive pressures in the global economy that have resulted from trade liberalization and price competition.

The fifth question brings our concerns over how regional embeddedness, market proximity and the legacy of state socialist industrial production


systems have affected the reconstitution of the apparel industry to an understanding of what we call a conjunctural economic geography of global production networks. In many ways this parallels Neilson and Pritchard’s (2009: 54–5) concern with “the place‐specific historical circumstances that position and explain social outcomes” and the broader concerns of economic geographers to situate the workings of the economy in institutional, social and territorial contexts (for example, Scott and Storper 1986; Sayer and Walker 1992; Storper 1997; Barnes and Gertler 1999; Scott 2006), and to link GVC models to the spatialized contexts of clusters and districts (for example, Belussi and Sammarra 2010). We build on these approaches to rethink models of contemporary globalization centred on the continuous relocation of industry and a race to the bottom and to highlight the range and diversity of trajectories of industrial upgrading and downgrading, and their varied social, employment and regional dynamics. By “articulations of capital”, we refer to the complex and contingent ways in which forms of capital in the apparel industry are embedded in and variously linked to dis-tinct systems of social relations. These include the state (at various spatial scales), labour as a complex of dynamic actors, and specificities of place and region‐based dynamics within globalizing industries. We develop this argument in more detail in Chapter Two by focusing on a theory of capitalist transformations that is attentive to the relational geographies of historical legacies, social networks and linkages, and forms of institutional and regulatory embeddedness (see also Massey 2005; Yeung 2005). Overton and Murray (2014) have emphasized the articulation of different forms of capital as a way of considering the diversity of economic forms in the New Zealand wine industry. Our usage extends this by emphasizing how capital is articulated with other social formations which work to construct the forms of capital dynamics at play in the apparel industry. This is a situated approach to the explanation of regional economic dynamics and restructur-ing trajectories in GPNs and post‐socialism. Before turning to a more extended discussion of this conceptual framework in the next chapter, the following section elaborates the structure of the global apparel industry and its recent transformations.

Transformations in Apparel Global Value Chains

The apparel industry is one of the most globalized of all industries. The industry in ECE is no exception, although it is primarily focused on integration into macro‐regional production systems with the EU market at the centre. Apparel production for export employs tens of millions of workers worldwide, particularly women in low‐income countries (Dicken 2007; Staritz 2011). At the same time, the globalization of apparel export


manufacturing factories has been one of the major forces shaping poor working conditions and a significant cause of regional wage depression (Hale and Wills 2005). The apparel value chain is organized around four main segments (Figure 1.2): (1) raw material supply, including natural and synthetic fibres; (2) input supply that carries out the first processing to produce yarns, fabrics, buttons, thread, and labels; (3) manufacturers, including domestic and overseas subcontractors, as well as embellishers (such as embroidery, printing, washing) as needed; and (4) distribution, marketing, wholesale and retail channels. Each is linked by logistics, planning and financial operations. In recent years, intermediary trading companies (such as Li and Fung) and logistics freight forwarding com-panies have become more significant actors in managing these segments and their linkages.

Over time, the centrality of the national structure of manufacturer‐driven value chains has given way to increasingly fragmented production systems in globalized buyer‐driven and retailer‐driven value chains (Gereffi and Frederick 2010; Gereffi and Memedovic 2003; Milberg and Winkler 2013). For Fernandez‐Stark et al. (2011: 7), the apparel industry

[is] the quintessential example of a buyer‐driven commodity chain marked by power asymmetries between the suppliers and global buyers of final apparel products…. [In the buyer‐driven value chain] [g]lobal buyers determine what is to be produced, where, by whom, and at what price. In most cases, these lead firms outsource manufacturing to a global network of contract manufac-turers in developing countries that offer the most competitive rates.

Textiles

Textile industry

Apparel

Ready-made Fashion

Distributionmarketing/

wholesale/retail

Householdfurnishings

Clothingdesign

preparationproduction

Distrtibution

Chemicals Artificial fibres

Yarnspinning

Fabricweaving, spinning,finishing, embellish

Industrialgoods

e.g., auto inputs

Figure 1.2 The apparel production system. Adapted by the authors from Dicken (1998).


Contract manufacturers co‐ordinate tiers of sub‐contracting systems, at times also involving home‐workers (Figure 1.3). The lead firms that drive this process

include retailers and brand owners and are typically headquartered in the leading markets—Europe, Japan, and the United States. These firms tend to perform the most valuable activities in the apparel value chain—design, branding, and marketing of products— and in most cases, they outsource the manufacturing process to a global network of suppliers. (Fernandez‐Stark et al. 2011: 7)

In the process, lead firms have been able to exercise strong control over sourcing decisions, and have also been able to control where value is extracted and to whom profit accrues at each stage in the chain (Fernandez‐Stark et al. 2011). At the same time, yarn and fabric manufacturers in major markets have also been able to shape national trade policies to protect their markets in increasingly global production systems, and to do so they have supported restrictive rules of origin in nearly all preferential market access agreements. Textile manufacturers and national governments have histori-cally dominated the specific forms of public governance and trade policies

Manufacturers

Manufacturingsupplier

Domestic and foreign subsidiariesand subcontractors

Distributors

Producer-driven value chain

Branded marketers

Retailers

Branded manufacturers

Buyer-driven value chain

Traders andnetwork coordinators

First-tier subcontractors

Second and third-tier subcontractors

Home-workers

Retailers

Figure 1.3 Producer‐driven and buyer‐driven value chains. Elaborated by the authors from Gereffi (1994).


that underwrite the global apparel industry. Yarn and fabric suppliers and national governments regulate value capture through global value chains, but they also do so much more directly through the political struggle over rules of origin and the setting of tariff and duty rates on specific products. The shaping of the EU’s policies on outward processing trade (OPT) and proximate sourcing reflect the power of these actors in EU trade policy. Only recently, with pressure on buyers to manage risk and heightened market uncertainty, and with the rise of alternative markets in the emerging econ-omies, have apparel producers been able to reclaim some of the bargaining power they once held in their respective chains (see Zhu and Pickles 2014).

This (re‐)organization of the industry has contributed to a geographical decomposition of production in the form of globalized and macro‐regional outsourcing of production. The expansion of trade has thus had several important contradictory impacts simultaneously leading to:

1. Aggregate employment and wage growth in some segments of the value chain.

2. Reduced unit costs of export production allowing for greatly expanded circuits of consumption in major markets, growing markets in the Global South, and firm limits on wage growth in apparel assembly platforms.

3. The separation and disembedding of apparel production from integrated textile and apparel complexes, mature industrial labour rela-tions, and strong health and safety state institutions.

4. Distributed responsibility for ensuring decent working conditions across a much broader range of actors, many of whom are ill‐equipped to facilitate workplace standards and social upgrading.

5. The rise of publicly traded branded buyers and retailers with ever shorter financial horizons as the key lead firm in the management of these circuits of trade and value.

6. Limited or no local or regional capacity for the development of backward linkages into yarn and fabric manufacture, especially in new assembly locations.

Each has taken a particular form in the ECE apparel sector; at times similar to other globalized production sites and at other times resulting in distinct and different forms. As we assess the changes in post‐socialist apparel indus-tries, it is crucial to understand how different organizational forms, patterns of ownership and degrees of local and institutional embeddedness are affected by the macro‐economic framework of constraint and opportunity that trade policy provides, and how they in turn adjust to these macro‐level dynamics.

In ECE, these changes have involved the decomposition of a much earlier tight relationship between textile and apparel production complexes in the relatively autarkic planned economy of state socialism (Smith 1998), providing a legacy of a highly capitalized, industrialized and skilled industry.


In the chapters which follow we elaborate how these legacies of a state socialist planned economy continue to matter to the particular configuration of apparel production in the region. The emergence of global value chains, and particu-larly the rise of the buyer‐driven apparel value chain, were thus, at root, the disaggregation of formerly vertically integrated production systems and the reallocation of tasks geographically and temporally to capitalize on regional cost differentials including labour costs, input prices, rents from trade policies and rules, and specialized skills and services. These dynamics have resulted in geographically extensive spatial divisions of labour regulated, as we shall see in Chapter Four, by a wide range of trade and customs policies.

“Fast Fashion”, Lean Retailing and Proximate Sourcing Versus a Global “Race to the Bottom”

The disaggregation of production and the globalization of activity in the apparel industry have resulted in geographical relocation, delocalization and the construction of geographically extensive networks of production (Kalogeressis and Labrianidis 2009; Smith 2009). However, an important parallel dynamic has been the rise of new buyer practices, including the increasing reliance on a model of “fast fashion” involving rapid stock replen-ishment and lean retailing (Abernathy et al. 1999, 2006; Tokatli 2008, Plank et al. 2012). The turn to lean retailing in many parts of the apparel supply chain has led to corresponding changes in the ways in which manufacturers and retailers manage costs, quality, time to delivery, and capital at risk in their decision‐making, in turn, placing greater emphasis on supply chain management (Abernathy et al. 1999, 2006). This is a story of sourcing strat-egies in which policy and logistical costs may outweigh the advantages of lower “factor” costs (such as low labour costs) and result in sourcing decisions that privilege and sustain production in regions close to major markets. As Plank et al. (2012: 3–4) have argued:

At the heart of the fast fashion strategy lies a business model that is based on increased variety and fashionability and on permanently shrinking product life cycles that requires bringing new products to markets at an increasing pace and in shorter time spans. Lead firms’ high responsiveness to changing consumer markets implies not only increased organizational flexibility and shrinking lead times for supplier firms but also delivering high quality apparel items at low cost … In particular regional suppliers – those firms located in countries in geographic proximity to the key end markets … – are often deriving their competitive advantage from being integrated into the fast fashion segment of apparel GPNs.

The challenge of managing the turnover time of capital and capital at risk in the supply chain has consequently become increasingly important. The longer


and more geographically distant the supply chain, the longer the replenish-ment period in retail markets, and the longer it takes retailers to respond to shifts in market demand and taste. Moreover, the longer the supply chain, the more capital is at risk in circulation, and the longer the period of realization of profit. The turnover time of capital affects the amount of money locked up in fabric, machines, “surplus” production and labour, each of which incurs delays before it is realized as surplus value and potential profit (Harvey 1982). The greater the amount and forms of capital that are at risk, the tighter are the demands of contractors on suppliers and the more likely are contractors to adopt more diverse production and sourcing strategies.

Regional trade agreements and EU enlargement policies influence these calculations and also drive post‐MFA responses of firms in supplier countries, that in part are dependent on the specific conditions and timings under which local textile and apparel industries have been inserted into global value chains (Gereffi 1999; Bair and Gereffi 2001, 2002, 2003; Gereffi et al. 2002) (see Chapters Five and Six). The combined effect, however, is that the complete hollowing out of production and employment in the apparel sector in higher cost locations is unlikely. Regional production arrangements of these kinds may indeed sustain locational stability in some product areas in the industry. These in turn, create limits to the global “race to the bottom” for low wage labour and have the potential to offer renewed opportunities for direct worker action as international buyers and local producers increasingly agree on the need for enhanced corporate social responsibility to sustain the goals of quality of product, flexibility in production and time to delivery.

We show later how EU buyers and producers in ECE are experimenting with a wide range of strategies to sustain production within these contexts of increasing competition. Some producers have adapted to the demands of lean retailing, some have established extensive networks of regional and trans‐border sub‐contracting, and yet others have opted for, or been forced to accept, low‐price assembly contracts, more reminiscent of a “race to the bottom”. Industrial upgrading, reworking management–labour relations and worker‐training programmes, technical and labour upgrading articulated with international corporate social responsibility and ethical workplace concerns to protect (and attract) future contracting have all become central elements of such restructuring. The result is a much more complex landscape of sourcing arrangements than simply competing on the basis of “factor” costs such as the price of labour would imply. Notwithstanding the continual emergence of reports on poor working conditions and the use of child labour in international supply chains in the apparel industry (e.g., Clean Clothes Campaign 2014), recognition of the diverse trajectories of international contracting, local sourcing and domestic markets in each region makes it even more important for workers and their organizations to interrogate the different opportunities and constraints these dynamics create.


Value, Upgrading and the Logics of Outsourcing

As the proportion of trade conducted through global value chains has increased over the past two decades, the ability to capture value has increas-ingly come to depend on the fragmentation of the production process and the disembedding of circuits of value from regional economies. The organi-zational and geographical separation of value‐adding activities sustains the lead firm’s powerful role in the value chain (Gereffi and Frederick 2010). The ways in which part of the value chain is organized and by whom have direct consequences for the creation and capture of value, and for the c onditions of economic and social upgrading or downgrading that result.

Value in globalized production networks in the apparel sector has increas-ingly been captured by up‐front and end‐market services: research, development, design, marketing and retail services (Gereffi and Frederick 2010). Apparel assembly operations (primarily stitching and embellish-ment) and logistics costs have been squeezed and the main actors have had little positional or negotiating power vis‐à‐vis the lead firms (Frederick and Gereffi 2011). Higher value‐added functions are increasingly concentrated in design, branding, and retail, while lower value‐added operations in manufacturing are geographically distributed to lower‐wage labour markets. As a result, returns to capital typically concentrated in the core economies have increased, while returns to wages in manufacturing operations have generally declined (Milberg and Winkler 2013).

With value chain disaggregation and coordination, the operations of design, development and retail have been increasingly drawn into the management and monitoring of complex first, second and third tier sub‐contracting production networks, reaching across an increasingly large number of countries. Quota removal further expanded the range of opportunities for footloose sourcing, which in turn expanded employment opportunities in some regions, but often at the cost of more widespread predatory employment practices, feminization of work and the depression of wages. Thus, for Tewari and Nathan (2012: 3):

[T]he garment industry is Janus‐faced. Its trajectories of upward mobility are shot through with systemic vulnerabilities and well known forms of exploita-tion … The sector’s industrial organization also encompasses the spectrum of organizational forms, from high‐end corporate exporters at one end to small informal firms and unprotected home‐based workers at the other. Ironically these opposite extremes are often intricately connected through complex webs of inter‐firm linkages and overlapping production networks.

Direct value capture by lead firms has been, as a result, transformed into an expanded system of actor coordination involving increasingly well‐ positioned strategic manufacturing suppliers and network organizers on the


global stage. These new strategic actors and partners have played increasingly important coordination roles in managing production and delivery, and in turn have been able to capture a larger proportion of total chain value.2

Consequences of the Global Shift

With hindsight, it was perhaps inevitable that the global sourcing of apparel would lead to the loss of tight control over production and working condi-tions. In many ways, outsourcing was intended to do precisely that and thereby allow greater flexibility in accessing and managing labour in more distant locations. As secondary and tertiary sub‐contracting expanded across many supplier networks in different countries, workplace conditions have often deteriorated and suppliers and their workers have become the weakest actors in the global production networks, increasingly trapped in conditions of input and order dependency, hand‐to‐mouth contracting, and subject to footloose sourcing practices. In ECE, as we shall see, state socialist‐era enterprises lost many areas of their design capabilities as they turned to contract sewing operations in order to survive the collapse of tra-ditional markets in the Soviet Union and domestically in the context of the transitional recession of the 1990s. The result was that these firms, and those that emerged de novo out of the restructuring of former state‐owned enterprises (SOEs), became reliant on a particular form of industrial and geographical integration which positioned them in often precarious positions in the integrating European macro‐economy.

With the geographical expansion of production networks, the consolida-tion of higher value activity in core economies and the spread of contracting relations with firms in lower‐cost regions, manufacturer practices have become much more complex. In some cases, global price squeezing of con-tracts weakened supplier profits and led to the intensification of the labour process and the widespread emergence of sweatshops and hyper‐ exploitation (Oxfam 2004; Hale and Wills 2005; Clean Clothes Campaign 2014).3 In this context, recent attempts to re‐regulate value chains and to encourage social and economic upgrading have enormous potential importance for workers, but in conditions that are unsustainable for suppliers without deep reforms in the sourcing and pricing policies of their main buyers. But these policies are themselves driven in large part by shareholder pressure for high returns and consumer expectations of low prices. The results have been exploitative and, at times, despotic production practices across ever more complex supplier networks (see Gereffi and Mayer 2006; Bhaskaran et al. 2013).

If some suppliers responded to these tightening contract and price constraints by sweating labour, others attempted to respond either by devel-oping more collaborative forms of production in which strategic partner-ships between management and labour, or between contract manufacturers


and key buyers via strategic agreements, were forged to counteract the uncertainties and constraints of tight contracting. In these factories, reorga-nization of the production process, the timing of work, payment of wages, and the recruiting and retaining of labour cadres became crucial tools for the management of uncertainty. In other contexts, firms struggled to upgrade their functional, product, or process capacities. In Chapter Six, we discuss this in terms of the multiplication of the sites of value production and capture, each with different relationships to the labour process, spatial divisions of labour, and the positional power of labour.

The delocalization of parts of the production chain and the expansion of networks of manufacture and trade within globally extended value chains have thus had several important consequences for employment and regional development in ECE. First, the apparel industry has historically generated poor working conditions and low wages. Assumed to be a low‐skill, predom-inantly female, low wage industry, it gave its name to the “sweatshop”, the production system dependent on the exploitative employment invariably of women and children in despotic conditions of poor working environment and low payment or non‐payment of wages. The predominance of low bar-riers to entry, low start‐up costs, and locational mobility in conditions of intensely anarchic market competition and aggressive sourcing and contract-ing practices has internationalized this model of low‐pay, feminized work-forces, and despotic control over production processes and labour time in the factory (see Burawoy 1985). The relative mobility of the industry has com-pounded this problem, leaving behind large‐scale unemployment in regional economies from which manufacturing and contracts have been withdrawn.

Second, apparel workers have historically been at the forefront of struggles for collective rights to protect against long and irregular working hours, poor and sometimes dangerous working conditions, poor wages and benefits, and physical abuse and violence. Organized garment worker movements have taken the lead in struggles over national minimum wages, standard working hours, and basic health and safety standards. Where labour has been effective, the industry has often responded with more flexible locational strategies.

Third, apparel manufacture has also been an important generator of employment, particularly for women and especially in regions where waged work was formerly not available to women or where male employment (mining, heavy industry, and other forms of manufacture) was dominant. Globally, some argue that these jobs – the above conditions notwith-standing – are ‘good’ jobs compared to the alternatives, and that even the sub‐living wages paid in parts of the industry contribute to poverty reduction (see Yamagata 2006; De Hoyos et al. 2008; Robertson et al. 2009). Lopez‐Acevedo and Robertson (2012), in particular, stress the importance of the global apparel industry as an employer of female workers, particularly because women are more likely to be poor than men. In later chapters we explore the extent to which such claims travel to ECE and the tensions around employment creation/sustenance and improving labour standards.


Fourth, the globalization of apparel production and the geographies of trade that have resulted are driven by distinctly different inter‐firm contracting arrangements. While apparel has been the archetypical global value chain led by large buyer and retail firms, it has also been driven by thousands of smaller buyers and suppliers operating on individual contracts, sometimes renewed over time, sometimes as one‐off orders. It is the inter-actional effects of these lead firm‐driven value chains and buyer– supplier one‐off contracting arrangements that proliferate the responses to economic and social upgrading initiatives in the industry. In this sense, costs are always comparative in changing networks of actors.

Fifth, the growing dependence of global apparel trade on value chains has important indirect consequences. As Cattaneo et al. have pointed out, one of the reasons that the 2008–9 crisis globalized so rapidly was because

the role of trade in the transmission of the economic crisis was heightened by the predominance of business models based on global production and trade networks … Specifically, GVCs [global value chains] can partially explain the apparent overreaction of international trade to the financial crisis. (2010: 9)

Global value chains and global production networks heightened interdependencies in the global economy and served as amplifiers of the economic crisis globally (Smith and Swain 2010; Smith 2013). It is this range of complex dynamics that we seek to understand in our analysis of the processes of industrial transformation and regional development in the ECE apparel sector.

The Structure of the Book

In Chapter Two, we develop the main conceptual framework for Articulations of Capital, showing how a conjunctural economic geography of global production networks helps in deconstructing some of the key forms of common sense we have elaborated above. A conjunctural economic geography has its origins in non‐essentialist and anti‐foundational episte-mologies and genealogies, which we develop in conversation with global commodity chain analysis, global value chain research, and more recent work on global production networks. The chapter situates the analysis in the debates over global value chains and global production networks, and argues for the need to see global industrial transformations as always embedded in local contexts and regional uneven development. It elaborates a framework that recognises GPNs as circuits of capital articulating firm strategies, the state and labour in ways that interpret the apparel industry as always deeply ingrained in an over‐determined social economy; one in which the often perceived footloose practices of capital are


much stickier and fixed than they often appear to be. Our argument is that a conjunctural economic geography of GPNs provides for an under-standing of the diverse ways in which production networks are embedded in their regions.

Chapter Three turns to the role of labour in the ECE apparel industry. Understanding the liberalization of ECE economies and their deeper integration into global production networks requires an understanding of how post‐socialism was part of what Freeman (2007) has called the doubling of the world’s labour market and the integration of new zones of labour into the global economy. But this was not a passive articulation. The structures of work and labour in ECE shaped in important ways the trajectories of ECE integration into global circuits of capital prior to and following the ruptural moment of 1989. The account we provide is not a straightforward one of either gains or losses for labour. The fortunes of workers have remained complex and highly differentiated. With the expanded pace of delocalization and outsourcing, and the emergence of new forms of labour regulation, codes of corporate conduct, ethical sourcing initiatives and the loss of export markets due to the global economic crisis, we argue that the current conditions of work and opportunities for organized labour are far from straightforward.

Chapter Four shifts the focus to the state and the institutionalized forms of regulation governing the apparel production networks in ECE. It argues that state and international trade policies were fundamental to the ways in which regional apparel production was embedded in west European pro-duction networks. The chapter sets out the global and European frame-works for the regulation of apparel production, highlights the processes of trade liberalization and assesses the consequences of the resulting enhanced competition from new producers in countries such as China. It argues, however, that while trade liberalization has increased competition and the outsourcing of production, it has also framed the conditions for sustained regionalized production arrangements and sourcing strategies, particularly in ECE and the Euro‐Mediterranean region.

Chapter Five introduces the structures of the apparel industry in Bulgaria and Slovakia prior to and following the collapse of state socialism and the restructuring of the command economy. The chapter analyses the ways in which the historical development of apparel production in the two countries shaped the regional economies of state socialism. It explores the signifi-cance of the state under state socialism for an understanding of the character of market transitions in the industry after 1989. We argue that the legacies of the state socialist system have been important to the reconfiguration of the economic geographies of post‐socialist apparel production after 1989. In particular, we show how the networks established under state socialism became the building blocks on which market transitions occurred as state owned enterprises were privatized and the industry was restructured.


Chapter Six focuses on the “upgrading problematic”. It focuses on the ways in which apparel production networks in Bulgaria and Slovakia have responded in complex and diverse ways to post‐socialist reforms and market liberalization. The chapter details the range of adjustment strategies adopted by firms in the two countries, and shows how interregional price competition, downgrading, and geographical shifts in patterns of sourcing and produc-tion came to be articulated with imperatives to regionalize production for major markets, attempts to stabilize supply networks, industrial upgrading, and the expansion of localized sourcing and domestic‐marketing strategies. The chapter examines the articulation of these forms of capital restructur-ing in relation to how firms are embedded in territorial and social networks, and the ways in which these have shaped firm‐level change. The analysis suggests the need to provide a more variegated understanding of the differential inclusion of industrial trajectories in the global economy than those centred fully on upgrading strategies.

Chapter Seven focuses on one of the ways in which apparel production has been re‐configured through transnational cross‐border networks to respond to competitive pressures. It shows how cross‐border networks bet-ween East Slovakia and western Ukraine emerged in the 2000s to manage cost differentials in the face of Slovakia’s admission to the European Union Single Market. By focusing on these cross‐border economic spaces, we highlight the centrality of border management regimes in mediating land-scapes of uneven development and the frontiers of capital accumulation in the wider Europe that impact on the functioning and organization of global production networks.

Chapter Eight turns to the diversity of economic formations within a particular region of southern Bulgaria to highlight the processes and patterns of post‐socialist transformation and global integration in the apparel industry. We show how these processes and patterns produce complex palimpsest landscapes and regional geographies where the legacies of past processes con-tinue to shape the present, not as determining influences, but as resources for different kinds of articulation with global and national economic forces.

Chapter Nine examines a largely missing element of much research on GPNs, namely the ways in which export production networks articulate with broader social economies. Important elements of the ECE (especially the Bulgarian) apparel industry are predicated on their embeddedness in informal production arrangements, informalized work and ethnically structured economic practices that contribute goods and labour for both domestic and export markets. The chapter details the ways in which a large number of small workshop firms located in ethnic Turkish and Bulgarian Muslim neighbourhoods became linked to national and international circuits of trade through open air markets, which in turn functioned to reduce overall costs of production, inputs and services in the formal apparel export sector.


Chapter Ten concludes by returning to the key theoretical challenges that Articulations of Capital seeks to address. We show how the book has contributed to the further development of work on GPNs and GVCs, trade liberalization and industrial and regional upgrading, and on the geographies of post‐socialist transformation. In particular, we address the book’s contri-bution to a conjunctural economic geography of global production networks by highlighting the way in which they are articulated with the territorial embeddedness of production systems, and how this requires an under-standing of the forms of articulation between the state, labour, capital and the spatial organization of social relations in order to understand and explain contemporary outcomes in the global economy.

Notes

1 We use the acronyms GVC and GPN to refer to the conceptual framings of this work, and the terms ‘global value chains’ and ‘global production networks’ to refer to the empirical phenomena (see also Yeung and Coe 2015). We use GVCs and GPNs interchangeably not to suggest that, conceptually, they are the same framework (see Gereffi et al. 2005 and Henderson et al. 2002 for the program-matic statements, and Yeung and Coe 2015 for a more recent update) but because they address an analysis of somewhat similar phenomena: globalized production systems and their consequences for regional, firm and societal development.

2 In the past few years, many such key manufacturers (particularly in China) and traders like Li and Fung have added design, development, and branding capacities of their own (Zhu and Pickles 2014).

3 The term ‘sweatshops’ refers technically to factories and workshops in which two or more infringements of international labour standards are regularly found. These include the use of child labour, forced labour, failure to pay wages and/or overtime, and basic health and safety violations. In practice, however, the term is often used to refer to a wider sense of labour squeezing and poor working conditions more generally.


Economic Geography, Conjuncture and the Dynamics of Capital

Chapter Two

Introduction

Global commodity chain, global value chain (GVC) and global production network (GPN) researchers share the common concern of understanding the organizational dynamics of industrial systems in contemporary capitalism. Each is interested in the ways in which the structure of economic organization is regulated by trade policy and other institutional frameworks, in turn, changing the landscape of economic opportunity and constraint. And each seeks to account for the changing geographies of production, work, exchange and consumption, as spatially extensive systems of commodity production have become one of the defining features of the contemporary economy. Despite its now well‐known origins in world systems theory (Hopkins and Wallerstein 1994; Smith et al. 2002; Bair 2009a), GVC research has developed a much more discrete set of foci around the forms of private governance of spatially extensive production processes (Gereffi et al. 2005). In this chapter we suggest that GPN and GVC research would benefit from the development of a more elaborated theory of the dynamics of capital accumulation in order to move away from the normative “inclusionist” (Bair and Werner 2011) concern with industrial upgrading (in the case of GVC research) or institutionalist


analysis (in the case of GPN research), to one which provides an understanding of the variegated developmental consequences for various actors (firms, labour and states, for example) of integration into the capitalist global economy. Our concern is to understand the dimensions of upgrading, and value capture and enhancement, which are at the core of GVC and GPN debates.

While much progress has been made recently in providing more nuanced conceptualizations of GVC and GPN dynamics,1 much of this work still lacks a clear understanding of three dimensions: (1) the role that production networks play in the dynamics of capital accumulation; (2) a conceptual understanding of ‘value’ in production networks; and (3) a spatialized and contextualized conception of the ways in which production is embedded in both global and local capitalisms and wider socio‐economic relations.2 We make these arguments in the first part of this chapter in relation to the wider dynamics of capital accumulation and circulation. In the second part of the chapter, we develop the argument in relation to recent debates over the articulation of capitalist production in global value chains and the developmental question of differential inclusion. In the third part we explore a further extension of GVC and GPN debates in relation to the wider social relations which structure forms of globalizing capitalist production. We set out an approach to understanding the conjunctural economic geography of GVCs and GPNs. This involves a commitment to understanding actually existing socialist legacies, post‐socialist transformations and forms of capitalist economic integration situated in particular regional spaces. In developing this framework we highlight four key issues: (1) the important role played by political‐economic and regional contexts; (2) the significance of legacies of transformation (what we call a deep history of articulation); (3) the always embedded, relational and inter‐dependent nature of economic geographies; and (4) an epistemology that is always political and which eschews models of neo‐liberal hegemony and of value chain upgrading and development that fail also to account for the political economy of uneven development and the complexity and contested nature of local transformations. Our aim here is not to develop a systematic review of this research (see, for example, Leslie and Reimer 1999; Smith et al. 2002; Bair 2005, 2009a, 2009b; Sturgeon 2009; Gereffi and Lee 2012; Smith 2014). Instead we focus on the ways in which the articulation of capital provides a series of analytical frameworks and concepts for understanding the actually existing dynamics of global value chains in post‐socialist regional economies. Our aim is to examine how GVCs and GPNs, as important new sites of the contemporary dynamics of capitalist globalization, are embedded in systems and networks of social relations that shape the particular processes and geographies of capital accumulation.

economic geography, conjuncture and the dynamics of capital 25

From Global Commodity and Value Chains to Global Production Networks and Beyond

In Gereffi et al.’s (1994: 4) influential formulation, “[t]he GCC approach explains the distribution of wealth within a chain as an outcome of the relative intensity of competition within different nodes”. Central to an explanation of this “relative intensity of competition” and its associated effects on the distribution of wealth is the process of governance in global commodity chains – a theme which re‐occurs in later work in GVCs and GPNs.3 For Gereffi et al. (2005: 79), the term “value chain” focuses attention on the ways in which value‐added in the supply chain is captured differentially by stronger and weaker actors, how the globalization of supply chains alters the dynamics among actors in the chain, and how value‐added processes lead to enhanced value capture and upgrading by firm and chains. In this view, the increasing disaggregation of value chains has allowed new kinds of lead firms to capture value by managing ever more complex and distributed production systems. It has also led to the geographical delocalization of these various steps in value chain co‐ordination. In time, such GVC analyses have supplemented the driving function of these lead firms with analysis of other actors – strategic suppliers and intermediaries – who emerged to resolve coordination problems in increasingly distributed value chains. In their expanding role as service providers and chain coordinators, these strategic partners were also able to capture additional rents (Kaplinsky 1998). In turn, this changing ability to capture rents in the value chain has been seen to be indicative of country‐level economic upgrading (Gereffi 1995).

With his focus on North American and global apparel sectors, Gereffi’s (1994) initial formulation of governance revolved around the role of lead firms; hence his distinction between GCCs which were co‐ordinated by buyers (retailers and branded manufacturers – buyer‐driven commodity chains), typical of those in the apparel sector, and those which were organized around the power of producers (large, multinational industrial capital – producer‐driven commodity chains) (see Chapter One). Alongside the governance structure of firms, Gereffi’s (1994) initial formulation also highlighted two other key dimensions: an input–output structure through which the commodity production process is organized, and a territoriality, “with implications for levels and processes of development depending upon the position of firms and localities within a chain” (Smith et al. 2002: 44). In a later contribution, Gereffi (1995) added an institutional dimension to the framework “which describes the ‘rules of the game’ bearing on the organization and operation of chains” (Bair 2009a: 9), although, as we discuss below, much work in this tradition lacked an adequate theorization of the state and capitalism (see also Smith 2014).


GVC research has attempted to capture a wider range of governance mechanisms than these earlier formulations, and to link with research in industrial development studies and on global industries with practitioner interest in policy formulation for industrial development. For example, Sturgeon (2009: 112) has noted how an important aim of the shift to GVC terminology

was to develop a theory that could help policymakers explain and predict governance patterns in cross‐border production networks. With such tools in hand … interventions aimed at upgrading the position of local workers, firms, and industries within global‐scale production systems could be more finely crafted and effective.

Two main aspects of GVC research as it has developed, since the publication of the key original statement in Gereffi et al. (2005), involve extending the theorization of governance of value chains and linking this to questions regarding industrial upgrading. Gereffi et al. extended the notion of value chain governance by developing a transaction cost economics and organizational economics framework to understand the power relations shaping the links between suppliers and lead firms. In practice, the focus on industrial upgrading has become one of the most important aspects of GVC work, particularly in how it has been adopted to inform international policy frameworks for industrial and economic development. In this sense, Sturgeon’s (2009) hope for GVC research in influencing global policy and developmental thinking has been realized (Global Agenda Council on the Global Trade System 2012; OECD, WTO, and UNCTAD 2013; see Neilson 2013, for a critique of this approach).

Global production networks perspectives have been explicitly positioned to move beyond GCC and GVC research, especially given the latter’s focus on inter‐firm relationships. One result has been the extension of the notion of value‐added and value‐capture to focus more concretely on the actors and locations in which value is produced, circulated and captured (Henderson et al. 2002; Coe et al. 2004). For example, Coe et al. (2008: 272) argued that the focus on GPNs provides “a broad relational framework, which attempts to go beyond the very valuable but, in practice, more restricted, global commodity chain … and global value chain … formulations”. In highlighting the relational focus of GPN research, Coe et al. argued that GPN research recognizes the range of non‐firm actors as crucial in the formulation and operation of production systems; the complex circulations of capital, knowledge and people in global production; the connections and synergies of value creation between different production networks and the inter‐dependencies involved in GPNs. The primary focus of GPN research is on the dynamics of value creation, enhancement and capture and in relation to regional dynamics, the power relations underpinning these dynamics, and


on the strategic coupling of GPNs to regional assets to enhance value generation (Henderson et al. 2002; Coe et al. 2004).

GVC and GPN researchers have both stressed the ways in which the intersection of actors and the interrelations among them shape the ways in which production networks develop in particular places. But much – if not all – of this research works with quite limited theories of value, of capital accumulation and their relationship to changing spatial divisions of labour. One of the more elaborated theories of value is Henderson et al.’s (2002) discussion of GPNs where value creation is conceptualized both in terms of a Marxian theory of value and a Ricardian notion of rent. Starting with a value theory in which are presented “the conditions under which labour power is converted into actual labour through the labour process; and the possibilities for generating various forms of rent” (Henderson et al. 2002: 448), they go on, following Kaplinsky (1998), to examine the production of rents from the control of technologies, organizational transformations of the production process, “relational rents” through the control of, for example, strategic firm alignments, “brand rents” through the control and ownership of brand names, and manipulation of trade policy for the creation of rents (“trade policy rents”).

In Ricardian terms, the capture of rent is the primary economic dynamic and workplace exploitation is the consequence of unregulated behaviour. In this regard, Polanyian readings of the ways in which the socially embedded economy becomes progressively disembedded by unregulated market behaviour have been developed to frame notions of economic governance (Gereffi and Mayer 2006). Such processes of disembedding the economy from society, of practice from governance mechanisms, have created pressure for renewed state and chain regulation to control the excesses of markets and protect vulnerable workers. More recently, by focusing on economic upgrading processes, GVC researchers have explored the ways in which corporate investments and new forms of management and organization of work can generate new opportunities for rent capture and sharing and the spreading of the gains arising from globalization. Here economic upgrading is considered in relation to social upgrading, and the relationships between each in different sectors of industry have been interrogated (Barrientos, Gereffi and Rossi 2011; Barrientos, Mayer, Pickles and Posthuma 2012).4

What these conceptualizations lack, however, is an understanding of circuits of capital, which allows us to focus more directly on the structuring forms of capital accumulation and deployment in globally interdependent production systems (i.e., networks of value) such as apparel (see Smith 2013; see also Smith et al. 2002; Starosta 2010; Selwyn 2012) and the specific sites and geographies of fixed capital investments. Crucial in this respect is an analysis and understanding of the deployment of capital in spatially disaggregated production systems and the resulting mechanisms used to manage the turnover time of capital.


Circuits of Capital and GPNs

Lead firms structure their production networks in ways that allow for geographically distributed systems of outsourcing and off‐shoring in order to expand the possibilities for the accumulation of capital and to manage risk in the industrial production process. We understand these activities within a framework that conceptualizes flows and circuits of capital through contested and mediating social formations. Such social formations, we argue, structure, modify and transform the dynamics of global capitalism. In doing so, other economic actors (firms, workers, communities and others) become integrated into the process of commodity production throughout the supply chains. As Hudson (2008: 425) has argued, to “conceptualize production in terms of GPNs is to do no more – and no less – than to recognize the practical realities of capitalist economies”. These “practical realities” are “centred upon commodity production, the production of things with the intention of sale in markets, and value expansion via the production and realization of surplus‐value” (Hudson 2008: 425; see also Starosta 2010). The circuit of value flows in capitalism is central to this conceptualization (Dunford and Greco 2006; Lee 2006; Dunford et al. 2013). In the production of industrial commodities, such as apparel, through global production networks and other organizational forms, industrial capital co‐ordinates constant and variable capital by advancing money to purchase equipment, technologies, components, material and labour power.

In apparel production systems, co‐ordination is provided by buyers and lead firms, traders or network co‐ordinators (Figure 2.1). These firms contract with manufacturing units usually in other countries to undertake sewing operations, while retaining control over the supply of designs, patterns and often textile and other materials to manufacturers who themselves put sewing machinery (and sometimes cutting and finishing machinery for pressing or embellishment) and labour power together to assemble the final garment. Each of these steps involves firm‐level circuits of capital, in which money is invested in the purchasing of materials and labour power to produce the apparel commodities, that then circulate from the point of production through middle‐men to buyers. In this sense, there are two circuits of capital in operation in sub‐contracted apparel production networks: those operating at the level of the individual firm (buying of inputs, machinery and labour power to produce apparel as a commodity), and those operating at the level of the production network as a whole (buying/co‐ordination of inputs to contract individual firms (manufacturers/sub‐contractors) to produce apparel as a commodity, and incorporating design and marketing/retail activity) (Figure 2.1).5 The increasing financialization of corporate governance in Western economies has also provided a key dynamic, leading to the disaggregation of production systems into increasingly globalized and geographically distributed production networks (Gibbon 2002; Palpaceur


et al. 2005; Milberg and Winkler 2013). The initial expansion of the geographical scope of apparel sourcing into ECE was – as we note in Chapter Four – one part of the economic strategies initially of German apparel buyers to cope with increasing labour costs. Later rounds of outsourcing in which UK and other EU retailers engaged were, in part, driven by a desire to leverage greater profits for buyers and dividends for shareholders by reducing production costs and while off‐loading responsibilities for manufacturing and labour management in the value chain. In Europe, this was referred to as outward processing and delocalization.

Contract manufacturers in ECE were in a particularly weak position vis‐à‐vis West European (and US) buyers because of their loss of access to input (fabric and trim) procurement after privatization and loss of state enterprise funds. Without access to short‐term credit, the post‐socialist firm

SC1 SC2

M1 M2

LF1 LF2

SC3

Institutional and financial environment: • state regulation; trade policy; private codes; organized labour • financial context in which risk and shareholder value are assessed

Intra-firm circuits of capital in theproduction of apparel:introduction of money capital into the circuit to co-ordinatethe purchase and bringingtogether of labour power andmachinery inputs (fabric & trim) and technology (means of production) to produce items of apparel as a commodity

GPN-level circuitsof capital to co-ordinate thenetworked productionand distribution of apparel

Introduction of credit (money capital), input materials such as fabric, trim (means of production), designs (intellectual capital) and contracts (legal forms) by lead firms/buyers and manufacturers/network organizersto enable factory production of apparel commodities

Distribution of made-up apparel commodities from producers to lead firms/buyers for sale and realization of profit and surplus value

Sub-contractors

Manufacturers/network organizers

Lead firms/buyers

Figure 2.1 Two circuits of capital in sub‐contracting apparel production networks.


had little positional power as primarily West European buyers extended their outward processing arrangements to ECE.6 Access to credit was a crucial determinant of opportunity or constraint in the face of delocalized production for export. For lead firm buyers, former state‐owned enterprises (SOEs) offered a particular kind of opportunity; already highly capitalized by state investments in capital stocks and buildings with relatively easy access to markets, newly privatized suppliers had access (legally acquired or otherwise) to sewing machines, workshop space and a trained labour force. By supplying all the inputs in bundled form under EU customs agreements for sewing and re‐importation, or by offering short‐term credit for input procurement, lead firms were able to lock in contracts at low cost. Financial risk – in the production stages of the value chain – was thus disproportionately passed on to suppliers, rather than being borne by buyers and co‐ ordinating manufacturing firms. The result was a geography of lock‐in and dependent asymmetric relations between EU buyers and ECE suppliers; a point to which we return in Chapter Six.

The marginal profits received by contract manufacturers in the ECE apparel sector have, however, become increasingly squeezed as contract prices paid by buyers have shrunk as a result of the combined effect of demands to provide shareholder dividends and as average unit prices for apparel have declined with the further globalization of production. Suppliers have increasingly had to rely either on contracts for higher value production (e.g., Italian tailored apparel, such as suits, or niche products such as high‐end work clothing utilizing technical textiles such as waterproofing and wind‐resistant capabilities) or on relatively quick response low‐value contracts. Both have provided some firms with opportunities to sustain profits, even as the wider industry has been badly affected by competition.

Each of these dynamics point to the centrality that circuits of capital play in the (re‐)organization of global production networks. Once capital is realized following sale, it is then re‐advanced through a new circuit of accumulation, the scale of which is partly dependent on the success of the initial circuit and the ability to access market opportunities and further external investment sources. Commodities in networks of global production are then the “embodiment of both use value and exchange value” (Harvey 1982: 7), and so commodity production networks incorporating a range of private, public and quasi‐private actors are

mechanisms to enable increases in productivity, reductions in the … [price of] labour … and reductions of the turnover time of capital [in motion] to enhance the [production and] extraction of surplus value. Such claims shift the focus away from the commodity per se to (a) the relations of value embodied in commodity production in places, and (b) the appropriation of surplus value through exchange and consumption across space. (Smith et al. 2002: 51)


Following Hudson (2008: 422), then, GPNs are constituted via

a variety of flows (of capital in various forms such as commodities and money, knowledge and people) between a variety of nodes, sites and spaces (of production, exchange and consumption), with varying governance arrangements, both multi‐scalar (supra‐national, national, regional and urban) and non‐scalar networked forms of governance.

Capital, labour and the state are crucial in structuring these circuits of capital accumulation, particular investment strategies and hence the relative competitiveness of lead firms and suppliers in global production networks (Smith et al. 2002; Smith 2014). We also stress the interdependencies underpinning the accumulation of capital in firms and their local industrial systems, and their regulation in particular time–space contexts through a variety of institutional frameworks. Dunford et al. (2013), for example, provide an elaboration of the heuristic model of Coe et al. (2004) which emphasizes more fully these causal dynamics involved in the restructuring of GPNs. This includes corporate strategy to accumulate capital (profit‐ seeking motives involving in situ changes and relocation/delocalization); the institutional context within which such strategies are situated, involving the configuration of the state–capital relation; and the articulation between finance and the industrial economy which is crucial to providing investment and extracting surplus value, given the wider conditions of market demand for industrial goods (Figure 2.1). All of this is situated within an understanding of the international economic order and the shifting geography of economic power in that order, which, in the ECE context, requires an understanding of the geo‐economic strategies of EU enlargement creating new spaces and frontiers for accumulation and accessing new markets; issues we elaborate in Chapters Four and Seven.

Integration into Global Value Chains and Production Networks: Upgrading and Downgrading in GVCs and GPNs

A key element of research in GVCs concerns the ways in which integration into value chains is organized and governed, and its implications for the forms and dynamics of industrial upgrading to capture additional functions in supply chains which enable the generation of greater value appropriation (see Bair 2005; Sturgeon 2009; Gereffi et al. 2005). Bair and Gereffi (2003: 147) have defined the upgrading of apparel firms in terms of stages producing “a series of role shifts involved in moving from export‐oriented assembly to more integrated forms of manufacturing and marketing associated with the original equipment manufacturing (OEM


[or full package production]) and original brand manufacturing (OBM) export roles, respectively”. Most typically, upgrading in the apparel industry occurs as a functional shift from export‐oriented cut‐make (CM) and cut‐make‐trim (CMT) sewing and assembly work to OEM or full‐package production or even to own design manufacture (ODM) and to own brand production (Bair and Gereffi 2003, see also Bair and Gereffi, 2002, and Yoruk 2001).

Humphrey and Schmitz (2002) parse out these dimensions of industrial upgrading into four types of upgrading in global value chains (see also Gibbon and Ponte 2005: 89):

1. Process upgrading, involving the reorganization of the production system and/or the introduction of new technologies to achieve greater efficiency in the transformation of inputs into outputs.

2. Product upgrading, in which a firm shifts into the production of more sophisticated products which enables the firm to capture and appropriate greater unit value.

3. Functional upgrading, involving the acquisition and adoption of new elements in the production process, again allowing the firm to enhance its ability to capture greater proportions of value by increasing the skill content of its activities.

4. Inter‐sectoral or chain upgrading, which would involve a firm taking its technological, skill and product competencies and applying them horizontally in new product areas and new sectors.

In the apparel sector, these forms of industrial upgrading can be specified and mapped onto specific processes and stages in the apparel value chain (Figure 2.2).

Figure 2.2 Types of economic upgrading in global apparel value chains. Adapted from Gereffi and Prederick (2010); Frederick and Stark (2011)


Each of these categories of upgrading refers to strategies to capture additional value from apparel production operations at a particular segment of the value chain. While these categories are heuristic and their application has been enormously productive in the analysis of firm‐, sectoral‐ and regional‐level restructuring, in what follows, we interrogate two ways in which concepts of upgrading might be refigured. First, it has long been suggested that upgrading research tends to focus on linear trajectories of industrial improvement in value chains, without considering the full range of scenarios actually experienced in particular regional economies (see Pickles et al. 2006). This is similar to what Bair and Werner (2011) have called the inclusionary bias of GVC research. In Chapters Six and Eight, we focus on the diversity of trajectories identifiable in the ECE apparel industry, only some of which relate to forms of upgrading, while others involve downgrading and exclusion from GPNs (Gibbon and Ponte 2005; Bair and Werner 2011). Second, the concept of upgrading focuses on the ways in which production systems are altered to effect the distribution of value in the value chain or production network. It does little to understand the wider, but nevertheless fundamental, question of the dynamics of the production of value and the consequences of these processes for questioning who benefits from upgrading beyond firm‐ and chain‐level actors, including communities, other industrial and service sectors, and regional economies (Smith et al. 2002; Starosta 2010; Smith 2014; Wong 2014). In Chapters Three and Six, we focus on how an appreciation of these wider dynamics is required in order to move the debate away from a normative one, to one focused on a conjunctural and relational understanding of emergent economic geographies.

Consequently, and despite its origins in a world systems analysis of global capitalism in the 1980s (Hopkins and Wallerstein 1986), much of this research has not engaged in a fundamental critique of global value chains and production networks as an emergent method for the co‐ordination of capitalist social relations at a world scale. Recent emphasis has been placed on largely institutionalist analysis, highlighting the increasing range of actors required for an analysis of globalized production: firms, state and non‐state institutions, labour, standards, trade regimes, and so on (e.g., Gibbon and Ponte 2005; Neilson and Pritchard 2009; Coe and Jordhus‐Lier 2011). In so far as GPNs have become such dominant organizational forms for the operation of the global economy, it is crucial that we understand how they function as dynamic elements of contemporary capitalism; as ways in which firms create new opportunities for capital accumulation, create new commodities, services and markets, and manage the turnover time of capital in their production networks. And in this process, we need a much richer understanding of the ways by which they are contested by


other actors (such as labour) and regulated by state and non‐state institutions (Chapters Three and Four).

The production, circulation and extraction of value in industrial circuits of capital are always geographical. They build on and deploy particular spatial configurations in developing specific locational strategies. In ECE, this involved reworking the existing industrial and regional contexts derived from state socialism and mobilizing their geographical proximity to the main EU markets. Our argument is that, in the context of the increasing outsourcing tendencies in apparel global production networks, ECE provided a spatial fix for a struggling West European industry and enabled it to manage competitive pressures on cost and the turnover time of capital by contracting out labour‐intensive aspects of production to lower cost but proximate producers in ECE. This process was mediated by EU and state programmes for trade and geo‐political integration leading up to the first post‐socialist EU enlargement in 2004, while at the same time being able to guarantee relatively rapid supply of goods to the main markets in the EU. In this sense, ECE was part of a wider macro‐regional strategy of GPN expansion which also took Turkey and parts of North Africa into a ring of ‘golden bands’ surrounding the core EU markets (see Chapter Four).

Issues of industrial and regional upgrading, then, are not simply about the ability of an industry to enhance its capacity for value creation and appropriation to underpin local economic development. The new forms of contracting that emerged in ECE after 1989 resulted in a shift away from state socialist‐era full‐package production and a re‐orienting of enterprises to assembly for new markets in the EU. This meant that the delocalization of the industry from Western Europe to ECE led simultaneously to the ‘downgrading’ of the industry in both parts of Europe. As contracting continues to delocalize, it generates new rounds of de‐industrialization and labour shedding, while only certain manufacturers and processes remain. To deal with these shifting geographies, we seek to develop a more dynamic understanding of what we call the “upgrading problematic” which is attentive to such multi‐scalar outcomes of upgrading and downgrading, and the diversity of trajectories which occur in the re‐positioning of regions and firms in global production networks. In particular, new geographies of capital accumulation are not only created through outsourcing and the spatial extension of global production networks. They also arise from the confluence of interests concerned with managing the power of labour to claim an increasing proportion of the social product in Western economies. These interests are mediated through state and international policy frameworks concerning geo‐political integration and trade liberalization and through the legacies of the state socialist economy, and the consequent firm‐level and regional outcomes for industries.


Firm Strategies for the Management of Circuits of Capital

How can we reframe the “upgrading problematic” to respond to the dynamics involved in the organization of circuits of capital? In the following chapters we examine three types of strategy: (1) in situ restructuring within firms; (2) relocation of production; and (3) the establishment and deepening of strategies of inter‐firm networking to transform economic organization and the profit strategies of firms (Humphrey and Schmitz 2002; Dunford and Greco 2006). These map onto upgrading frameworks but extend them to consider a wider set of dynamics and outcomes.

Intra‐firm in situ strategies to enhance competitiveness and profitability in the circuit of capital involve at least four elements:

1. “Process upgrading” involves cost reduction strategies which aim to increase relative surplus value accruing to firms either by implementing new technologies and/or new organizational systems to enhance production by the more efficient co‐ordination of the labour and production process. In the apparel sector, this involves the implementation of more sophisticated production techniques such as the integration of CAD‐CAM systems with manufacturing operations to expedite fabric cutting or the use of smaller production groups with workers fulfilling several rather than single tasks to enable greater flexible response to order fluctuations. Equally, cost‐cutting in situ restructuring could also involve the squeezing of the price of labour or undermining other elements of working conditions, to extract higher proportions of relative surplus value; one of the main reasons for the development of sweatshop conditions in apparel production.

2. “Product upgrading” involves the introduction of new products, expanded variety and quality of products, and entry into new markets. This might involve, as we see in Chapter Six, the introduction in collaboration with West European joint venture partners of higher quality tailored suiting for Italian markets or the development of new work apparel products for non‐EU export markets.

3. “Functional upgrading” is a form of in situ restructuring which, in the apparel sector, involves a contract manufacturer increasing their capabilities to enable them to undertake any range of additional activities beyond sewing. As we have seen, this might include functions such as the procurement of inputs, operating or organizing apparel finishing (e.g., washing and laundry) and packing activities, organization of logistics operations to ensure timely delivery to buyers, etc.

4. “Value chain upgrading” involves the introduction of new types of activity and/or entry into new value chains. In the ECE context, this has taken the form of apparel contract manufacturers attempting to diversify into the sewing of seat covers for the burgeoning


automobile assembly value chain or developing new activity in the leisure industry to spread risk away from apparel assembly operations (see Chapter Six).

A second form of strategy adopted relates to the relocation of some aspects of the value chain to reduce costs or take advantage of preferential trade agreements and preferential market access (Marin 2009). International offshoring is the relocation of a firm’s operations to a new location. International outsourcing involves the relocation of parts of the production process to an independent supplier firm. In the ECE apparel sector, we identify each of these forms of geographical relocation or delocalization: delocalization of assembly work from West European firms to ECE firms; outsourcing of sewing operations from western Slovakia to firms in eastern Slovakia where wage rates are lower; and delocalization and outsourcing of sewing operations from eastern Slovak firms across the border to Ukrainian firms (Chapters Six and Seven) or inter‐firm and inter‐regional outsourcing of contracts and larger orders by Bulgarian producers to other formal or informal workshops in the region or in nearby regions (Chapters Eight and Nine).

As the research on global value chains and global production networks has emphasized, a third strategic form involves the establishment and deepening of strategies of inter‐firm networking to transform economic organization and profit strategies. These firm strategies range from stand‐alone direct contracting arrangements with long‐standing or one‐off Western lead firms, to complex sub‐contracting arrangements with local and regional workshop producers, to networked, cross‐border networks of buyers, producers and sub‐contractors (Amin and Thrift 1992; Dicken and Thrift 1992; Yeung 1994). The precise configuration of inter‐firm relations is determined to a large degree by the wider profit‐seeking strategies pursued by lead firms in global production networks and how these are configured by their articulation with state regulation and labour, regionally embedded social relations, institutions and practices, and geographical distance from and access to markets.

The Turnover Time of Capital in Apparel GPNs and the Logics of Off‐shoring and Near‐shoring

A critical dynamic in circuits of capital and the strategies of firms, particularly in the apparel sector, involves the spatial and temporal strategies adopted to manage the turnover time of capital. In this calculus, relative labour costs, while important, are not the primary or only factor in driving sourcing decisions by lead firms in global production networks (Abernathy et al. 2006). Differential rates of inflation, currency exchange rates, the cost of capital, labour market skills and training infrastructure, return rates,


delayed delivery costs, logistics infrastructure and unpredictable market demand are all part of apparel sourcing decisions. With shifts in some product segments to an increased emphasis towards quick‐response supply chains and “fast fashion” (Tokatli et al. 2011; Plank et al. 2012), the management of the turnover time of capital allocated in the circuit of capital has become critical. ECE and other neighbouring production locations close to core Western European markets have become central to the management of the risk of capital deployed in the supply chain via quick response manufacturing systems across macro‐regional boundaries such as the EU and its neighbours. Electronic Point of Sales (EPOS) systems and close monitoring of retail sales and stock replenishment requirements via electronic and other technologies have been increasingly integrated into the organization of both proximate and more distant systems of sourcing. By being able to deliver clothing in response to rapid changes in core markets, firms in ECE have been able to meet the increasingly taut requirements of lead firms in pan‐European production networks. In part, this is due to the ability of ECE suppliers to meet delivery deadlines in a few weeks, in contrast to the much longer lead time from order to delivery for suppliers in Asia. The management of time and space is thus becoming increasingly critical to understanding not only the spatiality of manufacturing systems, but also the profit dynamics within them. But these dynamics in turn are dependent on wider sets of social relations embedded in particular regional contexts, to which we turn in the following section.

Articulation/Disarticulation and Differential Inclusion in Global Production Networks

Recent arguments about “disarticulation” in global value chains (Bair and Werner 2011) have posed the important question about what is included and what is excluded in the analysis of GVCs and GPNs. Stressing that there has been a tendency in much prior GVC and GPN research to focus too much, if not entirely, on actors (especially firms) and processes within chains and networks, Bair and Werner have argued that more attention needs to be paid to those elements of regional economies excluded from firm‐ and chain‐centred analyses. By focusing on those aspects and elements of chains and networks that are dropped, excluded, overlooked or eradicated by competition, they draw attention more directly to the ways that processes of inclusion and exclusion reflect the always present constitutive outside of economic relations in the global economy.

This approach re‐focuses attention on the multiple and contingent forces that structure the dynamics of inclusion/exclusion and upgrading/


downgrading in global production networks (see also Gibbon and Ponte 2005). Havice and Campling (2013: 2613) suggest this is important for three reasons:

First, it emphasizes that “structured relations of dominance and subordination” should be central to the analysis of social relations within and between territories in their interactions with commodity chains. Second, it encourages an examination of “the mechanisms which connect dissimilar features”. For the dis/articulations project, this idea translates into using commodity chain analysis to explore, for example, how investment in or divestment from one place at a particular time might be influenced by a seemingly unrelated dynamic elsewhere. Third, it relates that an articulation is always contingent and “a linkage which is not necessary, determined, absolute and essential for all time”, pointing to the dynamic nature of social formations (Hall and Grossberg, 1986, p. 53).7

Here the notion of disarticulation, with its focus on processes of inclusion and exclusion, is one form of what we refer to as the articulations of capital. Articulations of capital are precisely about the ways in which firms and other actors (such as service providers, state authorities, trade unions and civic organizations) are interdependently connected/disconnected (articulated and disarticulated) to/from particular circuits of capital and their corresponding economic geographies of production and consumption (see also Overton and Murray 2014). Articulations of capital are, however, also about the ways in which capital intersects, and is co‐constituted in relation to, a whole manner of social relations which are not reducible to the capital relation, but are articulated with it (Gibson‐Graham 1996; Stenning et al. 2010). Here the stress is on capital as a social relation constituted by and through the antagonistic relations among various social agents and formations in any one place and time. As Mezzadra (in Cobarrubias, Casas Cortes, and Pickles 2011: 588) has stressed:

Since the early 1960s Italian workerism attempted to develop Marx’s statement that capital is not ‘a thing’ but ‘a social relation’, emphasising the constitutive element of antagonism and of labour subjectivity within the very structure of capital. This opened up a very different angle on ‘exploitation’ from traditional Marxist analyses, one that makes an ‘economistic’ and ‘objective’ rendering of the concept impossible.

This is an analysis of capital focused on:

the irreducible specificity of every determination; the essential complexity… of every form of existence…; and the … possibility of conceiving an acentric –Althusser uses the term “decentred” – social totality that is not structured by the primacy of any social element or location. (Gibson‐Graham 1996: 27).


In the following section we map these two notions of articulation onto theories of context and conjuncture to assist in the explanation of how – in analysis of the dynamics of capital in GPNs – the logics of capital deployment and contracting create a diversity and multiplicity of emergent economic forms as a result of three forces. First, we show how the roles played by the institutional, cultural and geographical legacies of state socialism in ECE are important in shaping the trajectories of economic transformation and integration in global production networks (elaborated in Chapters Three and Six). Globalizing capital in ECE, in this sense, is an always already articulated set of moments and relations, embedded in the political‐economic context of post‐socialism. Second, we show how and why contexts matter for any elaboration of GVCs and GPNs, and specifically the ways in which context needs to be understood in deeply relational terms. Third, we also show how claims to incorporate the “essential complexity” of determinations producing GPNs and their intersections with particular geographies and territories still require a rigorous theoretical grounding. We resituate our understanding of context and relationality in recent work in cultural studies to elaborate what we refer to as a conjunctural economic geography of global production networks and post‐socialist transformations.

Instead of focusing on logics of inclusion and exclusion to frame the structure of the global economy, we build on these relational, contextual and conjunctural approaches to focus on a concept of differential inclusion which turns on the complex of actors, institutions and policies that structure labour markets and the production processes in ways that locate and multiply the forms of labour and economy in contemporary societies (De Genova, Mezzadra, and Pickles 2014; see also Havice and Campling 2013). It is the intensiveness of capital’s development that creates heterogeneity in the global economy. The re‐organization, re‐ordering and re‐placing of spatial divisions of labour over the past three decades have multiplied and fragmented the forms of labour. In this reading, the wage relation and nation‐state have only ever been geographically and historically particular ways of restraining and containing labour power. As we show in several chapters, cross‐border forms of differential inclusion of labour and capital work to structure the uneven integration of firms and regions into pan‐European apparel production networks (see, for example, Chapter Seven). Both capital and labour have become more, not less, differentiated, more disaggregated, not more integrated, as the economic technologies of trade liberalization, export production, product‐specific needs and brand‐driven consumption structure work, distribution and consumption through production networks.

The resulting notions of inclusion and exclusion, and their corresponding spatial divisions of labour, order the multiplicity of combinations of race, gender, life‐paths, nationalities, legal status, educational level and material experiences of work in particular and geographically contingent ways (De Genova, Mezzadra and Pickles 2014). These combinations create fields


of tension criss‐crossed by differential forms of work and by attempts to control the labour process by employers, states and civil society organizations. These fields of tension are discontinuous: from the enforcement of capital controls and trade flows to the regulation and control of labour and the workplace. The resulting technologies of investment, management and sourcing, and the corresponding production networks that have emerged, seek to maximize returns to capital and ensure its heightened control, despite the constant challenges it faces from the politics of production (Burawoy 1985) and broader struggles over economic regulation (Lowe 1996; Roediger and Esch 2012). In this sense, the multiplication of labour and its corresponding political and economic geographies depend fundamentally on the production of difference in labour markets.

Towards a Conjunctural Economic Geography of Global Production Networks: Conjuncturalism, Context and Embeddedness

A conjunctural economic geography turns on three primary commitments. First, we emphasize the dynamic tensions among actors in production networks to establish a more relational understanding of circuits of capital, networks of value and production, and broader economic relations. We show how these dynamic tensions among fractions of capital in production networks (sub‐contracting firms, manufacturers and production co‐ ordinators, lead firms and buyers), the state and other institutions of economic governance, and labour shape local and macro‐regional economic trajectories. We focus on the ways in which spatial divisions of labour and the concrete struggles of workers operate as active agents in producing and reconfiguring GPNs. Earlier work by Smith et al. (2002) and others (Selwyn 2007, 2012; Coe et al. 2008; Cumbers et al. 2008; Coe and Jordhus‐Lier 2011; Werner 2012) has stressed the importance of moving away from the tendency to “black box” the relations between labour and capital in GVC analyses of firms and networks. Instead they have emphasized the importance of understanding “the relations of power and dynamics of competition among firms, [which have rendered] … the social relations that mediate the production of exploitable workers and the conditions of their exploitation marginal to the analysis” (Werner 2012: 407). It is in this sense that we focus on the “labour process dynamics [that] strongly influence wealth creation and work conditions within any one node and across a chain” (Smith et al. 2002: 47). We seek to move beyond an interpretation of labour solely as a factor cost that determines locational decision‐making in the global apparel industry. Instead, we situate relative labour costs alongside a much wider range of mechanisms that shape GPN dynamics. Among these


mechanisms are the complex inter‐dependencies among producer demands, labour market dynamics and diverse forms of social action. We show how the over‐emphasis on labour costs emerged as part of the broader normalization of market logics, and resulted in the further weakening of the diverse economic relations that typified ECE regional economies.

Second, we make an epistemological shift in how we understand value and its production, circulation and capture. This shift stresses the inter‐dependencies among (or over‐determinations of) economic actors and the economic and socio‐politico‐cultural formations in which they are embedded. It is what we refer to as the “articulations of capital”. In developing an understanding of articulation, we find it helpful to draw upon Stuart Hall’s (1998: 325) pioneering work in which he argued that articulation is a metaphor used:

to indicate relations of linkage and affectivity between different levels of all sorts of things … [T]hese things need to be linked, because though connected they are not the same. The unity which they form is thus not that of an identity, where one structure perfectly recapitulates or reproduces or even ‘expresses’ another; or where each is reducible to the other; or where each is defined by the same determinations or have exactly the same conditions of existence; or even where each develops according to the effectivity of the same contradiction … The unity formed by this combination or articulation, is always, necessarily, a ‘complex structure’: a structure in which things are related, as much through their differences as through their similarities. This requires that the mechanisms which connect dissimilar features must be shown … [rather than] assumed as given. It also means – since the combination is a structure (an articulated combination) and not a random association – that there will be structured relations between its parts, i.e., relations of dominance and subordination. Hence, in Althusser’s cryptic phrase, a ‘complex unity, structured in dominance’.

Third, we focus on the crucial interplay of processes within and outside industrial networks. We do so in terms of the diverse economic relations of post‐socialist regional economies by interrogating the embeddedness of export‐oriented manufacturing in a variety of ‘non‐capitalist’, historically and geographically determined institutions and social formations and regionally distinctive labour markets.8 Thus, an important component of the articulations of capital is the interplay of processes within and outside industrial networks and inter‐firm relations. If, as Althusser (1969) suggested, the economy is over‐determined by the myriad processes, regulations, norms and practices produced through the semi‐autonomous functioning of the social, political and economic, then, in order to understand contemporary transformations in the economic geographies of post‐socialism and their articulation with global production networks, we need regional economic concepts that reflect the complexities of such social formations. This requires an analysis of


the range of actors, networks and institutions involved. To this end, we turn to a conjunctural analysis of the economic complexity of emergent capitalism in ECE. Our goal is to open a conceptual space through which we can understand the articulation of capital in apparel production networks with post‐socialist regional social formations. This is more than a “strategic coupling” of GPNs (Coe et al. 2004). It is a dynamic interweaving of context and contingency at the very core of an explanation of global production networks in ECE.

A conjuncture is relational, defined in terms of bundles of relations; “a social formation understood as more than a mere context – but as an articulation, accumulation, or condensation of contradictions” (Grossberg 2006: 5). In this way, “[a]ny event can only be understood relationally, as a condensation of multiple determinations and effects” (Grossberg 2006: 20).9 In a similar vein, Massey has elaborated conjunctural analysis geographically in the ways she defines place and space as the temporary crystallization and materialization of flows and relations occurring at multiples scales (Massey 2005; see also Grossberg 2013). It is the ways in which such articulations result in specific rounds of investment and disinvestment, patterns of production and consumption, flows of commodities, energy, knowledge and capital, and class struggles that produce specific regional social formations and geographies of accumulation; something that we highlight in Chapter Nine as “palimpsest landscapes” of capital – crystallizations of multiple economic geographies and practices.10

Conjunctural analysis of economic dynamics thus requires a sense of the deep history of articulation, one which is not mechanistic or layered but one that is open to over‐determinations and is focused on the relations among practices (Grossberg 2013). We develop such an analysis in Chapter Five, which considers the articulations of globalized apparel production with state socialist economic formations, and then extend it in later chapters. We examine how the legacies, or perhaps more correctly, the social forms of collectivism and state socialism, continue to shape contemporary practices, including the concrete forms of global production networks in ECE. As Grossberg (2010: 21) has argued, the conjuncture “is a transformative practice or work of making, unmaking, and remaking relations and contexts, of establishing new relations out of old relations or non‐relations, of drawing lines and mapping connections”. Any regional formation comprises tensions, contradictions and transformations; diverse ways of living and interacting that are in tension with one another. Because such conjunctures are contingent, they could always have been otherwise; there are no guarantees that specific articulations should be of a certain kind or that they will have predictable outcomes. Such an articulation of relations comprises bundles of practices and discourses that are embedded in differential systems of politics, uneven relations of power and weaker or stronger forms of control over territory and resources. It is precisely the fixing of such uneven


social relations that constantly re‐territorializes space as a contextual relational process (Massey 2005; Grossberg 2013). This is the conjuncture to which we now turn by focusing on context, transformation and embeddedness in regional economies.11

Contexts/Transformations/Conjunctures

ContextIn recent years geographers, anthropologists, economic sociologists and cultural theorists have expanded our understanding of diverse and alternative modalities of power, economy and life through their engagements with meanings of context. This has occurred particularly in the new discourses of cultural economy, “open” and “heterodox” Marxism, and approaches to diverse economies, alter‐globalizations and alternative modernities (Gibson‐Graham 1996; Lee 2006; Stenning et al. 2010). With these various discursive, social and cultural turns in critical theory, we can now take as given that context matters. Yet, as Peck (2004: 6) warns us, when turning to issues relating to the social, spatial and scalar constitution of economic systems, identities, processes and development paths, we all too often leave “only fuzzily defined and un‐theorized ‘context’ in the background”.

What then do we mean by context and how does an understanding of context help us to develop a conjunctural analysis of the economic and regional transformation of places in ECE steadily integrated into global production networks?12 For cultural studies, the concept of conjuncture was fundamental to refocusing critical theory and cultural studies on this understanding of the concrete, temporary and contingent specificities of contexts.13 For Grossberg, this always open possibility contains the potential for real social transformation, for Massey (2005: 110), it is the recognition of “contemporaneous coexistence and becoming”, and for Hall:

[i]ts sense of context is always a complex, overdetermined and contingent unity. Contextualism in cultural studies is often defined by and as a theory of articulation, which understands history as the ongoing effort (or process) to make, unmake and remake relations, structures and unity (on top of differences). If reality is relational and articulated, such relations are both contingent (i.e., not necessary) and real, and thus, never finished or closed for all times.14

There are only contexts, but these contexts cannot be fully mapped out empirically, but always only in terms of particular problematics. Context is not a given space or framework of objects and relations within which specific identities are formed and determined. It is not a conceptual space of relations that could, in principle, be filled out by the pursuit of more detailed


research and writing, but is a (temporarily) stabilized constellation of actors and meanings that is always open to being re‐worked. Such constellations produce concrete regionalized economic spaces, which in many cases are embedded in global production networks. In our terms, our theorizations of regional development and global production networks require that we attend to both the dynamic interactions of the primary forces in social formations (circuits of capital, labour processes and contestations, and the state) and also to how those interactions are always shaped by their specific contexts. It is this coming together, this conjuncture, which provides a non‐essentialist, over‐determined understanding of this intersection of political economy and context in the analysis of global production networks and value chains.

Transition and TransformationMost theories of GVCs and GPNs, and post‐socialist globalization more generally, start with a deeply embedded notion of transition. In the post‐socialist context, this is not only the idea of transition from communism to neo‐liberal capitalism (see Smith and Pickles 1998), but is an idea shared more broadly in the analysis of the global economy. These two dynamics of transition (post‐socialist and GVC/GPN) assume many of the same commitments; the dynamic and expansive nature of capitalist markets, the sense that the outside to capitalism is shrinking as globalization occurs, and the deep sense that economic behaviour is now so global that competitive pressures drive a single logic of industrial and social upgrading. From this perspective, economic globalization has a tendency to have a known future, reproducing mechanically the past experienced in the Global North (Chakrabarty 2000: 39). For Chakrabarty (2000: 47), such theories of transition deal with the diversities of space and time in one of two ways. Classical transition theory of a liberal and a Marxian kind assumes a universal process of modernization in which different histories and geographies are, in time, overcome by capitalism. In this view, capital logics are inherently expansive and universalizing. Related, but distinct are those theories of uneven development that “see these differences as negotiated and contained –though not always overcome—within the structure of capital” (Chakrabarty 2000: 47).

Transition theories understand non‐capitalist life – what Marx referred to as “partly still unconquered” – as not yet conquered. This is a history of capitalist expansion in which non‐capitalist regions and practices exist as if in the waiting room of history, awaiting only what Fukuyama (1992) saw as the inevitability of liberal democracy and markets. Only the mode and timing of their incorporation are in doubt, not that they will be, in time, incorporated into the global market. This is what Chakrabarty refers to as “History 1”; a history that centres global capitalism as always encroaching on and eventually eradicating the “non‐capitalist”. But there is a second


way to understand this “partly still unconquered” in more structural and philosophical terms as that which is, in principle, always in articulation; what Chakrabarty (2000: 65) calls “History 2”. Here the limits to capital are not geographical, temporal or technical, they are structural. As forms of abstraction universalize relations (whether economic in the form of capitalism, or political in the form of totalitarianism), the unconquerable forms of excess, energy, desire and partial autonomy of subjects constantly overcome the disciplining and control of capital, which in turn must adapt and restructure. “Difference in this account, is not something external to capital. Nor is it something subsumed into capital. It lives in intimate and plural relationships to capital” (Chakrabarty 2000: 66). History 2, then, “is not necessarily ‘pre‐capitalist’, ‘feudal’ or ‘outside’, … [but a recognition of ] the very intimate, always already present articulations in any social formation” (Smith and Stenning 2006: 206).

This is not an argument to see regional economies as non‐capitalist, or to call for some kind of culturalist, nativist or alternative exceptionalist explanation of social and economic difference. Instead, it is a form of analysis politically committed to constantly interrupting the totalizing thrusts of modernist and historically developmental accounts of economic change by focusing on those many ways in which economic transitions are always transformations (or what Chakrabarty calls translations), always embedded in diverse social relations. Such an understanding of regional economic change and the integration of regional economies into global production networks requires the inter‐weaving of diverse forces generating particular concrete forms of globalization. In other words, this is a theorization of globalization as a set of open exchanges whose trajectories are not pre‐determined, although in contemporary circumstances they are often highly predictable.

This theorization of transformation/translation is, therefore, about the ways in which diverse regional economies, forms of life and social formations are articulated with markets and capital logics. If transition theories of regional economic change see the diversity of economies and places as eventually falling under the sway of similar kinds of economic relations and rules, transformation and translation theories focus much more on the ways in which contextual and conjunctural change develops “more affective narra-tives of human belonging where life forms … [do not become equivalent] … and where the globalization of capital is not the same as capital’s universalization” (Chakrabarty 2000: 71). Here, Chakrabarty makes an important move, linking structural or philosophical theories of capitalism and translation to the historical conditions of life, in which articulations, contexts and conjunctures are always bundles of contradictory tensions.15 It is this insistence on the contradictory, rather than linear and modernist conceptions of integration into global production networks, that we pursue in Articulations of Capital. One central conclusion of this epistemological shift from transition theories to theories of transformation and translation is the re‐focusing of


our understanding of global value chains and production networks on the concrete forms that capitalist economic organization currently takes.

Conjuncturalism and Embeddedness in GPNsIn considering the embeddedness of global production networks as forms of economic inter‐dependencies through this lens of context and conjuncture, we highlight four aspects of conjuncturalism. First, in this view, the embeddedness of economic life in particular places is always relational and inter‐dependent; as an historical reality the materialized places of economic life are produced through what Grossberg (2006) refers to as the constant struggle to make, unmake and remake (‘articulate’) complex, mobile and often contradictory configurations. We see this particularly in the context of the ways in which the legacies of state socialist production systems became reworked both as resources for an engagement in apparel contract manufacturing for EU buyers, which, as the same time, structured relations of dominance which fundamentally constrained the ability of large parts of the ECE apparel sector to reposition itself in those systems of dominance.

Second, this commitment to complexity rejects reductionist or deterministic analysis and any attempt to impose direct and simple causality to explain how places are produced. Embeddedness is always produced by the articulation of multiple and often contradictory forces. For example, we highlight a variety of ways in which non‐reductionist explanations are required in relation to ECE apparel global production networks, not least in the ways in which the social economies of post‐socialist societies are articulated with formal capitalist production complexes to structure a particular kind of industrial system in the region.

Third, and as a consequence, the conjunctural study of places is always about concrete socio‐geo‐historical formations and the analysis of place and region is always strategic and relational, not universal. It is important to stress that this does not entail recourse to localism and indeterminacy, for which the localities projects in Britain in the 1980s were criticized (Smith 1987). Rather, it requires a conjunctural analysis of how the dynamics of capitalism and circuits of capital are always embedded in region‐specific contexts, and how the general dynamics of capital accumulation, geographical inter‐relatedness of circuits of capital and the inter‐weaving of places through GPNs are situated and contingent processes of economic differentiation and uneven development, arising from a set of complex articulations. Here the specificities of state socialism have continued to structure the uneven relations of power between contract manufacturers in ECE and buyers in EU countries.

Fourth, this notion of complex articulation means that there are no guarantees (Grossberg et al. 2000): the world did not have to become the way it is; it could always have been and can be otherwise. But such ‘otherwiseness’ is not an open possibility or something which can ‘simply’ be chosen. It is not a voluntaristic enterprise, but it does have to be built. It is itself contingent


on the relations and structures that constitute the ‘real’ and on the social forces mobilized to this or that end. As Grossberg (2006) reminds us, life is the continuous actualization – construction and reconstruction – of effective structures that constitute specific geo‐historical realities of power. By rearticulating a context, conjunctural analysis seeks to open up further possibilities for struggle and articulation and thereby to shape the nature of the debate about the political.

Regions are, then, the materialization of a conjuncture that sees a context as an articulation, accumulation and condensation of multiple crises, contradictions and struggles; a fusion of different currents or circumstances occurring at different scales (Massey 2005).16 Regions have to be constructed as the complex product of multiple lines of force, determination and resistance, with different temporalities and spatialities, what Massey (1999) refers to as “power geometries”. A conjuncture need not have a specific national form, although it is always territorialized in some way. The unity of a conjuncture is never complete, stable or organic, but is constituted by a particular coming together of regionalized social relations with global capital flows, which we know as global production networks.

This provides for a non‐essentialist understanding of GPNs and their embeddedness in places, spaces and regions, sensitive to the contextual and embedded nature of all spatial practices. But it is also an understanding that the spatial practices of regional, political, economic transformations are situated in, and articulated with, the ways in which circuits of capital are organized through GPNs. Its primary goal is to describe and analyze the proliferation, differentiation and diversity of forms of practice, embeddedness and class processes at work in the new geographies of globalization. It asks how we can be attentive to the rhythms and contexts of everyday life that constitute this matrix of differentiated and alternative ways of living (the deepening of contemporary capitalisms, the proliferation or demise of non‐capitalisms, or their articulations in concrete regional economic geographies) (Gibson‐Graham et al. 2001). It enables us to specify Gereffi et al.’s (1994: 2) claim regarding global commodity chains that “[t]hese networks are situationally specific, socially constructed, and locally integrated, underscoring the social embeddedness of economic organization”. It also provides an elaboration of Henderson et al.’s (2002: 452) conception of “territorial embeddedness” which involves how GPNs “absorb, and in some cases become constrained, by the economic activities and social dynamics that already exist in those places”. Our meaning of embeddedness turns on the fact that economic landscapes and forms of integration into wider interdependent constellations such as GPNs (as other kinds of places) are “always in the process of being made, always contested” (Massey 1993: 149). This involves sets of inter‐dependent relations between the dynamics of capital and other social formations always in formation; in other words, through the multiple articulations of capital.


Conclusion: Post‐Socialism and Conjunctural Economic Geographies

A conjunctural economic geography of GPNs is essential for our analysis of the constitutive dynamics of post‐socialism. The conjunctural and contingent experience of post‐socialism has played an important role in the forms of integration of macro‐regional apparel production networks into the global economy. It has also shaped the developmental consequences it has had for regions and firms in ECE. The legacies, path dependencies, and social forms of collectivism and state socialism continue to play important roles in structuring post‐socialist transformations and the trajectories of firms, global production networks, and the regional economies within which they are embedded (Grabher and Stark 1998; Pickles and Smith 1998; Smith 1998). As Stenning et al. (2010: 6) have argued, we require a “conceptualization of post‐socialism which is marked by a diversity of social forms, by continuity and change, and by an appreciation in which ‘actually existing’ state socialism continues to reverberate through the cultural and political economy of ECE”. We also require an epistemological and methodological approach which is focused on an always grounded theorization of the dynamics of capital accumulation in GPNs.

This is an argument against linear transitions from state socialism to market capitalism, which is now well embedded in critical political economies of post‐socialism (Pickles and Smith 1998). It remains a vital consideration in unpacking the diverse trajectories through which economies in ECE have been articulated with global production networks. Such trajectories are always embedded in particular contexts and conjunctures; what Hess (2004: 182) describes as “socio‐economic development, which is shaped by the history of its actors, the structure of its social networks of economic activity, and not least its territorial conditions”. In summary, then, we have emphasized the importance of analysis of economic transformation committed to understanding actually existing forms of capitalist economic integration, situated in particular regional spaces. In doing so, our focus is on the dynamics of emergent circulations of capital across geographic space through GPNs, the role played by political‐economic and regional contexts in this process of capitalist development, the significance of path‐dependent legacies of transformation (what we have called the deep history of articulation) in that process of capitalist expansion, the always embedded, relational and inter‐dependent nature of these processes in economic geographies, and an epistemology that is always political, always contesting reductionism in all its forms, whether in terms of linear models of post‐socialist transition or neo‐liberal models of economic growth and development.


Notes

1 This includes, inter alia, recent attempts to understand the relationship between GPNs and finance (Coe et al. 2014), and GPNs and logistics (Coe 2013), to theorize the state and GPNs (Smith 2014), to develop a theory of GPNs (GPN 2.0) focused on understanding the competitive dynamics and risk environments within which GPNs develop (Yeung and Coe 2015), and to understand the relationship between off‐shoring and the globalization of value chains in the context of financialization tendencies in western firms (Milberg and Winkler 2013).

2 Lane and Probert (2009) have highlighted the need for an integration of “varieties of capitalism” research with that of GPNs, however, they pay insufficient attention to the organizing principles and dynamics of GPNs in contemporary capitalism, preferring instead a neo‐institutionalist, actor‐centred perspective on globalization.

3 The term “value chain” was first developed in business management literature, particularly around the work of Michael Porter’s Competitive Advantage (1985). In the early 2000s, the concept was extended and adopted by development scholars to distinguish earlier global commodity chain analysis from a growing concern with the emergence of supply chains driven by northern lead firms. The origin of the term “global value chain” is attributed by Humphrey and Schmitz (2002: 1026, n 2) to discussion at a workshop in Bellagio 2000, where Gereffi and other researchers working in this area agreed to use the term global value chains (see also Gereffi et al. 2005: 100). The term emerged in the 2001 special issue of the IDS Bulletin on “The value of value chains: spreading the gains from globalization” (Gereffi 2001; Humphrey and Schmitz 2001).

4 These emerging foci have generated dialogues with business and international agencies concerned with economic growth and development (OECD, WTO, and UNCTAD 2013). They have also been in productive dialogue with geographical analyses of the global economy, particularly GPN researchers, who have argued for the need to integrate chain research into broader inter‐sectoral networks of production and exchange (Coe 2009, 2012), the social and regional contexts of production (Coe et al. 2004; Yeung 2014), finance markets (Coe et al. 2014), and the central role of labour (Coe and Jordhus‐Lier 2011).

5 We are grateful to Liam Campling for discussions of this elaboration.6 Interview with Head of ATOP Slovakia, November 2003, and with senior staff,

Ministry of Economy, Bratislava, November 2003.7 There are, of course, parallels with earlier approaches in economic geography

and political economy such as Massey’s conceptualization of spatial divisions of labour (Massey 1984), which concern understanding the multiple (over‐)determinations of regional economic trajectories; a point to which we shall return later.

8 See also Neilson and Pritchard (2009), who developed a similar argument concerning embeddedness by focusing on the institutions that shape GVCs, and Smith (2014) for the limits of this argument in relation to the state.

9 It is for this reason that Stuart Hall argued that he did not work on “race and ethnicity as a kind of subcategory”. Instead, Hall states: “I have always worked on the whole social formation which is racialized” (1995: 53–4, cited in Grossberg 2010: 21).


10 We are aware of the caution Massey (2005: 110) gives about the danger of interpreting the ‘palimpsest’ archaeologically in terms of geo‐historical layers. Like Massey, we see this set of complex over‐determinations and relationities (“the coexistence of the coeval”) in terms of practices, not sedimented layers.

11 For Hall, the conjuncture refers to a specific set of contradictions that signal an organic crisis in the social formation. In this sense, Thatcherism, Blair’s New Labour and Third Way politics, and the Conservative Party‐Liberal Democratic coalition each signal a particular response to a conjunctural crisis in British post‐war society (see also Massey 2014, in relation to neo‐liberalism). Grossberg provides a broader reading of a conjuncture and a more methodological reading of conjuncturalism, situating the conjuncture temporally and spatially beyond the boundaries of a specific organic crisis. Here, the conjuncture is understood more as a constellation of tensions and contradictions that have to be resolved in some way (although they may never be resolved fully as the tendency to continual crises between periods of stability in political economic relations indicates), requiring some kind of cultural, economic, or political resolution, and a corresponding spatial fix (Lawrence Grossberg, personal communication, 10 July 2014).

12 We are indebted to Grossberg and Escobar for these ideas on conjuncturalism and context. See particularly, Grossberg (2010) and Escobar (2008); see also Pickles (2012).

13 The concept of ‘conjuncture’ has played an important role in the history of Marxist thought. For Althusser, it was the central concept of the Marxist science of politics (Althusser 1969, 1970). Gramsci distinguished between what he called “organic movements (relatively permanent) and movements which may be termed ‘conjunctural’ (and which appear as occasional, immediate, almost accidental)” (Gramsci 1971: 177). Gramsci was thereby attempting to avoid what we now call constructivist approaches (‘ideologism’) in which events are explained one‐sidedly in terms of voluntarist and individual elements, and realist or naturalist approaches (‘economism’) where the world is presumed to be merely given. Each tends to focus one‐sidedly on direct and immediate causes, and overlooks the complex role of indirect effects. For cultural studies, by contrast, context itself is always ‘over‐determined’ by contexts other than itself, which in turn are over‐ determined by other contexts. This is not to say that meaning is free‐floating; instead, it is deeply embedded and shaped by the multiple contexts within which it gains any stability as meaning and identity. For a history of the concept, see Koivisto and Lahtinen (2012).

14 Hall (2002), quoted in Grossberg (2006: 4).15 There are parallels here with the research agenda focused on “diverse”

(Community Economies Collective 2001; Gibson‐Graham 1996), “disseminated” (Pickles 2004) or “proliferative” (Leyshon and Lee 2003) economies; economic forms “constituted by a host of economic practices articulated with one another in dynamic and complex ways and in multiple sites and spaces” (Smith and Stenning 2006: 191). As Smith and Stenning (2006: 204) have argued, this form of articulation focuses on the diversity of economic practices “to enable the development of an understanding of the mutually constitutive and over‐determined nature of social forms”. More specifically in an ECE


context, work on diverse economies of post‐socialism has highlighted these as the “multi‐coloured” of post‐socialism. Such multi‐coloured economies involve the complex articulation of always present formal and informal, capitalist and non‐capitalist economic practices in societies in transformation (Smith and Stenning 2006; Stenning et al. 2010).

16 See also Hall and Massey (2010).

Part TwoWorking off the Past: Context and Complexity in Apparel Global Production Networks


Working in the Post‐Socialist Apparel EconomyChapter Three

Starting Again with Labour

1989 signalled a critical conjunctural moment around which work, employment and labour relations became fundamentally restructured throughout East and Central Europe, and beyond. The collapse of integrated planning systems of state socialism and the undoing of forms of national and international economic integration meant that integrated production net-works were stripped of their rationale, that is, the supply of goods and the provision of work and employment in an integrated, state‐led economic system ideologically committed to the construction of variegated forms of workers’ states was largely discredited. De‐industrialization rapidly ensued as industries saw the collapse of the mechanisms for their (state‐led) co‐ordination. The tightly integrated, yet always contested, political economy of state‐owned enterprises which co‐ordinated product creation, production systems and circulation of final goods was dismantled, collapsed or was priva-tized. Unemployment burgeoned as the vestiges of state‐owned enterprises and newly privatized firms struggled to retain one of their primary roles under the Soviet system – the reproduction of the labour collective (Clarke 1993). The collapse of state socialism led to relatively rapid, yet uneven mar-ketization in which “soft budget constraints” (Kornai 1992), associated with


the attempted co‐ordination of enterprise managers’ and workers’ interests to meet production targets and plan quotas, were “hardened” as market‐ mediated relations emerged. This led to intense inter‐factional competition to control state assets, politicized privatization as former state‐owned enterprise managers and others with political capital sought to translate these social rela-tions into economic power and control (Pickles 1995; Begg and Pickles 1998; Smith 1998). The ensuing years immediately after 1989 resulted in a now well‐established struggle over the political economy of labour relations and economic control in which the geo‐political shifts articulated with economic violence and the marginalization of labour, alongside the emergence of ‘wild’ forms of primitive accumulation, rentier and merchant capital, and other capitalist social relations (Burawoy and Krotov 1993; Smith 1994; Burawoy 1996; Herod 1998, 2001; Ost 2002, 2005; Pavlínek 2002).

In the early 1990s, forms of trilateralism developed as post‐socialist states sought to maintain social peace by giving organized labour a seat at the table. But this had the simultaneous result of weakening union orga-nizing efforts at the shop‐floor level and among the unemployed, and produced little more than a weak corporatism and declining trade union membership (Ost 2002). The highly compromised position of trade unions as political transmission belts of the Communist Party state was compounded by anti‐communist purges and scandals surrounding nomenklatura, manager and voucher privatizations in which trade unions at times participated. Rapid privatization policies pursued by many post‐socialist governments across the region further weakened the position of organized labour (Herod 1998; Kubicek 1999; Pollert 1999).1 Trade union weakness was compounded by the active exclusion of trade unions by leading multilateral institutions involved in policy formulation, economic reconstruction investment and structural reform (i.e., the World Bank, the International Monetary Fund (IMF), and the European Bank for Reconstruction and Development (EBRD)), which created what Standing (2002: 51) called the first revolution to be led by international financial institutions (see also Smith 2002; Swain 2006). Organized labour found it difficult to respond to these rapidly transforming social relations and politics of transformation, alongside increasing unemployment, regional labour market segmentation and the pro‐business strategies of newer social democratic governments (Ost 2002; Rainnie et al. 2002; Smith et al. 2008a).

With unemployment rates increasing and other workers forced into early retirement to cut enterprise overhead costs and wage bills, workers became the losers in this “great transformation” (Rainnie et al. 2002; Smith et al. 2008a). For those who were able to retain employment, wage levels often declined, under‐employment increased, and informal activity expanded as one strategy to secure household social reproduction. Other such strategies involved international labour migration and remittance

working in the post‐socialist apparel economy 57

generation (especially after European Union (EU) enlargement in 2004), an economy of mutual assistance and self‐provisioning, natural resource extraction and corruption, which together, often in articulation with one another, became important means of sustaining livelihoods (Smollet 1989; Ledeneva 1998; Staddon 2001; Pickles 2002; Cellarius 2004; Smith and Stenning 2006; Smith et al. 2008a; Stenning et al. 2010; Clean Clothes Campaign 2014).

In this context of rapidly de‐industrializing economies attendant upon the collapse of the integrated planning systems of state socialism, a paradox emerged with the parallel expansion of post‐socialist private (and priva-tized) assembly production of apparel and other labour‐intensive goods for export. This expansion is partly explained by the deepening of trade liber-alization with what were to become core export markets in the EU. Trade liberalization was one part of the emergent new relations of geo‐political engagement between the EU and the post‐socialist states. Outsourcing and delocalization of labour‐intensive industries from Western Europe fundamentally transformed the structure of the apparel industry and the fortunes of workers in ECE (see Chapter Four). What was effectively a form of full‐package production for state socialist ‘markets’ prior to 1989 gave way to export processing and, in many cases, functional and product downgrading (see Chapter Six). The integration of privatized producers and new private firms into EU contracting and export networks further weakened the positional power of labour as firms became desperate for any contracts to sustain production, recomposed workplace alliances among state actors, managers, trade unionists and workers, and restructured the geographies of employment and production. Working conditions in many of the under‐capitalized export assembly factories and workshops deterio-rated, not least due to the ‘tight’ contract pricing which Western buyers were operating.

However, this is not a straightforward story of the loss of positionality for labour. Under state socialism, employment relations and organized labour were already fundamentally conflicted as they served the role as transmission belt for the party state. Since 1989, the fortunes of workers and trade unions have remained complex, particularly in the apparel sector, with its limited skill demands and low wages (see Morrison and Croucher 2010; Morrison et al. 2011; Croucher and Morrison 2012). With the expanded pace and scope of outsourcing to ECE, along with supply chain consolidation and ethical sourcing initiatives, the current conditions of work and opportunities for organized labour are far from straightforward.

In this chapter, we start with the question of labour in order to pose some fundamental questions about the economic trajectories of post‐socialist economic integration into global production networks in Europe. Our aim is to contribute to the wider repositioning of the place of labour in GVC and


GPN research, moving beyond dominant capital/weak labour narratives of globalized industrial work to a more contested, social relational understanding of work under post‐socialism (see also Smith et al. 2002; Selwyn 2007, 2012; Coe et al. 2008; Cumbers et al. 2008; Coe and Jordhus‐Lier 2011; Werner 2012; Jha and Chakraborty 2014). This is what Mezzadra has called the “Copernican revolution” – the reversal of the capital–labour relation – “to identify in workers’ struggles the real dynamic element (the real ‘mover’) of capitalistic development” (Cobarrubias et al. 2011: 585). For Mezzadra and Neilson (2013: 21), the concept of the multiplication of labour complements and reworks more traditional notions of divisions of labour by stressing the “diversification and heterogenization of workforces that are the other side of the growing relevance of social cooperation in contemporary capitalism”. By linking the multiplication of labour to the proliferation of borders and re‐bordering practices in contemporary capitalism, they refocus attention on changing international divisions of labour and the ways in which “emerging global modes of production work by exploiting the continuities and the gaps – the borders – between different labor regimes” (Mezzadra and Neilson 2013: 65). Here labour is not ‘just’ acted upon or reduced to a ‘factor cost’ of production, but it is a social category with its own agency which has shaped the organization and dynamics of industry.

In the discussion that follows, we highlight the ways in which the institutionalized struggles over production politics and the legacies of the state socialist commitment to labour regulation through the labour collective have influenced the ways in which export production has been embedded in former state socialist industrial regions. These legacies and path dependencies created embedded social systems within which certain opportunities for improvements and upgrading in internationalizing production systems were negotiated in some segments of the industry, while in others de‐regulation and intensification of labour were the norm. All of this points to the impor-tance of what we called in Chapter Two the deep history of articulation in understanding the emergent struggles over production politics in the apparel sector. Furthermore, the increasing integration of the West European and ECE apparel production networks in the 1980s were them-selves a direct result of the ways in which Outward Processing Trade (OPT) policies resulted from attempts by manufacturing capital in the European Economic Community (EEC) to manage domestic labour regimes and increasing wage gains to labour in the restructuring of their own ‘old’ industrial systems (Chapter Four).2 In the following section, we chart the changing trajectories of the apparel industry in ECE, before turning to consider the extent to which growth in export processing was predicated on accessing new labour markets, squeezing labour in production and rework-ing the legacies and institutionalized structures of the planned economy. The result was a differentiated picture of firm and worker engagement with export apparel production.


From State Socialist Full‐Package Production to Export Processing

Starting in the late 1970s and 1980s, apparel producers in ECE were increasingly integrated into Western export markets and particularly European production networks. EU trade policies and customs agreements in particular played a vital role in encouraging European manufacturers and retail buyers to expand their production networks into Poland, Hungary, Bulgaria and the former Czechoslovakia and Yugoslavia. Across the region, enterprises began producing under contract for manufacturing and retail companies in the EU (Fröbel et al. 1981; Lane and Probert 2009; Pickles and Smith 2011) and to a lesser extent in the United States.

Full‐bundle (later cut‐make (CM) and cut‐make‐trim (CMT)) produc-tion in particular was encouraged by the preferential customs agreements known as OPT (Table 3.1). The system was designed explicitly to boost the profitability of struggling Western European fabric and yarn manufacturers

Table 3.1 Forms of outsourcing in the ECE apparel industry

Outsourcing apparel assembly

Full‐bundle production (also referred to as “Production Sharing”)

Full‐bundle production refers to the system of exporting all the components of a garment including patterns, pre‐cut fabric, yarn, thread, buttons, and packaging, to be assembled and re‐imported into the buyer country

Lohn system Term used particularly in Germany and the Netherlands to describe full‐bundle production outsourced to Eastern and Central Europe

IshlemePráca vo mzde

Bulgarian term for full‐bundle sewing assembly workPráca vo mzde freely translated refers to “working for wages”. Initially it only referred to sewing operations for foreign buyers, but later it was also applied to describe sub‐contracting for other Slovak firms. The expression remained as some segments of production (such as cloth cutting) were added. As processes were added and with new forms of ownership and own brand production, práca vo mzde slowly disappeared

Outward processing trade: process Has emerged as the equivalent of full‐bundle production to refer to the general process of outsourcing for sewing and assembly

Outward processing trade: customs policy

Customs agreement for the export of fabric, yarn, patterns, and embellishment for sewing and assembly and the re‐import of the assembled goods with customs duty charged only on the value added in sewing and assembly and with additional quota provided for re‐import of OPT goods into the EU


by expanding input markets and encouraging access to lower‐cost labour markets for assembly in ECE. As we show in Chapter Four, this process was driven directly by EEC and EU trade and customs policies, which created trade quotas allowing for production sharing between EEC countries and neighbouring ECE enterprises. Designed explicitly as a time‐limited mech-anism to help EU‐based textile manufacturers adjust to trade liberalization and increasing competition, OPT encouraged the export, assembly and re‐import of fabric and trim with only minimal customs duty paid only on the value added, that is the cost of labour (Fröbel et al. 1981; Pellegrin 1997, 2001a, 2001b; Begg et al. 2003; Smith 2003). In the 1980s, state socialist planners supported the arrangements as a mechanism to expand production and ‘open’ the economy to West Europe designs, production processes and technology. Struggling West European manufacturers and retailers were able to reduce their production costs, while established state socialist enterprises, who were themselves struggling with problems of under‐investment, ageing infrastructure and over‐capacity, were able to gain access to foreign capital and know‐how. Underwritten by these available state socialist capacities and favourable outward processing customs arrangements, core businesses in Western Europe shed large segments of their domestic workforce, with the result that employment in the EU apparel industry declined by 40% between 1985 and 1995 (Stengg 2001: 3), while state socialist enterprises in ECE were able to sustain their own worker collectives.

However, after 1989, commanding heights industries across ECE were particularly hard hit by the loss of the Council for Mutual Economic Assistance (CMEA) export and domestic markets and state funding. The textiles industry was one of the hardest hit. Budgetary crises, factory closure and labour shedding destroyed much of the integrated production systems of the previous decades in just a few years. In the wreckage that resulted, sections of the textile industry were able to sustain minimal levels of state underwriting, contracting and production, but many of the state‐owned branch apparel workshops were closed.

In the face of this widespread devaluation of socialist industrial stock, post‐socialist governments and policy‐makers quickly wrote off entire industries. For example, in the mid‐1990s, state authorities in Bulgaria went so far as to declare the apparel industry moribund (Pickles and Begg 2000). Policy‐makers throughout the region adopted similar common‐sense understandings that socialist enterprises were inefficient and incapable of adapting to market conditions, while labour‐intensive industries such as apparel were ‘footloose’, ‘sunset’ industries whose likely demise should be reflected in state policies. In fact, industry analysts were largely misinter-preting employment declines in Western Europe and intense intra‐enterprise struggles for capital and power in ECE as industrial decline in the face of global competition. In reality, trade liberalization after 1989 encouraged further geographical re‐composition of West European manufacturing and


the deepening of the new international divisions of labour and the integration of labour markets on a continental scale. As Gereffi and his colleagues have shown more generally, production systems in the United States and Europe rapidly reorganized their supply chains in the 1990s, shedding low‐value work to increase productivity and upgrading to higher value‐added activities (Gereffi 1999, 2006; Gereffi et al. 2002; Gereffi and Memedovic 2003). In Western Europe, productivity gains and enhanced value creation came at the expense of employment, delocalization of assembly operations, and the expansion of regional production networks into ECE and the Euro‐Mediterranean region. In the countries in ECE, this certainly represented a tale of industrial decline, but it was also one in which new private firms and some sections of labour were becoming differentially repositioned in relation to the (re)creation of international production networks and the reconfigu-ration of new geo‐economic borders in Europe and beyond.

Maquiladoras in Europe?

As the socialist‐era textile and apparel state enterprises collapsed or privatized, large numbers of manufacturing workers lost their jobs. As socialist design, marketing and engineering jobs were lost, the result was a combination of regional de‐industrialization and residual forms of industrial downgrading in firms where wages declined, technical and managerial skills were depleted and line operators were de‐skilled and increasingly gendered. In effect, socialist-era fully‐integrated production systems were downgraded to export processing platforms where simple stitch‐up jobs predominated.

In this process, the internationalization of production was attendant on the mass break‐up of large state combinats, the separation of textile from apparel production, the fragmentation of factories from their workshops and the dismantling and weakening of many structures of labour and social protection, both state institutions and state and independent trade unions. The resulting wage levels were approximately one‐tenth of the costs of wages in Western Europe during the 1990s (Ellingstad 1997). Even today, wage differentials remain large (Figure 3.1).

The liberalization of ECE economies after 1989 offered European and US‐based lead firms, suffering from increased costs and competition, access to proximate infrastructure, know‐how and an almost infinite – or at least a geographically extendable – low‐cost reserve army of labour. As the Central and East European Business Center (US Department of Commerce) argued at the time: “Unemployment [in ECE] should continue to grow as the government closes unprofitable enterprises. This means good news for foreign investors who now face a job market rich with eager and skilled labour.” (See www.mac.doc.gov/eebic/countryr/bulgaria/market/macro.htm.) The ‘opening’ of the labour markets of ECE was thus part of what

http://www.mac.doc.gov/eebic/countryr/bulgaria/market/macro.htm

http://www.mac.doc.gov/eebic/countryr/bulgaria/market/macro.htm


was called “the great doubling” of the world’s labour market by opening the economic spaces of the former state socialist world, of China and of India to global capital (Freeman 2007).

OPT contracting stimulated a rapid expansion of apparel sewing work in surviving and former state‐owned factories. These previously fully‐integrated

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http://en.wikipedia.org/wiki/List_of_European_countries_by_average_wage


production networks reduced their skilled workforce and concentrated on assembly export orders. In some cases, former technicians and managers spun off under‐capitalized and often unregulated or poorly regulated factories and small workshops to capture some of the contracts (Smith 2003). These newly privatized factories and workshops at times operated with poor working conditions and much weakened labour and health and safety regulations. The resulting rise of predatory workplace and sourcing practices, and the consequent sweating of labour, were especially notable in regions where state regulations were historically weaker or where institutions had been disinvested by the state in the 1980s and early 1990s (Clean Clothes Campaign 2001, 2014). Abuses were widespread and concerns about post‐socialist “sweatshops” grew (particularly with their historical association with forced labour in the “gulags” (Pickles 2002, see Clean Clothes Campaign 2014)), regarding what Nickell (2014: 9) has recently called “consciously created zones of impunity”. Post‐socialist exporters were quickly seen to be mirroring conditions found elsewhere in the globally distributed apparel economy (Hale and Shaw 2001).

Further trade and market liberalization exacerbated these conditions. As examples of workplace abuse and despotic management increased, the experience of sweated and child labour and other human rights abuses in newly emerging economies was quickly linked to the emergence of assem-bly exporters out of formerly full‐package state socialist enterprises (Pickles 1995). Exploitation in value chains more generally was linked to and read through the weakening governance mechanisms and differential levels of power in global value chains (Gereffi et al. 2005; Gereffi and Mayer 2006; Mayer and Pickles 2014). Non‐governmental organization (NGO) activists working with factories and workers in a race‐to‐the‐ bottom saw in ECE the same captive conditions in which work and workers were being squeezed by the contracting practices and prices of the lead firms and their buyers (Clean Clothes Campaign 2001, 2014; Oxfam 2004; Appelbaum et al. 2005).

Together, capitalist exploitation in former state socialist economies, governance deficits resulting from the effects of new powerful external lead firms and buyers operating in countries with weakened institutions, and a global model of the industry drawn into a race‐to‐the‐bottom – all led to a rendering of post‐socialist restructuring in terms of a broader characteriza-tion of the industry as unregulated, exploitative, and “sweated”. In its September 1999 article on sweatshop production in ECE, entitled “Top shops use Europe’s ‘gulag’ labour” (The Sunday Times 1999, see also Pickles 2002), The Sunday Times reported on an undercover investigation in clothing plants in Bulgaria, Latvia and Romania, disclosing that “British high street retailers were using factories in eastern Europe where female workers are humiliated with strip‐searches and others where employees are paid so little they scavenge for food” (The Sunday Times 1999). More recently, the Clean Clothes Campaign (2014: 5) has argued that “the post‐socialist countries


function as the cheap labour sewing backyard for Western European fashion brands and retailers”, highlighting “the poverty wages and terrible working conditions that garment workers face across this region”. A key finding concerns the fact that “an immense gap between the legal minimum wage and the estimated minimum living wage was found. This gap tends to be even larger in Europe’s cheap labour countries than in Asia” (Clean Clothes Campaign 2014: 6).3

Integration into international production networks also coincided with economic reforms in ECE that weakened institutions of workplace regula-tion, undermined trade union activism and increased the desperation of workers to retain old jobs or find new ones. Together these stimulated intense wars of position over control of the industry and the regulation of work. As the book value of enterprises was run down by prospective new owners (often well‐networked state socialist‐era managers with experience of working on export contracts in the 1980s) seeking to acquire enterprise assets at below their actual value, the same owners and managers simulta-neously cultivated their international contracts. As private enterprises emerged from the parent state enterprises and as greenfield operations were opened, drawing on plant and personnel from the state enterprises, managers of small and medium‐sized enterprises found that they could embed their production in outsourcing networks supported by state and European Union near‐shoring policies (Graziani 1998; Pellegrin 2001a; Smith 2003; Smith et al. 2005). Thus, economic involution provided the very conditions for newly emergent fractions of capital to reconstitute an industry based on export processing for West European markets (Begg and Pickles 1998).

Post‐Socialist Regional Divisions of Labour

The consequences of trade liberalization for ECE apparel producers and workers were, indeed, often devastating. As newly privatized firms rebuilt their industry, inserting themselves into international supply chains and slowly upgrading their technology and workforce capacities from bundle production to CMT and OEM, producers in ECE again saw their contracts threatened by competition from lower‐cost producers in other regions of ECE, the Euro‐Mediterranean region and Asia. This was particularly devastating for low‐wage workers in higher‐cost locations in central Europe (such as Poland, Hungary, the Czech and Slovak Republics). These marginally higher‐cost production locations soon began to see employment loss as cost differentials ate into their competitiveness and as apparel employment continued to expand in south‐eastern Europe in the late 1990s and the first years of the twenty‐first century.


While most countries in ECE experienced these same processes of reform and restructuring, each did so in distinctive ways. The form and timing of fiscal crises, the policies adopted for, and the pace of, withdrawal of state enterprise investment and wage budgets, and the specific adjustment paths and privatization processes attendant on the rapid loss of state socialist mar-kets, all shaped the specific conditions in each region. Each had its own effects as firms restructured to rapidly changing circumstances, ownership patterns and cost structures in highly competitive international contracting environments. What at first appeared to have been a form of defensive restructuring in regional branch plant economies in ECE (particularly Poland, the former Czechoslovakia and Hungary) now appeared more complex, as ownership and organizational forms diversified and work regimes were transformed.

The further delocalization of the West European clothing industry and the offshoring and near‐shoring of assembly production to ECE that had begun as early as the 1970s (Fröbel et al. 1981; Gereffi 2006: 1) intensified after the 31 December 2004 end to quota‐constrained trade in textiles and clothing under the World Trade Organization’s (WTO) Agreement on Textiles and Clothing (ATC), and continued with the integration of the new Member States of the EU into the European Single Market in 2004 and 2007. Apparel lead firms were able to source apparel in any amount and from any country, unencumbered by quota constraints. International trade in apparel was con-strained only by national and regional trade agreement tariffs, non‐tariff bar-riers, rules of origin requirements, and any WTO‐sanctioned safeguards. This enabled lead firms to gain further economies of scale by increasing the size of orders for their mass market contracts, concomitant with a decline in the unit price provided to supplier factories and more exacting requirements concerning delivery time and product quality. Some supplier factories wit-nessed increasing pressure from lead firms to take on more functions (input sourcing, quality control, packing, labelling, warehousing and logistics), to shoulder more of the burden of financial risk, to accept lower contract prices, and required them to be more flexible and responsive to the dynamics of changing market demand. The result of increased volumes of orders and the complexity of supply chains was consolidation and the emergence of new actors, particularly large network organizers in Asia (Gereffi 2006: 33–8), and a new pressure to differentiate and accept niche orders from more prox-imate producers, particularly in ECE (Pickles 2006; Plank and Staritz 2009; Plank et al. 2012).

In Poland, the former Czechoslovakia, the former Yugoslavia and Hungary, for example, production for EU markets had emerged in the 1980s, providing an initial cushion against market losses in the 1990s. In what became Slovakia, the structure of firm size meant that large, former state‐owned apparel producers with long‐standing experience of and


contacts in European networks were able to manage the transition, main-tain production and deepen their relationships with sub‐contractors across the country. In the mid‐1990s, as competitive pressures (and wage and other cost pressures) increased in post‐socialist central Europe, a second tier of producers in Bulgaria, Romania, and the Baltic States began to emerge, with Romanian export production becoming the primary location for OPT in the region.4 In Bulgaria, the weaker position of state enterprises in international contracting, combined with an already highly spatially distributed workshop structure of production, resulted in asset stripping and plant closure on a much larger scale. Larger apparel enterprises experienced particularly difficult adjustments and became, for a while, highly contested assets, variously run‐down, under‐valued, and transferred between owners, with the consequence that their subsidiary enterprises experienced intense uncertainty in wage bills, contracts, and inputs. Many workshop affiliates, long used to variable work‐orders and seasonal down‐time (especially at tobacco planting and harvest), were closed and their assets stripped (see Chapters Six and Nine).

In these contexts, a structural shift in the industry occurred. Except in Ukraine and Poland, as textile production collapsed (along with production in many other industrial branches), clothing employment first stabilized and then grew across ECE (Figure 3.2). In the face of

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Figure 3.2 Clothing employment in East‐Central Europe, 1989–2010. Elaborated from International Labour Organization databases.


widespread commanding heights industry retrenchment, apparel as a share of manufacturing employment grew to one‐quarter or one‐third of manu-facturing employment in countries like Bulgaria and Macedonia, and almost one‐fifth of total manufacturing employment in Romania (Figure 3.3). By the latter part of the first decade of the twenty‐first century, in most ECE countries, employment in the industry continued to account for more than 5% of manufacturing employment and up to 25% in Bulgaria. But, unlike the fully integrated textile and apparel production systems before 1989, the re‐emergent apparel industry after 1989 was inserted into fragmented global value chains as low‐cost sewing workshops essentially functioning in the new international division of labour as export processing platforms.

For much of the mid‐1990s, apparel exports to core markets in the EU15 continued to grow, mostly via OPT mechanisms. However, as shown in Chapter Four, as trade became increasingly liberalized, OPT trade regimes became less significant as manufacturers struggled to upgrade their functions and systems, and to capture higher profits from their contracts. In the first half of the first decade of the twenty‐first century, as global trade liberalization and EU integration gathered pace and as costs in some coun-tries grew, several of the largest exporting economies in ECE began to lose ground to other emerging producers in the region. Indeed, overall, ECE exports to EU15 markets continuously lost market share relative to Asian producers over the period of global liberalization of quota‐constrained trade

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Figure 3.3 Clothing employment as a percentage of total manufacturing employment in East‐Central Europe, 1989–2010. Elaborated from International Labour Organization databases.


(MFA quota phase‐out) (see Chapter Four), albeit more recently stabilizing at around 12–13% of total EU15 apparel imports (Figure 3.4).

However, this macro‐regional picture masks important national level changes. For example, while Poland and Hungary saw an absolute decline in the level of apparel exports to EU15 markets during the 1990s and early 2000s, exports burgeoned in Romania and Bulgaria (Figure 3.5). A wave of crises was also experienced around the December 2004 quota phase‐out, with Romanian apparel exports falling precipitously, although recovering immediately following the 2008 global economic crisis. Polish apparel exports, once written off as an industry no longer with any presence, have returned to positive growth since 2006, as they have also following the economic crisis in Romania and Bulgaria.

The incorporation of proximate assembly producers in low‐wage countries on the margins of the European Union was part of a broader EU strategy of labour market reform, orchestrated under pressure from large industry and retailer associations. As these fractions of West European capital sought to extend the frontiers of accumulation opportunity by eastwards expansion, national and EU policies created ever more conducive policy frameworks for them. This so‐called “golden bands” approach was a driving motif for both enlargement and trade integration in and beyond Europe (see Chapter Four).5

The EU market became embedded within three “golden bands” of apparel production and export, which were increasingly central to the accumulation

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Figure 3.4 Share of EU15 apparel imports by macro‐region, 1995–2012. Elaborated from Comext database.Notes:Asia: India, Bangladesh, Hong Kong, Indonesia, Vietnam, Sri Lanka, Pakistan, Thailand, Cambodia, Macau, South Korea, Lao, Taiwan, Malaysia, and also including China.ECE: Romania, Bulgaria, Poland, Hungary, Czech R., Slovakia, FYR Macedonia, Baltic States, Ukraine, Slovenia, Belarus, Croatia, Bosnia & Herzegovina, Albania, Moldova.Euro‐Med: Turkey, ECE, Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestinian Authority, Syria, Tunisia.


strategies of Western European industrial and retail capital in the clothing sector: (1) core EU/European; (2) Central Europe and North Africa; and (3) wider Eastern European locations. Beyond these three golden bands, trade liberalization and the final removal of quota‐ constrained trade in 2004 and 2008 stimulated expanded sourcing from Asia (Figure 3.6). Chinese and Bangladeshi exports to the EU15 grew significantly. In the face of this dramatic relative increase of certain Asian producers, exports from ECE to EU15 markets continued to constitute between 0.5 and 4% of EU15 apparel imports. While many ECE countries saw a relative reduction in their exports to the EU over this period, many continued to operate in those markets and some even saw absolute growth of apparel exports.

These macro‐regional systems of “golden bands” production were, of course, part of wider geo‐political and geo‐economic integration projects between the EU and its neighbouring states. Partly concerned with restricting migrant labour flows, partly connected to the consolidation of dictatorial governments controlling the rise of radical Islam in North Africa, and partly connected with the geographical expansion of the economic interests of EU capital to enable EU‐based firms to access cheaper labour reserves in neighbouring states, these frameworks underpinned in important ways a much larger system of macro‐regional integration (see, for example, Smith 2015). But again, national dynamics differed across the region

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Figure 3.6 The changing position of apparel suppliers to the EU15 market, 1995, 2005 and 2012. Elaborated from Comext database.


(Table 3.2). Polish apparel exports to the EU fell absolutely and relatively between 1995 and 2005, but grew again in both ways between 2005 and 2012. Romanian exports grew absolutely and relatively between 1995 and 2005, but fell between 2005 and 2012. Bulgarian exports grew absolutely and relatively between 1995 and 2005, but fell a little relatively and stayed stable absolutely between 2005 and 2012. Slovak exports have been virtually stable both absolutely and relatively throughout this period, with a slight relative decline throughout.

Low‐Wage Production and the “Sweatshop Trope”

As inter‐regional competition and low‐cost contracting emerged as the norm in the industry, workplace abuses and sweatshop conditions were common, particularly in smaller rural workshops where the industry was particularly poorly regulated, contracting was uncertain and products were generally of low value. The consequences for labour are by now well known. The global doubling of labour that resulted from the opening of formerly closed state socialist economies intensified downward pressure on contract prices and wages while simultaneously allowing buyers to leverage tighter delivery schedules, increased flexibility and higher penalties for non‐ compliance (see Oxfam 2004; Hale and Wills 2005; Freeman 2007). In some cases, these adjustments led to a rapid increase in imports from more ‘cost‐effective’ Asian locations (see Gereffi 2003). As production shifted to these regions, other locations lost contracts and shed employment, with consequences for intensified pressure on those workers remaining. For Hale (2005), this liberalization and industrial restructuring produced greater deregulation in labour markets, creating further challenges to labour standards, and

Table 3.2 The relationship between relative position and absolute growth of apparel exports from selected ECE countries to EU15 markets, 1995, 2005 and 2012

Relative change (% of total EU15 apparel imports)

Decline Stable Growth

Absolute change (total value of EU apparel imports)

Decline Poland (1995–2005)Romania (2005–2012)

Stable Bulgaria (2005–2012) Slovakia (1995–2012)

Growth Poland (2005–2012)Romania (1995–2005)Bulgaria (1995–2005)


tendencies towards the intensification, informalization and flexibilization of work, particularly with the expansion of home‐work and small‐scale produc-tion. Such unstable, locationally mobile and organizationally flexible and precarious working conditions have now become widely generalized in many parts of the apparel industry (Hale and Wills 2005; Clean Clothes Campaign 2014; Brooks 2015) and are being intensified as the demands of fast fashion are translated to shop‐floor practices (Cline 2013; Powell 2014). As a result, there was a deepening sense of uncertainty about the future of the industry among public officials, managers and workers, and a growing consensus that the geography of winners and losers in the global apparel industry would change even more rapidly in the coming years with a race to the bottom seemingly the most likely outcome (see OECD 2003; EU High Level Working Group 2004; Mayer 2004; Nordås 2004; Oxfam 2004, USITC 2004; UNCTAD 2005; Conway 2006).6

The scripting of the apparel industry in ECE during this period as generically sweated did some real damage, however, to understanding of the actual social relations in production. The conflation of prior experience with poorly regulated export processing zones, and long‐standing interpretations of state socialist enterprises as themselves paternalistic, in which worker power was inconsequential, each collapsed important forms of legacies and workplace politics which, in time and in a wide variety of ways, functioned in certain cases as resources for adaptation and resilience, contributing in important ways to the post‐socialist regional economy during its most des-perate times (Pickles 1995; Pickles and Smith 1998). As Burawoy (1985), Kornai (1992), and Grabher and Stark (1997) have variously argued, the history and legacies of state socialist organization of work, as well as the health and safety and labour protection agencies – many of which continued to operate throughout the 1990s and 2000s – were all crucial elements of the industrial economy (Begg et al. 2003; Pickles and Smith 2010).

In practice, complex relations of power and dependence, coercion and consent, framed the relationship between the new cadre of managers (them-selves often former state‐owned enterprise technicians or bureaucrats) and their former state‐workers, some of whom were able to carefully negotiate their working hours, seasonal commitments and daily routines (especially if they had agrarian responsibilities) (Pickles 2002). As a consequence, the reading of post‐socialist apparel workshops as sweating labour – while important strategically for organizing against factory and supply chain abuses in the booming industry – also had the indirect effect of conflating under‐investment with hyper‐exploitation, and articulating with neo‐liberal interpretations of socialist and Soviet industry as inefficient overly‐ bureaucratized hoarders of labour and material (see Allen 2003, for a reinterpretation of Soviet industrialization). In the process, it homogenized diverse enterprise practices while making invisible more complex social relations that existed between managers and workers, and between buyers and suppliers, in certain


circumstances. Moreover, it undermined attempts to encourage the state to take an active interest in the future of the industry.

Perhaps most surprisingly in these circumstances, the focus on sweated labour in the ECE apparel industry overlooked three crucial aspects of the conditions of workers. First, existing workers were the residual employees of a much larger collapsed industrial structure. They themselves recognized the conditions of their employment but did so as a strategic calculation in conditions of otherwise high unemployment in many apparel‐producing regions. It is, therefore, not sufficient to pose a straightforward standards and justice argument in conditions of complex inter‐dependencies among export processing jobs, mass unemployment and deep economic and social structural change. To do so rests too easily on reductive concepts of value flow and capture, the strategic position of workers engaged in low‐paid work in conditions of high regional unemployment, and it lacks a spatio‐temporal analysis of the concrete conditions workers face in situations of rapid economic structural change and involution.

Second, the international focus on sweated labour that followed directed political attention to either demands for private standards or the reinvigora-tion of public regulatory agencies (such as the Labour Inspectorates, Institutes of Health and Safety, and trade unions) to protect workers against despotic employers. But, while this was an important strategy to mobilize consumer pressure on West European buyers and retailers, it over-looked the complex management and worker social relations in production in the region. It also paid insufficient attention to the important on‐going struggles in the inspectorates, institutes and trade unions to wage wars of position that reflected careful calibrations of needs and the balancing of gains against potential further job losses. As we show below, these calibrations drew on important state socialist‐era practices of a negotiated production politics that operated quietly rather than publicly.

Third, the actual conditions of subservience to unfavourable market conditions actually changed quickly, in part because of these social relations in production. Marginal improvements were partly driven by expectations of potential wage gains around EU enlargement, and enterprise adjustments to the paradoxical situation of skilled worker shortages in conditions of chronic regional unemployment and large‐scale out‐migration follow-ing EU accession (Pickles 2002; Pickles et al. 2006). Pickles (2002), for example, noted the emergence of tightening labour markets among export assembly producers in south‐eastern Bulgaria as early as the late 1990s, a labour market tightening that seemed to have been generated by growing competition for skilled workers in conditions of a surplus of unskilled unemployed workers. Gospodinova (2006) similarly highlighted the problems of worker training in Bulgaria, where low levels of training and increasing demand for skilled workers generally (turners, millers, welders and builders, as well as managerial level employees) became more important


as other parts of the economy grew and as EU accession allowed greater levels of labour out‐migration. In interviews in Slovakia, firm managers expressed their concern about their need to respond to loss of workers who had decided to migrate to Western Europe following membership of the EU (see Chapter Six). Employers, however, remained wary of making such investments in training and working conditions because of the widespread practice of inter‐enterprise poaching of qualified workers whose training had been financed by another employer.

In these circumstances, post‐socialist enterprises and their workers offered West European manufacturers and retailers an opportunity to recapture some competitive advantage by extending their production systems into low‐wage labour markets (Fröbel et al. 1981; Graziani 1998; Coe et al. 2004, Smith et al. 2005). At the cost of relatively low (and rapidly diminishing) logistical and transaction costs, regionally extended supply chains were able to tap into large, low‐cost yet skilled labour pools in settings in which industrial infrastructures, laws, and norms were relatively well established and in which existing prod-uct capabilities – high quality men’s and women’s suits, for example – fed into niche markets in EU countries requiring regionalized production, stock replenishment and tighter control over logistics and quality control (Abernathy et al. 2006; Pickles 2006; Pickles et al. 2006; Smith et al. 2008b).

As some workers without doubt suffered the consequences of value chain downgrading, these pressures simultaneously encouraged selective work‐force upgrading. With increasing competition, concentration in the supply chain, and punitive quality requirements and delivery deadlines, place‐based workforce capacities became an important determinant of success in inter-national markets. In these circumstances, wage differentials in the levels of line workers between Western Europe and ECE were compounded by differential levels and ranges of wages among different categories of work within individual countries. Thus, for example, in 2013, the minimum insur-able earnings for managers in Bulgaria were less than three times those for line workers, a comparatively small difference in international terms, and hence – as Ching Kwan Lee (2009) has shown for Chinese companies operating in Africa – an important factor in reducing the overall cost and increasing the competitiveness of contracting in the region (Table 3.3).

In the next section we turn to some of the ways in which we might think about work and labour in the apparel industry in ways that further puts in question the model of apparel as an unproblematically flexible, sweated and footloose industry. We consider the continuing embeddedness of export production in conditions of state socialist and post‐socialist labour regula-tion which means that – at least, in some circumstances – workers have more resources at their disposal than models of mobile and footloose capital might suggest. We turn to the historical legacies of regionally‐based garment export capacity that continue to shape sourcing decisions and the condi-tions of work they generate; highlighting some of the ways in which the

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857

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385

335

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place‐specific state socialist commitment to the social reproduction of the labour collective (for example, the social wage) continue to matter in impor-tant and strategic ways. Finally, we conclude with consideration of emerging new forms of industrial governance spurred in part by EU policies governing codes, standards, and labour mobility in an enlarged Europe. We assess the potential role of these forms of industrial governance for understanding improvements in the position of labour in pan‐regional production.

Struggles over Work and Working Conditions

Trade Unions

An understanding of the regulation of work and working conditions under conditions of economic liberalization in the ECE apparel industry requires an analysis of the embedded and contextual (and sometimes paradoxical) relations between the structure and practices of organized labour under state socialism, which produced the very conditions for success in apparel assembly production. With the shift from forms of ‘full‐package’ Soviet Union- and other CMEA‐oriented production to globalized assembly production for export, jobs and wages came under immediate pressure. As stable state socialist‐era production contracts gave way to assembly work for export, ECE suppliers were essentially trapped in a wage squeeze. As the only source of value added in OPT arrangements, socialist work contracts were replaced by flexible working arrangements, and standardized socialist norms gave way to deregulated, and at times predatory, capitalist practices. This occurred at the very time that embedded party unionism had only limited credibility among former state‐enterprise workers and virtually no role in many newly privatized firms. Indeed, trade union membership declined significantly throughout ECE. In Slovakia, for example, total union membership declined from 1,147,542 in 1996 to 747,947 in 2000, representing a decline from 55.1% trade union density to 38.7%.7 Trade unions did continue to operate in larger former state‐owned factories, coop-erating with managers, and health and labour inspectorates continued to regulate work conditions, albeit with limited powers. However while trade unions and labour, health and environmental inspectorates were often ignored under state socialism, some private and privatized firms have continued earlier traditions of working with their trade unions to shape contracting from those buyers who were concerned about compliance with the codes of conduct demanded by their customers.

While there may be a bifurcation of experience between non‐unionized new firms and former state‐owned factories, in those factories where unionization remained significant, it was possible for workers to benefit from wage and non‐wage conditions that remained important in many post‐socialist firms. For example, in one former state‐owned factory in one


of the main centres of apparel production in Central Slovakia, the now privatized enterprise was employing in the mid‐2000s over 2,500 workers, of whom 70% were unionized. Management maintained a commitment to continuing pay supplements to workers – the ‘social wage’ of state socialism – above individual wage payments. Typical of state socialist enter-prises, and the continuation of the social wage after 1989, these involved firm contributions generated out of surpluses to pay into a social fund for recreational facilities and financial loans and low‐cost credit for workers, the provision of on‐site health care and wage subsidies to workers, which have been estimated to amount to approximately an additional 14% of average monthly salaries in the firm (Smith 2003). The retention of the social wage, enabled by the continuing trade union presence in the factory, was in large part due to the tightening of local labour markets for apparel workers (see Chapters Six and Nine). Such social wages enabled enterprise management to maintain an element of workforce stability and to guar-antee continuity of workers and their skill capacities. However, they had the additional effect of increasing the factory wage bill at a time when contract prices were generally declining.

Precisely how these struggles are worked out, and what role workers and worker organizations can play in them depend in large measure on the specific conditions in particular places and times. For example, in another former SOE in Slovakia, owned by an Italian brand, more antagonistic relations have been experienced as the firm has struggled with cost pressures and interna-tional competition. This led in late 2014 to trade union‐organized protests over the non‐payment of wages, non‐compliance with the national Labour Code, and the refusal of the firm to heat the factory to a suitable level (Hudák 2014). Trade union presence and ability to leverage gains for workers are, then, a contingent matter and depend in large part on the dynamics of production politics intersecting with the wider competitive conditions within which the firm is embedded and the strategies of firm ownership.

Codes of Conduct

Increasing competitive pressures in global apparel production networks arising in part from the liberalization of trade and the geographical shifts to lower‐cost production locations have generated significant and on‐going concern over how to ameliorate the worst excesses of deteriorating labour standards and workplace abuses. Corporate social responsibility (CSR) agendas and the adoption and deployment of corporate Codes of Conduct have been the primary reaction by many lead firms in the industry (e.g., Jenkins et al. 2002). Labour unions and the International Labour Organization (ILO) have supported ‘better’, ‘fair’ and ‘decent work’ programmes, corporate interests have focused to a greater extent on CSR, and consumer organizations and worker rights NGOs have focused more


on ethical trading initiatives, ecological labelling, international standards, compliance monitoring and/or direct action campaigns.

Three aspects of this emerging global system of private workplace governance are particularly important here. First, internationally agreed norms for work-place standards, such as the ILO’s Core Labour Standards, have provided the basis for the establishment of codes adopted by organizations such as the UK Ethical Trading Initiative (ETI), whose influence on European buyers has become significant. Second, trade union and NGO initiatives have attempted to provide the basis for the negotiation and establishment of workplace codes of conduct and their monitoring and implementation. These include market‐specific forms, such as collegiate sportswear with the Fair Labor Association (FLA) and Workers’ Rights Consortium (WRC) initiatives in the United States and more broad‐based initiatives, such as the ETI in the United Kingdom (see Hughes 2001, 2005). Third, many global corporations have now established their own corporate codes of conduct, in some cases driving them deep into their supply chains, although increasingly with the help of some of the multi‐lateral and NGO institutions. Here we highlight how the development of these institutionalized practices has impacted on the regula-tion of working conditions in the ECE apparel sector. There are instances where these practices have created improved conditions of work and new forms of (always partial) positional power for workers to improve conditions in production networks. Equally, there are other cases where the CSR agenda is little more than corporatist gloss demobilizing direct action by workers either at the level of the shop‐floor or in broader terms.

Throughout the ECE apparel industry, real concerns have been raised with regard to freedom of association, harassment, health and safety viola-tions, overtime and unpaid wages, especially in smaller, newly established firms which are not able to draw on the institutionalized resources of the former state‐owned enterprises (Musiolek 2004; Hale and Wills 2005; Clean Clothes Campaign 2014).8 For example, following a Clean Clothes Campaign project, many cases were brought to public attention across the region, such as the case of four women in Roska’s cooperative in southern Bulgaria, which indicates the tenuous and exploited position of small‐scale apparel production for Greek contractors working across the border space between the region and northern Greece:

The four women tried to negotiate with the buyer [a Bulgarian intermediary for Greek contractors], but the buyer would not accept their price. Roska reports that another cooperative of 20 women got orders but then were not paid for their work. They had finished the order, but as they became a source of competition for the client, the client did not pay them, citing a frivolous quality excuse. This is the way Roska believes the Greek employers control the sweatshop industry and prevent serious competition. (Clean Clothes Campaign 2001: 3)


The ability of institutionalized labour standards governance systems, such as CSR, Codes of Conduct and multi‐stakeholder approaches to ethical trade to ameliorate the worst excesses of labour abuses, has been the subject of intense debate (Hale 2000; Hughes 2001, 2005; Jenkins et al. 2002; Hale and Wills 2005; Locke 2013). Codes of Conduct have been dismissed as unable to deal with fundamental structural problems of labour abuses because they fail to deal with the critical issue of unequal power relations in apparel production networks. However, Hughes (2001, 2005) has high-lighted a more complex reading in which the potential effects of Codes of Conduct established through the UK’s ETI are mediated in part through the relative balance between corporate imperatives of cost competitiveness and the divergent strategic positions of buyer departments and ethical monitoring departments, even within the same corporate organisation. The increasing adoption of such Codes in some production locations in ECE is having real, yet uneven, effects. For example, in one firm in southern Bulgaria with two production locations and a ‘show factory’ for production for a Western retailer contracted through a Turkish buyer, the implementa-tion of Codes of Conduct (checked regularly through buyer and contractor inspections) was a critical part of the firm’s strategy for gaining and retain-ing orders.9 Furthermore, in tightening local labour markets for apparel workers, managers see that Codes of Conduct can enable factories to attract workers more easily. In the Bulgarian context, Codes of Conduct had the further advantage of inducing Turkish intermediaries to maintain regular payment schedules to contracting firms, which meant that wage payments to workers were more regularized. Trade union representatives in Bulgaria also suggest that Codes of Conduct have provided important, yet always partial, positional power for workers in the industry in a way that they did not previously have, although these are not without their problems:

Codes tend to improve working conditions in factories, because otherwise management would lose their contract if they didn’t implement them. The problem is that buyers only negotiate with management. Social auditors do talk with workers and trade unions when they visit the factory. Workers are interviewed separately (not with the trade union). They often focus on the payment of overtime. But in Kardzhali it is only the firms with contracts with large US and EU buyers (e.g., Adidas) that have social audits.10

Alongside the uneven impacts of the CSR agenda, the legacy of a continuing and extensive factory inspectorate system established by the state socialist state has enabled certain working conditions to be monitored quite carefully. In some cases, initial abuses have been offset by the existence of national Labour Codes with their roots in state socialist norms about the protection of the socialist worker. These legacies of institutional practices and discourses of worker protection mean that the generally close relationship between the


apparel industry and sweatshops has been mediated through these institu-tions and discourses in different ways in ECE than has been the case in other parts of the world. For example, certain factories in Plovdiv, Bulgaria, one of the key production sites, received increased support from buyers for the improvement of labour and work conditions, especially through factory visits and Code enforcement.11 Leading buyers, including Puma and Adidas, vis-ited the Labour Inspectorate to discuss their compliance programmes. Puma visits often involve teams with staff responsible for different parts of factory monitoring, for example, working time, work conditions, health and safety, and apparel quality control. Indeed, Codes of Conduct are used explicitly by buyers to identify factories to which they are able to contract production. In Bulgaria, such buyer Codes of Conduct often resemble the national Labour Code, although in addition they focus on ILO Core Labour Standards. In some cases it has become the case that the Bulgarian labour inspectorates have reduced their monitoring in factories which have established lead-firm enforced Codes of Conduct. This has enabled the labour inspectorate to focus attention and limited resources on non‐compliant firms and those with complex chains of sub‐contractors.12

In this sense, Codes of Conduct play a dual role as a disciplining and an enabling ‘technology’ to retain workers by improving working conditions in factories and to enable contractors to retain orders with Western buyers. In these cases, they also seem to have the indirect function of expanding the range and effectiveness of state monitoring across a broader range of regional producers. Hurley (2005) and Clean Clothes Campaign (2014) have suggested that the implementation of the Labour Code and factory inspections are more problematic in smaller firms in Bulgaria, but it remains unclear whether this will continue to be the case if Inspectorates are able to upgrade their capacities and to work in more targeted ways. Certainly, Codes and the Inspectorates have, at times, come under threat, particularly when they have figured as flashpoints over struggles to de‐ regulate the industry and reduce state expenditures. In Slovakia during the early 2000s, the neo‐liberal state undertook a root and branch reform of the Labour Code which liberalized key aspects of employment law, including making the hiring and firing of workers much easier for employers and the de‐regularization of short‐term contract work, with such workers no longer able to access the protection accorded to those on more permanent contracts (Smith et al. 2008a; Stenning et al. 2010). Such changes have important effects, not least on the way in which unprotected short‐term work is often used to deal with seasonal fluctuations in apparel production. These forms of liberalization have more limited impacts on larger firms and the former state‐owned sector where longer‐term employment contracts are more common. But, as Bhaskaran et al. (2013) have shown for India, liberalization has tended to informalize lower‐tier production systems by driving parts of the production process into


small‐scale unregulated workshops which tend to contract out more of their work to household producers, with corresponding impacts on the gendered distribution of work and on child labour.

The resulting picture, then, is one of a differentiated landscape of working conditions across the region in which the legacies of state socialism and embedded institutional practices of labour regulation continue to matter to the experience of factory work and labour organizing. But these institutional and discursive legacies are not mere ‘residues’ of that prior period. They now form specific sites that are being mobilized by workers and their representatives, and sometimes by foreign buyers. Thus, for example, the collapse of the neo‐liberal Slovak government in 2006 and the election of a left‐nationalist bloc with strong trade union support, followed by a landslide victory of the social democratic government in 2012, led to the re‐writing of the liberalized Labour Code with important and potentially positive impli-cations for conditions of work in the apparel sector.13 Or, in south‐east Bulgaria, independent household producers mobilized family workers to expand their penetration into domestic markets, leveraging the opportu-nities from expanded demand for lower‐cost clothing over a five‐year window, to upgrade housing, and springboard their investments and relocate children into other occupations, or expand their formal operations by investing in equipment and capturing expanded markets and developing own brands for domestic markets.14

Industrial Upgrading and Opportunities for Direct Action

In contemporary conditions, where regional unemployment levels are high, apparel factories are still finding it difficult to recruit skilled and trained workers. In part, this is due to the relative attractiveness of employment in other sectors compared to apparel, and the loss of employees to other EU countries following enlargement. This is in contrast to the period prior to EU enlargement when apparel production sustained many local economies, based on former state‐owned enterprises, and alternative job opportunities for apparel workers were more limited.

More recently, apparel manufacturers have faced an increasing relative tightness in labour markets as a result of the steady erosion of training and apprenticeship education opportunities in the sector, and this has led to serious detriment in the supply of skilled workers. At the same time, the demands on quality, timing and skills from international buyers have increased the requirement for skilled workers needed for own equipment branded products. As a result, workers have a strengthened relative positional power and have been able to make some gains in working conditions, wages and benefits. An example is provided by the week‐long strike in August 2010 by clothing workers in two Italian‐owned factories in


the Vranov nad Topľou district in east Slovakia. In recent years, the two factories had become increasingly important to Slovakia’s growing export of hosiery to Italian markets, which by 2005 had become the second most important apparel export product (Pickles and Smith 2011). Following the breakdown of negotiations with management of the factories, 400 workers voted for strike action which, amid fears that such action might spread further, eventually led to an agreement for a 15% increase in wages, partly linked to performance improvements.15

While some firms, such as these Slovak firms, are developing their internal industrial relations practices and upgrading their compensation packages for core workers, some enterprises have also moved to provide extra support to sustain core workers while outsourcing lower‐value tasks to lower‐cost producers in countries such as the Ukraine (see Chapter Seven). The implications that these pressures and responses may have for the longer‐term position of apparel workers in countries such as Slovakia are not yet clear. The terrain on which management and workers now have to act and the continuing role that the geographically and place‐specific legacies of ‘worker states’ provide in shaping the landscape of production and the experience of workers is made particularly difficult by both the perceived and real fragility of contracting relations in an increasingly liberalized trade environment. These difficulties are compounded by conceptual models of ‘global industries’ (such as textiles and apparel) that do not pay sufficient attention to the ways in which locally contingent labour and employment practices create a ‘friction’ to models of ‘slippery space’ and delocalization.

Conclusion

The worker states of state socialism in ECE were anything but worker democracies and the socialist impulses of individuals were typically over‐ridden by the strong bureaucratic powers of party cadres and nomenklatura power. State accumulation of power and wealth came at the expense of incipient worker movements and undermined any impetus towards shop‐floor democratization, although paradoxically it did lead to new forms of negotiated workplace politics, as managers struggled to sustain worker support for hoarding and storming to meet the demands of centrally set planning targets. Workers nonetheless were able to sustain some influence over the allocation of wage bills and ensure that the social wage and community infrastructures were underwritten by state enterprises.

Following the collapse of state socialism, workers quickly lost even these ‘negotiated’ conditions and their nominal voices of organization, the party unions, struggled initially to rearticulate their political role in more liberalized contexts. Trade unions were weakened by de‐industrialization


and unemployment, and the new private enterprises which began to emerge in the 1990s were largely hostile to trade union organization. In the apparel industry, the results of decline in the integrated textile and apparel state firms were loss of employment for all but core workers in key enterprises, and this was often quickly followed by the re‐employment of former workers at low wages in the smaller workshops in the towns and villages. In such conditions, working conditions often deteriorated, ‘fly‐by‐night’ operators took advantage of female workers, and long working hours and abusive work became the norm in many workshops and factories.

Today some countries in post‐socialist Europe are electing social democratic parties to government (e.g., Slovakia), often supported directly by organized labour, and this is creating opportunities to renew commitments to mecha-nisms of trilateralism, and strengthen workplace regulations and enforce-ment. To some extent, these interests coincide with those of enterprise managers who are now desperate to re‐position their companies in rapidly changing international production networks, where buyers increasingly demand higher quality, expanded services and workplace compliance. The role of international trade unions, ethical production and trading campaigns, consumer‐led pressure, environmental movement calls for ecologically sound production, and corporate responsibility and monitoring efforts are all becoming important elements in the calculus of contracting and production. While many of these initiatives create barriers to entry for some, for many others they provide opportunities to capitalize on their proximity to major markets, workforce capacities and the (albeit heavily degraded) institutional legacies from prior periods of export production.

However, there remains a complex balance between downward pressure on wages and working conditions wrought by intense price competition for export contracts, on the one hand, and the necessity of adopting strategies of industrial and product upgrading to meet enhanced contracting demands on the part of lead firms, on the other. Each of the dynamics highlights the impossibility of operating with conceptual models of work in the global economy that are not attentive to place specificity and locally/historically situated institutional practices. Each affects the positional power of workers in the former workers’ states in important, yet complex and contradictory, ways. In this sense, workers are far more than a ‘factor cost’, and sweated labour even in low‐wage factories is not the only way in which labour power is organized. The differentiated forms of factory management and working conditions have emerged as a result of a range of management strategies for dealing with global value chain dynamics in differentiated production networks. In each case, coordination and control mechanisms have emerged to both coerce and gain the consent of diverse workforces whose skills, wage demands and concerns about social wages shape this process. As the multiplication of labour deepens with the economic transformation in ECE, these diverse and sometimes new forms of work require much more


attention than they have received to date. In this chapter we have highlighted how the flattening of the labour process from diversified job categories under state socialist full‐package production to simple work under OPT regimes has occurred. More recently this has been followed by the gradual and eventual multiplication of labour emerging from the OPT regime, which took the form of increasing job responsibilities as production systems became more complex, and as inter‐firm and inter‐branch labour bidding increased. All of this points to the essential requirement that an understanding of the geographical extension of global production networks centres an anal-ysis of the dynamic and relational role of labour in globalized production.

While ‘workers’ states’ did not deliver their promise to workers, the legacies of the institutionalized systems that were created, the local organization of export platforms and the responses of local actors to broader struggles over the shape of globalization may provide important, if fragile, capacities for shaping and sustaining future apparel work and the conditions of that work. In Chapter Four, we develop this conjunctural approach in understanding the multiple social forces at play in the establishment and regulation of apparel production by considering the role of the state in the formulation of inter-national trade policy, which provided the origins of the outward processing systems in ECE.

Notes

1 The main exception was Solidarity in Poland which retained – largely as a result of its position against the party state before 1989 – a strong support base among workers and spent periods of time in government. There was also some distinc-tion between ECE and the parts of the former Soviet Union in relation to the degree of continuity of past practices of trade unions as part of the labour collective (see Borisov and Clarke 2006).

2 OPT policies were a response to the increasing ability of labour in Western Europe to gain a greater share of the social product and of the demands of man-ufacturing and retail capital to sustain profitability. By enabling the out‐sourcing of labour‐intensive parts of the textiles and apparel production process to ECE, the European Economic Community at the time was hoping to lower overall costs for its own manufacturing industry by providing access to cheaper labour in state socialist countries while simultaneously boosting the productivity of the capital‐intensive parts of the production network, that were generating higher value. We examine the development of trade regimes in more detail in Chapter Four.

3 While we do not disagree with these findings, national level data from Štatistický úrad Slovenskej republiky (2014) suggest that average wages in the Slovak clothing sector were 520 euros in 2013 (slightly lower for women). While these sectoral data include average wages (i.e. management and workers), our inter-views across the region suggest that actual wages are generally approximately


120+% of the official minimum wage (or approximately 480 euro in Slovakia in 2012). This is just above the 60% of the average national wage threshold and just below the estimated subsistence minimum for a family of four persons (see Clean Clothes Campaign 2014). This suggests that wage rates are above the official minimum levels in the Slovak context, even if according to recent reports, in some struggling factories minimum wage levels have not been met (see Hudák 2014). The situation may be worse in other ECE and FSU countries, where state commitment to upholding minimum wage levels is even weaker (Clean Clothes Campaign 2014); a point made more broadly in relation to labour standards by Locke (2013).

4 By 2006, the European Observatory of Working Life estimated that about 80% of orders placed in Romania were based on the Lohn system (http://www. eurofound.europa.eu/ewco/2006/05/RO0605NU03.htm).

5 Interview with Director of Economic Affairs, EURATEX, Brussels, 2003. 6 Most recently, in the context of the burgeoning growth of the Bangladeshi

clothing industry following the end of quota‐constrained trade, some of the most extreme consequences for workers have been witnessed, not least in the collapse of the Rana Plaza apparel production complex in 2013.

7 ILO Industrial Relations Data. Available at: www.ilo.org/ifpdial/information‐resources/dialogue‐data/lang‐en/index.htm; accessed 29 November 2014.

8 Interviews conducted at the Trade Union Confederation of Slovakia in Bratislava also confirm such reports.

9 Interview with firm manager, Djebel, Bulgaria, July 2004.10 Interview with KNCB, Kardzhali, Bulgaria, July 2004.11 Interview, Director, Labour Inspectorate, Plovdiv, June 2004.12 See also Locke (2013) for an examination of the interface between domestic

labour inspectorates and corporate Codes of Conduct.13 The main changes to the Slovak Labour Code which came into effect in

2013 involve stricter regulation of ‘dependent’ or permanent employment to minimize the use by employers of self‐employment forms of worker engage-ment; better severance terms for workers; increased obligations on employers to negotiate with trade unions on dismissals; and extension of the minimum wage and maximum working hours legislation to all employees.

14 In this latter case of garage production, the question of who is a worker and who is a manager becomes a highly problematic one.

15 The role of the state in this accommodation was important. The companies received state aid for employment creation in peripheral regions, which amounted to the refund/subsidy of about half of total wage costs.

http://www.eurofound.europa.eu/ewco/2006/05/RO0605NU03.htm

http://www.eurofound.europa.eu/ewco/2006/05/RO0605NU03.htm

http://www.ilo.org/ifpdial/information-resources/dialogue-data/lang-en/index.htm

http://www.ilo.org/ifpdial/information-resources/dialogue-data/lang-en/index.htm


Managing Europe’s Golden Bands: Trade Policy and the Regulation of Production Networks

Chapter Four

Institutional and Policy Frameworks of the Golden Bands

Global and macro‐regional trade regulations have shaped ECE production networks in important and distinctive ways. Yet these policies and regulations have, themselves, been shaped at various times by different actors in the industry. In this chapter we focus on the ways in which state policy, in the form of different dimensions of international trade policy, has been struc-tured around the articulation of different national interests, the interests of macro‐regional state actors such as the European Union, and the important differential roles played by textile and retail interests in core EU markets.

The chapter describes the global frameworks that regulate apparel trade and shape the resulting geographies of production. We highlight the ways in which trade liberalization has encouraged outsourcing and increased competitive pressures from producing countries such as China, but we also show how regionalized production arrangements and sourcing strategies have remained important throughout the period since 1989. These processes of regionalization reflect some of the ways in which EU enlargement and European Neighbourhood Policy frameworks have shaped industry production dynamics, and they also demonstrate the role that border management and cross‐border economic integration have come to play in

(with Robert Begg)

managing europe’s golden bands 87

post‐socialist transitions. We show how regionalization is a crucial element of industry strategy to ensure geographically proximate sourcing for time‐sensitive product lines. These articulations of trade policy with geo‐economic policy reflect the always multiple and overlapping hierarchical processes of globalized production networks (see Mezzadra and Neilson (2013: 66) for a parallel argument).

We focus on the ways that EU regulations have co‐produced actually existing geographies of outsourcing, and particularly on the crucial role played by Outward Processing Trade (OPT) arrangements in the run‐up to and following EU enlargement in enabling cross‐border production relations between pre‐enlargement EU member states and state socialist (and later post‐socialist) economies in the region. We further focus on Euro‐zone integration (especially relevant in the context of the Slovak Republic) and the enlarged EU’s managing of relations with its immediate neighbours through the European Neighbourhood Policy and the development of Deep and Comprehensive Free Trade Agreements. These have been important in the emergence of cross‐border apparel networks. Central to this regulatory landscape is the role played by EU lead firms and apparel buyers in the reconfiguration of production networks. Their search for expanded sourc-ing opportunities and reduced costs across wider fields of operation has resulted in consolidation among EU retailers and the reconfiguration of the power of buyers and retailers vis‐à‐vis the more traditional drivers of value chains, the textile manufacturers.

Overall, this chapter provides a theorization of the nexus of capital and the state in global production networks by focusing on the ways in which particular policy frameworks and institutions structure the temporalities and spatialities of macro‐regional and cross‐border economic integration (see Figure 2.1).

Trade Policy in Apparel Global Production Networks1

The sourcing, production and consumption of apparel are shaped by the myriad of complex and often technical details embedded in trade agreements, tariff structures, preferential access rules, rules of origin and customs regulations. They are the context within which lead firm buyers and manufacturers manage their input supplies, production contracts and supplier locations, and the timing of contracts, shipments and seasons. It is through these preferential access, tariff and duty levels, and rules of origin that the politics of textile and apparel manufacturers and buyers are played out. As a result, the disaggregation of apparel production and the globalization of apparel value chains were and continue to be driven first and foremost by trade policy. Indeed, the textile and apparel industry has also been among the most actively involved in shaping national and


international trade regulations. But it is also in these bargaining arrangements that the possibilities and limitations for economic and social upgrading among suppliers are developed.

Trade policy is shaped by three primary forms of bargaining. First, defensive bargaining exists among different fractions of industrial capital, including textile (yarn and fabric) and apparel manufacturers and their representative industrial associations at national and macro‐regional levels. Each has fought hard to retain its primary markets in the face of international competition, textiles as input suppliers to apparel manufacture, and apparel manufacturers as suppliers of domestic markets. As the quota system and the subsequent further liberalization of trade encouraged the outsourcing and off‐shoring of apparel assembly, textile manufacturers in particular mobilized politically to retain their role as input suppliers for the sewing operations that were being relocated off‐shore (Heron 2012). The result was the complex series of quantitative limits, the most significant example of which were the Multi‐Fibre Arrangement (MFA), safeguard actions, rules of origin, duties and differential tariffs on imported products from specific countries.

Second, competitive bargaining pitted core industry manufacturing inter-ests against the combined interests of commercial retail and peripheral region suppliers. Fabric and yarn manufacturers pressed for the liberaliza-tion of apparel trade, but also wanted protection guarantees and expanded markets for their products. By contrast, buyers and retailers pressed for the liberalization of textile trade along with low tariff and duty‐free access to markets. They were often joined by governments in low‐income countries seeking preferential and expanded access to major markets. Retail and buyer associations, as well as consumer groups, have been primarily interested in liberalizing to reduce their costs of production, maintain or reduce retail prices, and enhance competitiveness.2 In turn, they have fostered consolidation.3 Manufacturers in low‐income countries keen to develop their own apparel industries by leveraging export markets have also supported trade liberalization.

Third, persuasive/coercive bargaining has involved government agencies and civil society groups pressing for developmental, peace or social compliance conditionalities in trade policy. Some of these involve positive conditional-ities in trade agreements, linking regulations and access to side agreements on labour or human rights, working conditions or product and environ-mental standards (e.g., see Locke 2013; Campling et al. 2015). Other measures have been punitive responses to human rights or labour abuses, product dumping, currency manipulation or unfair trading practices.

These defensive, competitive and persuasive/coercive uses of trade policy and regulation have resulted in a complex and highly politicized regulatory landscape. Separately and in combination they shape the decision‐making processes of lead firms in global apparel production


networks and determine – in large measure – how and where rents are captured. The following section maps out the dynamics of quota liberalization in the textile and apparel industry, before turning to the geographical consequences of quota removal and regionalized trade preferences in the form of outward processing trade.

Global and Macro‐Regional Trade Liberalization in Textiles and Apparel

The Multi‐fibre Arrangement and the Agreement on Textiles and Clothing: Quota Removal in the Global Apparel Industry

The most important change in global apparel trade policy over the past 40 years has been the imposition and subsequent phased removal of quantitative quotas on imports into the major markets of the EU, the United States and other industrial economies (such as Canada, Japan and Australia).4 Quantitative limits on imports into major markets such as the EU15 protected well‐established national industries, supported the growth and enhanced the competitiveness of new lead firms in increasingly buyer‐led global value chains, allowed low‐income countries to enter into export production and build national industries and provided important geopolitical instruments to emerging economies (Table 4.1).

In 1957, to appease US textile manufacturers concerned about growing imports, Japan imposed voluntary export restraints (VER) on the export of cotton textiles to the United States. This became a model for the 1961 “Short‐Term” Arrangement Regarding International Trade in Cotton Textiles and the 1962 Long‐Term Arrangement Regarding International Trade in Cotton Textiles and Substitutes under the auspices of the General Agreement on Tariffs and Trade (GATT). In turn these arrangements led to the creation of the quota system subsequently extended in the Multi‐Fibre Arrangement (MFA) implemented in 1974 (Glasmeier et al. 1993; Heron 2012), which itself was replaced in four phases by the Uruguay Round Agreement on Textiles and Clothing (ATC) between January 1995 and 31 December 2004.

The MFA/ATC quota regime operated through complex product‐specific constraints on imports, rules for the continued use of US and EU fibre, yarn, and fabric inputs, and special levels of market access for producers in lower‐income developing countries. Such restrictions, however, have been a double‐edged sword. While sheltering domestic manufacturers in the United States and Western Europe from lower‐cost imports, they also made them vulnerable to international competitors willing to seek off‐shore

Tabl

e 4.1

Tra

de re

gimes

, GPN

stru

cture,

geog

raph

ies of

prod

uctio

n, an

d em

ploym

ent c

onse

quen

ces

Tra

de

regi

me

Eff

ects

on

GP

N s

tru

ctu

reG

eogr

aph

ies

of

pro

du

ctio

nE

mp

loym

ent

con

seq

uen

ces

Multi

latera

l agr

eem

ents

Long

‐Term

Arra

ngem

ent

Rega

rding

Inte

rnat

ional

Trade

in

Cotto

n Tex

tiles a

nd

Subs

titut

es 19

62

Cons

olida

tes N

orth

ern t

extil

es le

ad‐fi

rms

Enab

les in

itial

outso

urcin

gDo

wnwa

rd pr

essu

re on

appa

rel w

ages

in th

e Nor

th,

emplo

ymen

t shif

ts fro

m N

orth

to So

uth

Mult

i‐Fibr

e Arra

ngem

ent

1975

–199

5Re

giona

l and

colon

ial pr

oduc

tion n

etwo

rks

Fragm

enta

tion a

nd re

giona

l pr

oduc

tion n

etwo

rks

Indu

stry d

eclin

e in m

ajor m

arke

ts, sh

ift in

to hi

gher

‐va

lue pr

oduc

ts an

d pro

cesse

s, an

d em

ploym

ent

expa

nsion

in m

any n

ew en

trant

regio

nsAT

C quo

ta ph

ase‐

out

1995

–200

5Co

llaps

e in q

uota

‐bas

ed na

tiona

l indu

stries

an

d con

solid

ation

of va

lue ch

ainGl

obal

Asia

and r

egion

ally

prox

imat

e pro

duce

rsCo

mpe

titive

and c

ost p

ressu

re on

small

er‐sca

le pr

oduc

ers,

espe

cially

in Af

rica,

Cent

ral Am

erica

, and

Ocea

nia.

Regio

nal T

rade

Agree

men

tsCA

FTA‐

DR an

d NAF

TA tr

eatie

sLe

ad fir

m co

ncen

tratio

n and

proli

ferat

ion

of no

mad

ic so

urcin

g by s

mall

firm

sSu

staine

d mar

kets

for t

extil

e m

anuf

actu

rers

in th

e US a

nd EU

Shift

from

expo

rt to

dom

estic

mar

kets;

re

giona

l pro

tecti

onism

(e.g.

, safe

guar

ds)

Regio

naliz

ation

of so

urcin

g an

d tra

deIn

creas

ed re

giona

l tra

de in

int

erm

ediat

e goo

ds

– Su

staine

d reg

ional

emplo

ymen

t (e.g

., CAF

TA‐D

R)–

Expa

nsion

of Ch

ina +

2 sou

rcing

(e.g.

, Viet

nam

, Ca

mbo

dia, B

angla

desh

)–

Lack

of w

orkfo

rce de

velop

men

t in C

MT (e

.g., L

esot

ho,

Keny

a)–

Enha

nced

wor

kforce

deve

lopm

ent w

here

loca

l ba

ckwa

rd lin

kage

s are

possi

ble (e

.g., T

unisi

a, M

oroc

co)

US Af

rican

Gro

wth a

nd

Oppo

rtunit

y Act

(AGO

A)EU

Econ

omic

Partn

ersh

ip Ag

reem

ents

Bilat

eral T

rade

Agree

men

tsUS

‐Cam

bodia

Text

ile

Agre

emen

tLe

ad‐fi

rm co

ncen

tratio

n and

capt

ured

loc

al fir

ms

Susta

ined m

arke

ts fo

r fab

ric an

d yar

n m

anuf

actu

rers

in th

e US a

nd EU

Geo‐

strat

egic

sour

cing a

nd

trade

supp

orts

Expo

rt as

sem

bly pl

atfo

rms

Abse

nce o

f reg

ional

integ

ratio

n am

ong C

MT

prod

ucer

s

– Su

staine

d em

ploym

ent (

e.g., H

OPE I

I Hait

i)–

Guar

ante

ed m

arke

t acce

ss (e

.g., C

ambo

dia).

– La

ck of

wor

kforce

deve

lopm

ent i

n CMT

(e

.g., J

orda

n im

migr

ant w

orke

rs)–

Enha

nced

wor

kforce

deve

lopm

ent w

here

loca

l ba

ckwa

rd lin

kage

s are

possi

ble (e

.g., E

gypt

)


production locations. The labour‐intensive nature of apparel manufac-turing, the predominance of small firms, and the relatively low barriers to entry, especially in lower‐value apparel assembly, enabled the movement of production to lower‐wage countries throughout the 1970s and 1980s (Gereffi 1994; Dicken 1998). Manufacturing competition from lower‐wage countries was exacerbated during the late 1980s and 1990s by the emer-gence of buyer‐driven commodity chains. Under systems of full‐package contracting, some large EU (and US) retailers became ‘factories without walls’, restricting their domestic activities to design, marketing, and retailing while sub‐contracting production processes to largely Asian suppliers. The combination of these two processes created significant pressure on EU manufacturers and retailers to follow suit.

The resulting geographies of quota‐driven export production led to the rapid expansion of low‐wage employment in export platforms, border zones, special economic zones and greenfield factories, while more traditional centres of fully integrated national production disintegrated and employment declined. Average apparel wages were squeezed and new forms of labour management emerged, including the deepening of dependence on young female workers, tight control over behaviour, precarious work contracts, non‐payment of wages and enhanced dependence on cross‐regional and trans‐national migrant workers (Hale and Wills, 2005; Arnold and Pickles, 2011).5

Between 1995 and 2005, the ATC integrated selected groups of quotas on certain products into the GATT, thereby removing preferential access to specific segments of the main markets and allowing producers in other parts of the world quota‐free access to those markets. For most countries, the integration of quotas occurred in four phases, but with most quota categories, in the main import products back‐loaded to 2005 (Table 4.2) (Curran 2008; Lane and Probert 2009; Heron 2012). As a result, 1 January

Table 4.2 Four phases of quota integration into the Agreement on Textiles and Quotas

Phase Starting date

Share of export volume integrated

Increase in quota growth rate

Number of HS products integrated

I 1 Jan. 1995 16 16 318II 1 Jan. 1998 17 25 744II 1 Jan. 2002 18 27 745IV 1 Jan. 2005 49 – 2978

Notes: The first four columns were common to all signatories. The final column refers to products integrated in the US case. For countries with less than 1.2% of the importing countries’ total quotas in 1991, quota growth acceleration was advanced one phase.HS = Harmonized system.Source: OTEXA.


2005 marked the beginning of a major shift in production, employment, and trade in the global apparel industry, and a rapid expansion in the numbers of countries worldwide that could export to the major markets.6 New producing country investments created expanded opportunities for accessing untapped sources of cheap production, driven often by the mar-shalling of cheap, often migrant, labour pools in export processing, free trade and border industry zones. Sourcing patterns shifted rapidly, as we saw in Chapter Three.

Adhikari and Yamamoto (2007: 184) describe the effects of quota phase‐out particularly clearly:

Even during the heyday of the quota system, characterized by a distorted global market for … [textile and clothing] products, entrepreneurs in countries restricted by quotas found ways to exploit the system. They established factories in countries with low levels of quota utilization and in some instances even helped in the industrialization process of those coun-tries. For example, Korean companies established factories in Bangladesh, Caribbean and Sub‐Saharan Africa, Chinese companies established fac-tories in several Asian and African locations, Indian companies in Nepal and even relatively minor players in the global market such as Sri Lankan and Mauritian businesspersons established factories in the Maldives and Madagascar, respectively, to overcome quota restrictions. While the indige-nization of this industry took place in some countries (e.g., Bangladesh, Nepal) due to the entry of the local entrepreneurs, in other countries (e.g., Maldives) the industry itself got wiped off the industrial map once the foreign investors pulled out.

The effects of this agreement to liberalize trade by removing all quotas on apparel trade by 2005 have been, and continue to be, nothing short of rev-olutionary for the industry.7 Central to these effects was the rapid rise of sourcing from China, India and Bangladesh, alongside the initial relative decline and then stabilization of macro‐regional systems of sourcing in ECE and the Euro‐Mediterranean region (see Figure 3.4).8 In Europe, the former communist economies of ECE and selected countries in the Mediterranean Basin are small exporters compared with China, Bangladesh and Turkey, but the EU market has remained important for industries in those countries (Pellegrin 2001a; Dunford et al. 2002; Smith 2014).

As imports from major Asian producers expanded, quota removal between 1995 and 2005 drove down unit prices from many lower‐cost producing areas. In many ECE locations there was an immediate upward shift in the unit value of exports (Figure 4.1),9 even as wages and conditions in apparel factories were squeezed down worldwide; the most extreme consequence of which could be seen in the Rana Plaza factory collapse in Bangladesh in 2013. Since 2005, unit values in ECE have fallen to comparable levels to those in China, as they have simultaneously increased in the latter.


These global shifts have been disruptive for textile manufacturers. Their capital investments are larger and more embedded in networks of input sup-pliers, service industries, skilled labour markets and communities. While locally‐based apparel producers aligned with textile and worker interests on trade policy to protect national industries, more footloose brands and large‐box retailers supported trade liberalization as a path to cost reduction, and in that they were supported by suppliers in export‐oriented emerging economies. Furthermore, as Heron (2012: 45) argues, as deepening arrange-ments for production sharing became established, “the cumulative effects of a prolonged period of import penetration and capital intensification [in the textiles and apparel sectors of advanced economies] had served to weaken considerably the social and institutional basis of the [textile and apparel] coalition”, precipitating increased recognition among manufacturing industry actors of the apparent need for fuller liberalization. This accompa-nied – at the EU trade policy level – an increasing commitment to what became known as the “global Europe” strategy; an acceptance of the need for liberal market integration and the adoption of what was deemed a mutually beneficial trade liberalization agenda. In this process, the European Commission’s Directorate General for Trade (DG Trade) played an increas-ingly influential role in shaping Europe’s trade liberalization agenda.

Contract prices were squeezed even further as competition among pro-ducers and buyers increased and as lead firms and brands expanded their operations. As lead firm buyers intensified and expanded their reliance on global supply chains, their suppliers were caught in increasingly uncertain webs of competitive bidding for contracts. Unregulated or semi‐regulated second‐ and third‐tier sub‐contracting became increasingly common and

0

1000

China

Bangladesh

Turkey

Romania

Bulgaria

Poland

Slovakia

Ukraine

2000

3000

4000

5000

6000 1995

2000

2005

2006

2007

2008

2009

2010

2011

2012

Figure 4.1 Unit values of EU apparel imports (selected countries in Euro/100kg). Elaborated from Comext database.


working conditions and labour standards deteriorated (Hale and Wills 2005). The increasingly visible effects of the race to the bottom soon led to enhanced civil society and consumer pressure for oversight on product and work standards. As a result, trade agreements have become more responsive to these concerns and more responsive to political pressures. With new reg-ulations (such as the California Supply Chain Transparency Act), buyer responsibility for their entire supply chain has been clarified and a ‘new generation’ of EU bilateral FTAs have included labour standards as distinct chapters on sustainable development (Campling et al. 2015).

Macro‐Regional Trade Agreements and the New Patterns of Apparel Trade

The changing geographies of European and Mediterranean Basin apparel trade and production have also been shaped by processes of economic integration within the region. Two primary processes have increased the importance of EU15 markets for apparel producers in ECE. The first is the role of the preferential trade arrangements for EU applicant states prior to their entry into the Single Market of the EU, and for non‐applicant partner states in the Mediterranean Basin. Of particular importance are the Europe Agreements signed in the early 1990s with the ten applicant ECE countries. These agreements structured the free trade zone with the EU in specific ways. The textiles and apparel sector was always one of the most sensitive sectors for full‐scale liberalization, especially given its significance for pro-duction and employment in EU member states. Consequently, separate Protocols were signed between the EU Member States and each applicant state to regulate a gradual liberalization of textiles and apparel trade. Initially aimed at tariff removal in the early years of the twenty‐first century, the Agreements were later revised to allow for virtual full liberalization by 1 January 1998. The shortening of the period in which liberalization was to occur was driven, in part, by a desire on behalf of the EU to demonstrate to the applicant states a continuing commitment to integration and eventual membership during a period in which negotiations and progress on accession membership talks were slow.

The second process involved a series of bilateral preferential trade arrangements with third countries, among them the EU customs union with Turkey introduced in 1996 as a prelude to possible eventual EU accession (see Tan 2001), and those signed in the 1980s as part of the Euro‐Mediterranean Barcelona Process (see Smith 2015). Regional trade agreements provided further preferential access, tariff reductions and trade facilitation support for regionally proximate suppliers, generating a com-plex regulatory landscape that creates specific geographies of investment and sourcing (Plank et al. 2012).


Outward Processing Trade and the Origins and Reconfiguration of Pan‐European Apparel Production10

If MFA phase‐out reconfigured the geography of global apparel trade in fundamental ways, European production sharing arrangements known as outward processing trade were essential for the establishment of proximate models of apparel sourcing in ECE. Outward processing is both a produc-tion process and a specific vehicle for regulating that production process through trade and customs regimes (see Table 3.1). As a production process, outward processing is used synonymously with off‐shore apparel assembly and contracted outsourcing. As a cross‐border production process, EU‐based manufacturers, agents or retailers contract producers in ECE to manufacture garments for re‐import into the EU. This involved the bundled supply of most inputs and components to the ECE producer, although it also involved other forms of contract production in which greater levels of responsibility for the supply of inputs rests with the ECE producer. As a trade regime, outward processing trade (OPT) is a system of production governed by EU trade regulations.11 It has its origins in the emergent production‐sharing arrangements between German manufacturers and enterprises in state socialist ECE going back to the 1970s (Fröbel et al. 1981; Dolan 1983; Lane and Probert 2009).

OPT as a trade regime between the EU and ECE took two forms (see United Nations Economic Commission for Europe 1995:125; Pellegrin 2001a). The first was ‘fiscal’ or ‘tariff OPT’ in which customs regulations established in the mid‐1970s12 and consolidated further in the early 1990s suspended entirely tariffs on the re‐import of goods from ECE into the EU.13 As a customs agreement, no duties are levied when raw materials (such as textiles) are temporarily exported from the EU for outward processing undertaken in a third country and re‐imported into the same EU country as partially finished or fully finished goods.14 Rules of origin requirements limited the textile component involved in OPT to being sourced from within the EU, rather than allowing EU firms using OPT arrangements to use imported fabric from outside the EU.15 Tariff OPT was, then, a more general and more broadly used mechanism for obtaining tax relief from customs duty available for non‐quota commodities. Tariff relief is available across a broad range of products and has been particularly important for apparel manufacturers and retailers in the EU.

The second form of OPT as a trade regime is known as ‘economic OPT’, which consists of granting additional quota for the import into the EU of specific products produced with EU‐originating materials. The European Union initially argued for the introduction of OPT quotas under the Multi‐Fibre Arrangement (MFA) III (1982–86) (Economic Bulletin for Europe 1995). By carefully controlling the export, processing, and re‐import of


certain textile and apparel products under OPT, the EU attempted to manage the political and economic conflict between the potential loss of domestic employment in apparel and textiles and the erosion of its global position in those industries to foreign competition.16 Between 1982 and 1986, the EU established a set of OPT quotas through bilateral agreements.17 In 1994, the EU replaced the early 1980s bilateral agreements with EU reg-ulation 3036/94, creating an EU‐wide set of OPT quotas. One condition of obtaining the authorization for OPT was that off‐shore assembly operations by any one EU manufacturer within ECE could not substitute for more than half of that manufacturer’s production within the EU. Any deterioration of EU production would cause a reduction in quota authorization.

These early origins of ECE‐EU outward processing shaped the present situation in a number of ways. The collapse of command economies in 1989 was not the initiator of either market relationships between the ECE apparel producers and the EU, or the export of textile and apparel products from ECE to Western countries. These sourcing practices and regulatory regimes existed prior to1989 and have been shaped by this historical geography of textile and apparel trade established during the 1980s. First, out‐sourcing to ECE suppliers during the 1980s was part of a larger strategy by some of the Northern European Community (EC) countries to lower wage bills. As such, apparel assembly was moving not only to Asia and ECE countries, but also to Southern European countries prior to them joining the EC. In this process, for example, Greece and Portugal became assembly platforms for Germany and the United Kingdom. Second, such positions of trade and production, embodied in the early OPT legislation, still shape relations between EU and ECE countries. The primary OPT sourcing countries in the period following the collapse of state socialism in ECE were those where EU contractors had established contacts in the early‐ to mid‐1980s. Poland, Romania and Hungary were particularly important in ECE apparel assem-bly production for the EU at this time (see Figure 3.5). The single most important EU partner was Germany, accounting for over 60% of all OPT imports from the six main ECE exporting countries in 1989 (Pellegrin 2001a: 106).

While no particular geography was written into the OPT regulations, they were crucial in the subsequent regionalizing of sourcing strategies in the Euro‐Mediterranean region, particularly as EU firms sought to ensure access to suppliers who could guarantee rapid replenishment in the face of market demands for quick response and fast fashion models. The outcome was that 65% of OPT imports were derived from ECE countries and a further 30% from the Mediterranean rim economies (Scheffer 1994; Heron 2012).

As EU companies adopted more generalized sourcing strategies across ECE, Romania and Bulgaria grew in relative importance in OPT while the original core OPT producers, such as Poland and Hungary, declined in relative importance. In part, this was a response to the declining relative


importance of Germany and the rapid but much later increase of Italian off‐shoring (Dunford 2006). While individual country trade patterns differ in timing and amount, OPT was the primary and initial stimulus to apparel export growth from ECE suppliers to EU markets. After 1996, the impor-tance of ECE‐EU trade under OPT declined absolutely and relatively as quota benefits and tariffs were removed. Consequently, EU firms increasingly shifted their contracting to normalized trade. By 2000, trade regime OPT had declined to 35% of total apparel exports from ECE countries to the EU.18

Of course, the phasing‐out of OPT as a trade regime for ECE does not mean that outward processing as a set of cross‐border production relations has ended. Indeed, the shift to ‘normal trade’ in ECE has meant that although the OPT regulatory regime has ended and is no longer recorded as such in the EU trade statistics, outward processing as a production process continues to be a significant part of ECE‐EU apparel trade, primarily involving CMT forms of production. Indeed, outward processing as a form of assembly production using imported fabric continues at an increased rate as trade has been liberalized. At the turn of the twenty‐first century, German off‐shore assembly production, known as Passiven Veredelungsverkehrs (PV), continued to account for more than 75% of total German apparel imports from the six main ECE apparel‐exporting economies, which them-selves accounted for more than half of the total off‐shore production of German firms (Begg et al. 2003). Exports to Italy, France, Greece, Holland and the United Kingdom also continued to be dominated by CMT produc-tion arrangements using materials imported from the EU.

How did the process of liberalization occur? Between 1991 and 1995, the rapidly changing economic, cultural, and political landscape required a change to the OPT regulations. The imminent demise of apparel and textile quotas as a protectionist device was spelled out in the WTO’s Agreement on Textiles and Clothing. As part of the trade liberalization dictated by the ATC, the EU progressively removed quotas on textile and apparel imports. Rates of removal, however, have been uneven. In particular, the removal of quotas has favoured the ECE and southern Mediterranean countries. Between 1991 and 1995, OPT quotas for the ECE grew at the rate of 36.2%, while those for Asia were growing at only 6.9% (Brugnoli and Resmini 1996). Quotas were also applied and used very differently across countries, depending on the particular niche they filled or threat they posed to EU producers. By 1994, OPT quota utilization ranged from a low of 21% for Hungary to a high of 40% for the Czech Republic. By 1998, the EU had also eliminated all tariffs for ECE applicant states, as part of its broader geo‐political process of integration in the run‐up to enlargement.

Such changes in trade regimes and their consequent and dramatic effects on the geography of the European apparel sector were driven in part by the desire of the EU to create a pan‐European free trade area. Following the Barcelona Conference of 1995, the framework was set for a free trade area


that would include not only the ECE applicant states, but also the Med‐12 countries (Algeria, Morocco, Tunisia, Egypt, Syria, Lebanon, Jordan, Israel, Palestinian Authority, Malta, Cyprus, and Turkey) (Bayar 1998), a dynamic deepened as part of the more recent Global Europe strategy and the EU’s response to the Arab Spring, which has seen the development of a much more integrated “deep and comprehensive” free trade agenda (Smith 2015).

OPT trade quotas and tariff relief were, then, a relatively short‐lived, but critically important transition mechanism on the way to liberalization. OPT was a political device for managing competing demands of the interests of certain national fractions of West European textiles capital (especially in Germany), of the European Commission in attempting to ensure the continued presence and operation of the industry in the EU and comple-menting a broader vision of the greater Europe (enshrined in the Europe Agreements), and of the more initially sceptical interests of Member States (such as the United Kingdom and France19) which were less favourable towards OPT and towards trade liberalization more generally in the 1970s (Dolan 1983). However, perhaps its more significant and long‐lasting implication is that the trade regime forms of OPT have become the basis for establishing deep‐seated production and contracting processes used by EU‐based manufacturers to reduce costs and enhance profitability in highly competitive European markets through contracting certain types of pro-duction in ECE. It is the diversity of forms that such production contract-ing takes and their implications for possible upgrading of apparel production in ECE that we turn to in the next section and in the following chapters.

European Union Apparel Lead Firms and the Europeanization of Supply Chains

While the growth of off‐shore regionalized production has been shaped by trade policies, it has been enacted by lead firms in global production net-works and supplier chains in Europe’s periphery (see Gereffi and Korzeniewicz 1994; Bair and Gereffi 2002). Retailers have international-ized their contracting networks and some manufacturers have moved away from direct production and into higher value design and marketing activ-ities. One of the major consequences of such strategies has been the partial “hollowing out” of apparel production across the EU15. For example, in the United Kingdom, the apparel market has traditionally been dominated by a small number of relatively large retailers consisting of mid‐market department store chains, which account for over half of all apparel sales (Gibbon 2001).20 Historically, these chains sourced apparel from UK‐based manufacturers and to a lesser extent from Asia. The entry and increased role of new types of retailer, including discounters (such as Matalan and Primark), supermarket food retailers who diversified into apparel (such as


Tesco and Asda), and foreign mid‐market chains (such as H&M, The Gap, Zara and Uniqlo), several of whom introduced fast fashion models of business operations, have intensified competition in the sector.

In this process, many retailers re‐oriented their supply chains in Asia (notably China), North Africa and ECE. The clearest example of this dramatic reorientation of retailer supply chains in the UK market is that of the main high street retailer, Marks and Spencer. For Marks and Spencer, the 1998 release of trading figures highlighting a halving of year‐on‐year profits and a significant decline in market share resulted in the implemen-tation of a dramatic restructuring strategy. A core element of the new strategy was the shift away from its traditional ‘Made in England’ sourcing in which 75% of garments were produced domestically by a range of British‐owned, large apparel manufacturers who had established long‐term supply relations with Marks and Spencer. The dominance of domestic sourcing was replaced by a cost reduction strategy centred on the internationaliza-tion of the supply chain. It was estimated that internationalization of the supply chain returned immediate cost savings of roughly £320m alongside a dramatic reduction in UK apparel employment (Dunford et al. 2002; Evans and Smith 2006).

While this is a dramatic example, Marks and Spencer was not alone in expanding international sourcing arrangements. Gibbon (2001) estimates, for example, that import penetration in the UK apparel sector increased from 47% of retail sales in 1995 to 65% of sales in 2000, and since then further internationalization has taken place. Within this context of overall increased import penetration of the UK apparel market, producers in ECE also increased their share until the global liberalization of apparel trade. For example, the main six ECE exporters increased the share of non‐EU UK apparel imports from 4.8% to 11.8% between 1989 and 2000. In 2012, the proportion had fallen to 1.8%, as Asian suppliers became much more important (see Chapter Three).21 Such globalizing strategies have been driven by profit maximization and cost reduction pressures. These, in turn, have been under‐written by the increasing need to maintain shareholder value and increase dividends with increasingly short‐term reporting require-ments (Gibbon 2002; Milberg and Winkler 2013). Working directly through such internationalizing manufacturers, direct investments or joint ventures were established in ECE to directly supply UK retailers (see Chapter Six). The resulting division of labour saw design and technical development remain in the United Kingdom while assembly work was outsourced. The result has been a significant downsizing of production capacity and activity in the United Kingdom (see Dunford et al. 2002; Smith et al. 2002).

Marks and Spencer represent only one strategy of British producers and retailers to increase import penetration. A second strategy has involved the use of agents in ECE contracting production for smaller retailers directly from ECE suppliers. Here the agent is typically responsible for quality control


and production oversight, and – for smaller orders – is able to bundle orders and contract with key suppliers to ensure delivery times, cost and quality.

In Germany, large retail firms like C&A, Karlstadt and Kaufhof followed comparable strategies, although they have used OPT contracting in ECE for much longer than UK retailers and manufacturers (Fröbel et al. 1981). In order to circumvent OPT tariff relief provisions that gave preference to manu-facturers, large German retailers simply passed production through manufac-turing firms (Pellegrin 2001a).22 In important ways German direct investment has been much more prevalent in the ECE apparel sector, as we discuss in Chapter Six. In part, this reflected the earlier stages of capitalization in the German apparel industry which meant that apparel manufacturers were among the first to off‐shore production to ECE and North Africa, starting as early as the 1970s.23 The result was a stronger corporate commitment in the German apparel manufacturing industry to production sharing and joint ventures which provided a rationale for regionalization strategies. It was also, in part, a strategy to ensure quality in the supply chain for the very demanding German market.

Italy has been a relative latecomer to outsourcing to ECE (Dunford 2006). As Graziani (1998) has argued, Italian textile firms responded to the pressures of the 1990s by acquiring downstream apparel firms with off‐shoring experi-ence, but the process was also dependent on the parallel entry of Italian banks and textile manufacturers particularly in eastern Slovakia, Romania and Bulgaria (Sellar 2012). In such cases, the emergence of deeper trade and pro-duction relations between ECE and EU15 (now EU29) countries has been affected by increasing levels of input substitution as buyers encourage the use of domestically produced textiles by ECE suppliers, a process that itself has encouraged inward investment in textiles, particularly by Italian textile firms.

In Spain, the internationalization of apparel sourcing has been driven almost exclusively by the demands of “fast fashion”, which has prevailed as an important model in the retail sector, led in particular by Inditex/Zara and the Mango brand. As Plank et al. (2012) and Tokatli (2008) have shown, “fast fashion” and proximate sourcing have become increasingly important in the last decade in regionalizing production activity, with companies such as Zara focusing on “Europe and its neighbouring countries” (Tokatli 2008: 35).

Each of these nationally‐specific lead firm strategies rendered integration into ECE production networks in distinct ways and at different times. However, as discussed in Chapter Two, each of these shared a common approach involving the negotiation of the changing international and macro‐regional trade regimes to enable the geographical extension of the circuit of apparel capital into new locations. They articulated existing pro-duction capabilities in ECE with the requirements of lead firms to enable a particular form of international economic integration predicated initially on outward processing arrangements, particularly focused on the demands of German, Dutch and Belgium lead firms.


Conclusion

The integration of the ECE apparel sector into EU production networks has undergone a series of dramatic transformations. These are closely related to the changing strategies of EU‐based lead firms as they balance competing locational opportunities in the global economy within the context of intensive competition in domestic markets. Critically, they are related to the changing trade policy environment, which has steadily opened up outsourcing opportunities initially via OPT and more recently through full‐scale liberalization. The resulting forms of contracting since the 1980s have created distinctive regional geographies of apparel sourcing within pan‐European production networks.

In this chapter we have emphasized two sets of processes that are central to understanding the changing geographies of European apparel. First, the dynamics of transformation in the ECE apparel sector have been strongly shaped by global and European trade regulations. These regula-tions first enabled a widening of participation of ECE apparel exports to the EU through outward processing trade arrangements and established the basis for proximate sourcing and reduced turnover time for certain national buyer strategies. OPT was the result of the trade politics of the EU and the original desire of German and Dutch textile capital to retain fabric production in the EU as far as possible. An increasingly liberalized regulatory environment has seen these embedded relationships trans-formed into “normal” trade relations. This liberalized environment is occurring as part of the broader process of world trade reform, and the need to ensure that textile and apparel regulations converge with the broader GATT and WTO rules.

Second, within the trade rules set down by multi‐lateral and EU bodies, retailer and buyer strategies in the EU established particular forms of con-tracting relations with ECE producers. Within an increasingly competitive EU apparel retail market, buyers and chains adopted a range of strategies that enabled them to access production capacity in ECE and beyond. Central to these strategies has been the management of the turnover time of capital in the apparel value chain, in the attempt to ensure the profit maximization of retail firms by outsourcing financial risk to manufac-turers while ensuring relatively rapid and responsive production systems using models of geographically proximate sourcing. All of these transfor-mations are on‐going and further forms of restructuring should be expected. It is clear, however, that the development of ECE apparel pro-duction and trade has dramatically transformed particular regions involved in the sector throughout ECE. What remains crucial, however, is to consider the longer‐term implications of this pan‐European engage-ment and the extent to which ECE firms and communities are able to


continue within the context of one of the world economy’s most cost‐sensitive sectors. It is these issues that the following chapters consider in depth.

Notes

1 Parts of this and the following section are drawn from material published in Pickles (2013).

2 Interview with Secretary General, European Association of Fashion Retailers, Brussels, April 2007.

3 In the United Kingdom, Gibbon (2002: 293) argues that the top 10 largest clothing retailers accounted for 52% of clothing sales in 2001. The relative fall in the share of the historically dominant high street retailer, Marks and Spencer, over the last 10 years is likely to have distributed the market share to emerging lower‐cost, lower‐margin multiples such as Tesco.

4 See Heron (2012) for an overview.5 The rise of maquiladora production and the proliferation of child labour and

sweatshop working conditions in second and third tier suppliers have been well documented, as discussed in Chapter Three. Gereffi and Mayer (2006) argued that this form of globalization created a global “governance deficit” with all the attendant problems that the lack of regulatory oversight can create. States and societies responded to these problems by seeking to fill the gap with new gover-nance capacities (Gereffi and Mayer 2006), what Mayer and Pickles (2010) have called a surfeit of governance mechanisms.

6 Although various safeguards were negotiated, particularly with China by the United States and the EU (see Lane and Probert 2009 and Heron 2012).

7 The EU and the United States have each been accused of slowing down the process of liberalization in order to protect their own textile and apparel industries, particularly by ‘back‐loading’ the process by selecting products to be liberalized in the first three phases of the ATC that were the ‘least sensitive’ for their domestic industries and that played a relatively minor role in global trade (Brugnoli and Resmini 1996). Equally, other barriers to trade, such as anti‐dumping practices, continue to limit the complete liberalization of the apparel sector even after 2005.

8 In North America, liberalization of apparel and textiles has been accompanied by increasing regional integration – largely through the North American Free Trade Agreement (NAFTA) – as delocalization has shifted apparel production from the United States to Mexico and other countries in Central America and the Caribbean Basin (see Kessler 1999 and Gereffi et al. 2002, for fuller discussions).

9 As we note elsewhere (Pickles and Smith 2011), the value of unit value measures is most effective at a highly disaggregated product level, which enables analysis of changes in similar real product categories over time. The data presented in Figure 4.1 are at the two‐digit level of aggregation and provide a broad appreci-ation of unit value trajectories, but this level of aggregation means that the data are likely to reflect many divergent and different product‐specific dynamics.


10 The following two sections are significantly updated and revised to incorporate new interview material and trade data from parts of material previously published in Begg et al. (2003).

11 Similar arrangements emerged in North America where is it known as ‘production sharing’ or ‘807 production’, referring to the clause of US trade laws that governs the process (see Glasmeier et al. 1993; Bair and Gereffi 2002).

12 Council Directive 76/119 of December 1975 (see Dolan 1983).13 Heron (2012: 33) and Fröbel et al. (1981: 109) note that this European

Community‐level legislation was preceded by earlier West German national legislation, which demonstrated to other west European countries that this was a mechanism for slowing, if not stopping, the continued loss of employment in the textiles and clothing sectors.

14 Fiscal OPT is legally governed by EC Customs Codes (OJ L 302, 19.10.92) and Council Regulation 3036/94 of 8 December 1994 (OJ L 322, 15.12.94). See also Pellegrin (2000) and Boromisa (2001).

15 Interview with Director of Economic Affairs, EURATEX, Brussels, February 2003.16 It was also seeking to manage the internal European Community debate

between enthusiastic supporters of OPT, such as Germany, the Netherlands and Denmark, and other more sceptical member states, such as the United Kingdom and France (Dolan 1983; Heron 2012).

17 EC Customs Codes OJ L 78/82, 20/3/82; Regulation No.636/82.18 The continuing role of OPT reported trade in these countries is explained by the

fact that even though quantitative restrictions on the import of apparel products ceased at the end of 1997 and OPT itself was phased out at the same time, the OPT category continues to record trade undertaken under Outward Processing Relief which gives duty relief on re‐imports of goods to the EU following outward processing in third countries. There are no quotas for such trade but such trade can still occur under EU tax law. We are grateful to Bob Muse and Véronique Schneider of the European Commission SIGL Help Desk for clarifying this complexity.

19 Dolan (1983) notes that French state interests started to shift with the deepening involvement of French firms in clothing production arrangements in North Africa during the late 1970s and early 1980s.

20 This section draws upon a series of interviews with three of the major apparel retailers in the United Kingdom, reflecting different market positions. Because of the agreements concerning anonymity in conducting these interviews, we are not able to specify which retailers were involved.

21 These data are elaborated from the Comext database.22 Interview with Director of Economic Affairs, EURATEX, Brussels, February

2003.23 Interview with Director General, EURATEX, Brussels, July 2014.


Transformations, Legacies and Networks: The State and Market Globalizations

Chapter Five

Introduction

In Theorising Transition (Smith and Pickles 1998), we argued that the social and political relations that structured economic life under actually existing state socialisms continued to act in constitutive ways in the geographies and trajectories of post‐socialist transformations. In this chapter, we show how integration into (largely) European‐oriented global production net-works was only possible because of the ways in which those production systems were articulated with, and embedded within, the fabric of the state socialist economy and the party state. The opportunities arising from apparel GPNs were shaped by new and old social forces, institutions and practices, and by forms of capital that emerged as privatization and the “opening” of the economy occurred after 1989. In this sense, state socialism and the planned economy created a series of relational assets on which the transition to capitalism was built. These assets were fundamental in shap-ing the geographies and organizational forms of apparel export economy evident today. At their core was the form of the state and its associated institutions and practices. In this sense, the chapter responds to Peck’s (2004: 4) injunction that economic geography and regional analysis have the tendency to leave “only fuzzily‐defined and under‐theorized

(with Robert Begg and Milan Bucek)

transformations, legacies and networks 105

‘context’ in the background”. As Grabher and Stark (1998) argued, building post‐socialism was like building a ship at sea; it was not the construction of a market economy ab initio but a complex process of borrowing, adaptation and re‐adjustment situated in particular political‐economic contexts. These legacies provide the context in which the conjunctural articulation of the collapse of state socialism and the emergent capitalist social and economic relations occurred.

Throughout, we show how the enduring role of the state shaped the entry of ECE apparel producers into global production networks in regionally specific ways (see also Smith 2015). We analyze the long‐run trajectories and significance of apparel production, employment and trade in Bulgaria and Slovakia, focusing on the regional structure of production and spatial divisions of labour established during state socialism. We show how these forms of production were subsequently articulated with emerging private property regimes, new state forms, and particular fractions of international capital in the 1990s. In the case of Slovakia, we focus on the dominance of large state enterprises and their associated networks of branch plants in creating linked metropolitan and peripheral region industrial clusters embedded in the larger Czechoslovakian space economy (until independence in 1993). The resulting regional divisions of labour became important resources as post‐1989 structural adjustment policies and subsequent rounds of de‐industrialization necessitated several rounds of organizational restructuring. In the case of Bulgaria, we focus on the role played by state ‘social industry’ policies in creating an extensive rural workshop economy in border and mountain regions. Here social policy linked job creation for women with the need to manage ethnic legacies of Ottoman rule in conditions of heightened Cold War geopolitical tensions. In this context, the structure and geographies of state industries were shaped by complex inter‐weavings of gendered, ethnic, mountain and border policies.1 These, likewise, created very specific conditions for the subsequent opening of the industry to the EU and other major markets.

Apparel and State Socialist Models of Development

Throughout ECE, post‐Second World War nationalization had led to a state‐planned expansion of the scale and scope of production; industrial stock was re‐capitalized and services and training for the industry were expanded. Under the national planning framework, this involved the vertical integration of apparel production within large national‐ and Soviet‐bloc‐oriented textile enterprises or combinats. As with other socialist industrial structures, inputs (such as cloth and trim) were sourced internally and output was distributed to known and guaranteed markets. Production was organized in a hierarchical structure of enterprises, in which core factories,


branch plants and workshops were coordinated, the latter to ensure “social employment” primarily for women in rural areas and small towns and villages (Begg and Pickles 1998; Smith 2003).

There were important national differences. In Slovakia, industry was centred on large, urban‐based, state‐owned enterprises with networks of medium‐to‐large branch plants in surrounding towns and villages, providing employment opportunities largely for women. In Bulgaria, large urban‐based plants were also apparent but they were connected to an extensive geography of small village workshops. In both cases, the industry was linked to a wider set of social goals involving female employment opportunities, particularly in areas where male employment was being developed in other commanding heights industries like energy, steel or mining. Integrated textile and apparel production was also part of an overall regime of exten-sive industrialization aimed at integrating labour reserves in rural regions into a national economy dependent on controlled migration to urban areas (see Smith 1998).

The socialist enterprise had three important characteristics that have shaped post‐socialist economic transformations in apparel production networks. First, socialist enterprises were embedded in continental‐scale trade networks and their corresponding regional divisions of labour. With the crisis of state socialist governments in 1989, these integrated market networks largely collapsed, guaranteed markets dissipated and enterprise networks fell apart, particularly as struggles over the privatization of state resources led to rapid auctioning of factories and equipment, sometimes literally overnight. The result was large‐scale de‐industrialization and enterprise failure, with remnant, fragmented and under‐resourced newly private firms struggling to replace guaranteed markets. As these ‘fragments’ turned to export processing, two divergent forms of economic organization emerged. In Slovakia, the regionally integrated state system was re‐ fashioned in various phases as enter-prises struggled to maintain traditional buyer relations with western lead firms, which had been established in the late 1980s, in the face of rising costs and increasing international competition. Regional associations and inter‐regional networks were mobilized to adjust to increasing cost competition and to maintain contracts in the face of increasing demands for scale and complexity of operations. By contrast, as the Bulgarian state enterprise system collapsed, the residual newly privatized firms were increasingly isolated, the workshop structure limited their functional capacities and scale of operation, and – as a result – many struggled to find new buyers. Those that did had to downgrade their production processes, working on contracts for the simplest sewing tasks. For the most part, regional input suppliers and service providers collapsed.

Second, the socialist enterprise was much more than an integrated production system across all aspects of technology and confection. The enterprise was also involved in many aspects of the social lives of its workers


and their communities. As Pickles (1995) has shown, the state extraction practices under state socialism necessitated specific forms of surplus redis-tribution in order to meet the stringencies of the annual ‘plan’ and to coerce workers’ willingness to storm at key periods of production to meet, but not exceed, those plans (Figure 5.1). The challenge for state planners in a regime of extensive industrialization was always to maximize the extraction of surplus from enterprises while maintaining social harmony in the pro-cess. The resulting economic logic was one that resulted in the punishment of enterprises and managers for failure to meet plan quotas and the ratchet-ing up of quotas when they were met. Under these conditions, the impera-tive for enterprise managers was to ensure that the enterprise could maximize state appropriation while avoiding penalties and increased quotas.

The resulting management task was complicated and challenging. It required a particular kind of production politics in which materials were hoarded in case of future shortages and in which they were traded with other enterprises for goods and services when they were not available in the enterprise. Where possible, workers were similarly “hoarded” (what later came to be called “over‐employment”), but for very specific reasons: workers were an invaluable resource to ensure that production quotas were met, but not exceeded.

This need for careful coordination of management of inputs and workers necessitated its lubrication through the redistribution of surpluses in the form of social wages and community investments (Figure 5.2). In the state enterprise, the wage was only part of the full range of remuneration and resources provided. Enterprises functioned as the providers of social ser-vices, meals, transport, and recreation facilities. They also often invested heavily in community infrastructure and services (see Domański 1997; Smith 1998). After 1989, reformers often characterized these kinds of

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Figure 5.1 The structure of coercive bargaining in the socialist enterprise.


hoarding practices and services as examples of the inefficiencies of state ownership. But in post‐1989 economies, with capital shortages and contract uncertainties, manufacturers reproduced – and workers pressed for – similar practices as they built post‐socialist private firms. Manager–worker relations were often consensual and coordinated, rather than conflictual, particularly in many of the larger firms. In many smaller firms, especially the more fragmented conditions of the Bulgarian workshop economy, these paternal practices were dropped much more quickly as low‐value contracts pressed workshops into ever simpler forms of full bundle sewing work. Even here, many workers continued to expect that their formal wages would be supple-mented by social wages that included bus service, free or subsidized meals, vacations, and health care, and many managers also continued to assume that social wages were an important part of their management practices as they now struggled to deal with the new uncertainties of export contracting, unstable short‐term credit arrangements and tightening labour markets.

Third, unlike many other areas of the world where global contracting resulted in the creation of export processing platforms, ECE producers had, until very recently, worked in relatively advanced, integrated production

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Figure 5.2 The social wages and community investments of socialist enterprises.


systems. These may have been under‐invested and inefficient, particularly in energy use (Pavlínek and Pickles 2000), but the owners of new private firms were typically managers, engineers or accountants from large state textile and apparel combinats, while workers typically were long‐standing employees of state enterprises, many with experience across a wide range of operations and machines. By the late 1980s, these capacities and skill sets were broadly based, although they had fallen behind those of equivalent firms in Western Europe and East Asia. Nevertheless, the standard technical, accounting, managerial and production skills were relatively strong and were transferred into the private firms after 1989.

However, unlike the apparel industry in Western Europe and the United States, state socialist apparel production in ECE was, even with the emergence of OPT contracting, relatively untouched by the emergence of fast‐moving fashion markets. As Stitziel (2005: 69) has shown for East Germany, “Party leaders hoped to scientifically control fashion in order to make it change ‘according to plan’ and facilitate the harmonization of consumption and production.” This meant that the turnover of styles, the need to develop new designs, and the consequent shortening of the time between conception and sale that became hallmarks especially in the women’s wear fashion segment of Western markets, were not experienced to anything like the same extent in the full‐package, integrated and planned production complexes of ECE (see also Zakharova 2005, on Soviet fashion). Additionally, within the wider context of the shortage economies of state socialism, home tailoring and domestic self‐provisioning of clothing became a widespread practice, further adding to the pool of relatively skilled workers available to the industry.

Slovakia

In Slovakia, the apparel industry had its roots in the collectivist industry model of state socialism.2 The post‐war extensive growth model of forced industrialization transformed the economic structure of the eastern part of then Czechoslovakia away from its earlier industrial and agrarian base (Smith 1994, 1998).3 At its core was the development of heavy industry, notably engineering, steel and armaments. Apparel was an important accompani-ment to this wider process of forced industrialization and to Czechoslovakia’s role in the CMEA in which apparel was increasingly traded with the then Soviet Union in exchange for oil, gas, iron ore and grain.

The industry was built on a small number of privately owned, pre‐ existing firms that had been established in the inter‐war period (Smith 1998). This involved the nationalization of privately owned factories in the late 1940 and 1950s, and the establishment of large‐integrated state‐owned enterprises (SOEs) with extensive branch plant structures often located in peripheral


districts. It developed around two significant regional concentrations; one in central Slovakia, centred around the large Ozeta and Makyta state apparel enterprises producing men’s and women’s clothing respectively, with its associated Merina textile combinat (Trenčín); and one in eastern Slovakia, centred in and around the city of Prešov and the Odevné závody kpt. Nálepku (OZKN) state enterprise, synthetic textiles production in nearby Humenné, and the branch plants of OZKN, which in the 1990s became the independent Zekon and Svik apparel enterprises in Michalovce and Svidník (Smith 2003) (Figure 5.3). Between 1970 and the early 1990s total employment in the clothing industry remained above 20,000, accounting for 4–6% of total manufacturing employment (Figure 5.4).

Nationalization of existing apparel companies and the establishment of new state‐owned enterprises also allowed state socialist planners to balance the largely male‐dominated jobs in heavy industry with employment opportunities for women in apparel and other light industrial sectors. In several districts, such as Púchov in western Slovakia, gendered divisions of industrial employment were particularly sharp with male employment focused in the rubber industry based around the Matador factory and female employment associated with the establishment of the Makyta clothing factory.4 This gender division of industrial labour has remained important, with 86% of workers in the apparel industry in Prešov, as in other regions, still female by 2005.

Together, the articulation of heavy and lighter industrial labour pools, often in the same household, created a complementary process of industri-alization that transformed the regional economies of rural regions throughout post‐war Slovakia. Factory employment became the norm, gender relations were partially transformed as women were increasingly employed in light industrial sectors (albeit based on widespread assump-tions concerning “normal” gender divisions of labour in industrial work), and forms of household social reproduction were altered to take into account the central role of the factory in the reproduction of the domestic economy. With expanded production and employment, the socialist enterprise increasingly became a key site of social reproduction with social wages providing childcare, health care, education, recreation and community infrastructures.5

The result was a transformation in the methods of co‐ordination and integration among productive units enabling the state to co‐ordinate economic planning with social reproduction and community development.6 For example, one of the largest clothing enterprises in the Prešov region in eastern Slovakia was Odevné závody kpt. Nálepku (OZKN) (Figure 5.5). OZKN was a central part of the local apparel production network that accounted for approximately 12% of the total industrial employment in the region in the late 1990s. OZKN was among the largest of the clothing enterprises in Prešov, with a network of branch plants across the region.7

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It comprised a core plant in Prešov and four other branch plants throughout eastern Slovakia with a specialized division of labour among the plants, employing a total of about 5,500 employees. By the mid to late 1980s, like many state‐owned apparel enterprises, OZKN was engaged in OPT

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Figure 5.5 OZKN apparel factory in the mid‐1990s. Photo: Adrian Smith.


production relations primarily with German contractors. Since the early 1990s, large state‐owned enterprises, such as OZKN, and their branch plant economies, have undergone a dual process of privatization and fragmentation. One consequence was the immediate loss of capacities and skills, as large parts of formerly integrated production were replaced by assembly work for export. But, at the same time, fragmentation freed capital stocks and managerial and technical workers to expand their roles in an emerging private sector that became increasingly dependent on these established systems of knowledge, expertise and production dynamics.

Bulgaria

As in Slovakia, the Bulgarian apparel industry was one part of a wider set of state socialist industrial policies aimed first and foremost at the construction of large‐scale heavy industry. From the 1960s onwards, the economy was dominated by large‐scale, fully integrated production units (the commanding heights of the economy (Begg and Pickles 1998)). These were concentrated in core industrial regions. Typically, this ‘combinat space’ comprised ferrous metallurgy, petrochemicals, heavy equipment, armaments, transportation equipment and large consumer appliances. Since the early 1980s, and alongside this ‘combinat space’, a range of border, peripheral region and social industry policies resulted in the decentralization of small assembly operations to border, mountain and ethnic villages (Pickles and Begg 2000). In what elsewhere we have referred to as the “branch plant” and “workshop space” of the Bulgarian economy (Begg and Pickles 1998), textiles, elec-tronics, leather, wood products and apparel industries were organized as a set of dispersed, smaller factories, branch plants and workshops located in district capitals and villages, particularly in large‐scale mining regions such as in southern Bulgaria in settlements such as Kardzhali and Smoylan (Figure 5.6).

As in many parts of rural Bulgaria, apparel was a traditional industry in this mountain region, with homespun production of woollen products using local wool derived from a transhumant pastoral economy that linked the mountain summer pastures with winter pastures of the Aegean. In the nineteenth century, capitalist apparel firms emerged and were later elabo-rated into networks involving the putting‐out of production that linked ethnic villages across the region with the growing twentieth‐century manu-facturing and trade centres in urban centres like Plovdiv. These workshop networks were formally integrated into state socialist structures after 1948 and their production was subsumed to command economy textile combinats and CMEA ‘markets’. For much of the post‐war period, the industry was focused on meeting domestic consumption requirements and the export needs of CMEA countries, primarily the Soviet Union.


In similar ways to the former Czechoslovakia, the industry was linked to a wider set of social goals involving the creation of employment opportunities for women in areas where male employment was being developed through other industrial sectors. From its inception, this distributed workshop economy was underwritten by wages from commanding heights industries (with a pre-dominantly male labour force) and by household agrarian production (espe-cially tobacco and predominantly female). In Bulgaria, a different apparel industry structure developed, however. Employing 20–50 people, the relatively small village workshops did simple assembly work for core plants located in district capitals. They, in turn, took orders from larger regional factories and ultimately operated within a unified combinat national structure. In this system, the regional lead firms enjoyed some level of autonomy and independent con-trol over their networks of regional producers. It was in some of these lead firms and their workshop subsidiaries that Western European manufacturers began placing orders as early as the 1980s, creating a short‐run boom in apparel assembly for export (Fröbel et al. 1981; Pellegrin 2001a), such that by 1989 the industry was sustaining employment levels of around 80,000 or approximately 5% of the total industrial employment (Figure 5.7).

This workshop economy was entirely dependent on the core enterprises for the distribution of orders, inputs and wages. The workshop economy emerged in the particular conditions of the agrarian and household econ-omies it was intended to sustain. The result was a production system whose dependence was articulated with a partial autonomy in matters of work organization, work time and investments in local communities. The rigid

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dependencies meant that post‐1989 withdrawal of core industry support led to the immediate collapse of parts of the workshop economy. But the partial autonomy of the workshop model created additional flexibilities for small‐scale operators able to sustain orders or establish firms after 1989. In particular, rural workshop managers found that secondary incomes from small‐scale tobacco and potato farming and petty commodity trading allowed them to open and close workshops or expand and shrink work-forces, and maintain low wages as costs began to rise elsewhere. It was this combination of low barriers to entry, existing facilities, equipment and skills, and specific conditions of labour in the rural economy that led to a rapid influx of firms into the region in the 1990s and 2000s, particularly from Greece and Turkey. As a result, while the deep economic crisis of the early 1990s initially led to significant contraction in employment in the industry, after 1995, OPT contracting flooded into the region and employment increased dramatically to over 140,000 employees by 2003, when it accounted for 24% of the total manufacturing employment (Kalogeressis and Labrianidis 2009) (see Figure 5.7).

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Figure 5.7 Apparel employment in Bulgaria, 1980, 1985–2012.Sources:1980–1990 Statisticheski Godishnik 1991 Page 147, 701991–1993 Statisticheski Godishnik 1994 Page 186, 561994 Statisticheski Godishnik 1995, Page 89, 861995 Statisticheski Spravochnik 1997, Page 42, 441996 Statisticheski Godishnik 1995, Page 74, 761997–1998 Statisticheski Godishnik 1999, Page 761999 Statisticheski Spravochnik 2000, Pages 46–72000–2012 NSI Special Run 2013


State Socialist Institutional Legacies

While central planning operated on a command and control model of forced industrialization, it was able to do so only through forms of coercive bargaining among state planners, enterprise managers and workers (see Figure 5.1). Such forms of bargaining were necessary to achieve and sustain industrializa-tion in what had largely been agrarian communities and among a workforce whose consent to storm production to meet annual quotas was the lifeblood of enterprise management. Indeed, as Burawoy (1985) and Burawoy and Lukács (1992) have shown for collective industries, and Creed (1998) has shown for collective farming, the politics of production in the factory and on the farm generated forms of collective resistance to state appropriations of product, necessitating complex negotiations and bargaining among all actors. The result was the emergence of alliances between managers and workers that induced large‐scale social and community investments by enterprises. The two went hand in hand: growing (generally ‘passive’) resistance to state, party and enterprise authorities (what Burawoy (1985) has called the “politics of production”) was linked to deepening involvement of those same enter-prises in the provision of social goods and community investments (see Figure 5.2). One consequence of this duality of industrial process was the necessity to create institutions that provided cradle‐to‐grave care, if at diminishing levels of investment by the 1980s. After 1989, these practices were deeply imbricated into the fabric of people’s lives and their expectations of the proper role of the enterprise. The provision of transport, food, vaca-tions, health care and on‐site sales of product at cost all were standard in the state socialist enterprise. For many Slovak and Bulgarian managers and workers, they were the norm to which they had to adjust after 1989 (see Chapter Six).8 These practices played a crucial role in the broader cultural economy of post‐socialism. As such, they highlight the ways in which state socialist legacies articulated with emergent capitalist social and economic relations in the conjunctural space of what is post‐socialist transformation.

Institutionalizing Regulation

While state socialist enterprises were very much the engines of forced indus-trialization throughout ECE, they were also crucial institutions through which worker collectives, labour markets and communities were regulated. Some of the often overlooked state institutions that bore a heavy burden fostering this dual system of enterprise governance and community management, and had to manage the balance between coercion and con-sent among workers, were the state institutes and inspectorates, particularly the Institutes of Technology, the Labour Inspectorates, and the Institutes of Health and Safety. Despite the criticisms levelled against these organizations for being relatively ineffective in the face of strong enterprise management


and local authority pressure, they were in fact relatively effective institu-tions of governance and regulation, operating to normalize codes and standards, check enterprise performance and compliance, and issue man-dates and penalties to foster economic efficiencies, on the one hand, and social protections, on the other.

After 1989, as policy‐makers and restructuring agencies focused their criticisms of socialist economies on their bureaucratic inefficiencies, these Institutes did lose much of their political support and funding for their efforts to maintain and modernize norms and standards (Clean Clothes Campaign 2014). Labour Inspectorates, in particular, lost much of the support they had previously enjoyed, coming more and more to depend on manager discretion instead of state mandate to gain access to factories and workers. Not all factories are now covered by Inspectorates and, with the withering of the post‐socialist state, their geographical reach and institu-tional power have declined, particularly as fly‐by‐night and unscrupulous manager practices have increased (see Clean Clothes Campaign 2014, and Chapter Three). But, for most firms, the presence and efforts of the Inspectorates did continue in some measure, and they managed to maintain some pressure on basic standards and rights, albeit in already compliant factories. In almost annual field visits since 1989 we have encountered the technical personnel from these Institutes pursuing their regulatory roles at the factory level. The inspectors are well trained, often with research and advanced technical skills. In many cases, they continue to have the trust of managers and – in some cases – provide important added services as information providers and technical advisers. But mainly they have pro-duced and sustained a ‘standards floor’ for industrial production below which managers and workers understand they ought not fall.

The same can be said of traditional works councils and trade unions, and the new independent trade unions. With the loss of direct state support, works councils lost a great deal of their previous power and the post‐socialist independent trade union movement declined rapidly. Lacking the mandate to represent workers universally, and without strong worker backing at the factory level, the independent trade unions were forced to re‐build themselves with much reduced funds and access to workers. Nonetheless, as with the Labour Inspectorates, the regional branches and national confederations have per-sisted, and they maintain their active commitments to minimum standards, decent wages and social benefits and protections. Indeed, regional branch and national confederation trade unionists remain among the better informed in regard to the dynamics in the apparel industry, and – while they have little ability to forge new governmental regulations – they continue to organize and lobby for the maintenance of standards and the protection of jobs.

Delocalization of production and loss of local control over orders certainly exacerbated the constraints on trade union organizing and increased the challenges for local branches, national structures and international federations (Bernaciek 2008), but they played significant roles in framing the conditions


of transformation after 1989. In parallel, were a series of other state institu-tions that also had important consequences on the emergence of globalized production complexes in ECE after 1989.

Industrial Policy and Technology Transfer

The socialist state was heavily involved in every aspect of the creation and planning of industrial enterprises, and particularly in pushing industrializa-tion and regional economic catch‐up through investments in institutions of research, technology transfer and learning. State‐led forms of technology transfer, CMEA‐focused ‘marketing’ of products, and political needs to showcase national industrial success led to the building of large‐scale industrial trade fair and exhibition grounds.9 For example, in Bulgaria, the International Fair in Plovdiv emerged as the largest such fair in South‐east Europe. Founded in 1892 as the First Bulgarian Agricultural and Industrial Exhibition, the fair became an international one in 1936 when it joined the Global Association of the Exhibition Industry (UFI). During the commu-nist period it became a showcase for Bulgarian technology and industry, and provided opportunities for enterprises from other CMEA countries to share ideas and innovations (Figure 5.8).

Figure 5.8 International Fair Plovdiv. Photo: International Fair Archive.


Currently, the Fair is still the largest exhibition venue in South‐east Europe, with nearly 160,000 square metres of exhibition space, focusing on the development of Bulgarian industries, introducing innovations and technology transfer, encouraging investment, and establishing partner-ships and markets (Figure 5.9). It has been a particularly important site for the local apparel industry, providing under‐resourced firms with information on new machinery, processes, and markets (Figure 5.10).

Fashion Schools, Branding and Modelling

Another institutional legacy of the state‐planned economy is the design and fashion industry, underwritten by widespread socialist investments in schools of fashion and design. These technikoms have long fostered design skills and workplace experience and training for designers (Figure 5.11). As the apparel industry developed, in‐house design for state enterprises became the norm and, as in several other ECE countries, design professionals continued to find work throughout the period.

Figure 5.9 International Fair Plovdiv, International Exhibition of Textile, Clothing and Leather Goods, 2004. Photo: John Pickles.

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Figure 5.10 Apparel machinery at the International Fair, Plovdiv, International Exhibition of Textile, Clothing and Leather Goods, 2004. Photos: John Pickles.

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Figure 5.11 Student design work, International Fair, Plovdiv, International Exhibition of Textile, Clothing and Leather Goods, 2004. Photo: John Pickles.


Kazalarska (2009: 3) has argued that, under state socialism, the state had an ambivalent relationship with fashion:

On the one hand, fashion was ideologically incompatible with socialist ideals, it was considered a repugnant and unwanted remnant of the decadent, bourgeois, capitalist society; on the other hand, it was deliberately employed as an ideological tool in the shaping of the “new socialist man”, inculcating socialist moral values and virtues. Fashion was subject to the pragmatic considerations governing the centrally planned economy of production and distribution and its deficiencies, at the same time it played an instrumental role in promoting socialist “consumer culture”, especially from the 1960s onwards.

One result was that designers in both Slovakia and Bulgaria tended to link their fashion design work with the pragmatics of daily ready‐made apparel and with national traditions of dress, thus nationalizing and legitimizing fashion under socialism. In this way, fashion became both standardized in three main categories: utopian dress, socialist fashion and everyday fashion (Bartlett 2010), but in association with geographically differentiated design traditions among ECE countries.10

After 1989, as formal sector textile and apparel firms closed or downsized their design departments, these functions were lost to most private firms, but the training programmes remained and designers entered into the more precarious tailoring and dress‐making fashion fields.

Little research has been carried out on the fate of these training programmes or the designers who passed through them into firms and then into other occu-pations. Some designers, who formerly worked in the design departments of SOEs, set up independent design offices, as did many young designers coming out of design schools. Some entered the new domestic brand sector as private firms shifted their end markets away from low‐value sewing for EU export to domestic markets (e.g., Riva, Elegant, and Bonelli in Bulgaria, Figure 5.12). Others concentrated on newly upgraded domestic fashions (Figure 5.13), and yet others shifted their design skills from fashion products to sportswear, technical clothing or ready‐mades for apparel retail outlets (Figure 5.14).

In these ways, the socialist state was a direct and indirect actor in the wider industrial economy. These institutions of enterprise structure, community investment, works councils and trade unions, regulatory bodies and institutes for the training and promotion of skills and products were all fundamental to the trajectories of transformation that emerged as the economy was restructured and integrated in export markets after 1989.

Outsourcing and Delocalization from the 1980s to post‐1989

As producers across ECE began producing under primarily OPT contract primarily for manufacturing and retail companies in the EU and to a lesser extent in the United States, international buyers found in ECE industrial


systems that were unlike many other export processing platforms emerging at the same time. While many of the latter were greenfield sites in export processing zones or make‐shift factory space carved out of other buildings, in ECE, factories were relatively highly capitalized, the regulatory institu-tions were relatively well established, and trained and disciplined workers could be found at all levels of the production process.

(a)

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Figure 5.12 Bulgaria domestic brands, Sofia. Photos: John Pickles.


In Slovakia, for example, large state‐owned apparel and newly privatized firms with long‐standing business contacts in European networks were able to manage the transition, maintain production and deepen their relation-ships with subcontractors. Bulgarian apparel producers were less well integrated into international contracting networks by the late 1980s, but

(a)

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Figure 5.13 Fashion show for domestic brands, Plovdiv, Bulgaria. Photos: John Pickles.


their spatially distributed workshop structures were sufficiently attractive to a wide range of buyers that they were able to survive despite the massive asset stripping and plant closure that occurred in the core enterprises imme-diately after 1989. Thus, OPT production and associated employment in

(a)

(b)

Figure 5.14 Transfer of branded design into domestic technical apparel and ready‐mades. Photos: John Pickles.


the industry expanded dramatically both relatively and absolutely in Slovakia and slightly later in Bulgaria at a time when the wider space‐ economies of both countries were experiencing major post‐socialist recessions (see Figures 5.4 and 5.7).

From the mid‐2000s, with the end of quota‐constrained trade, increasing integration into EU free trade regimes and rising domestic cost pressures, ECE manufacturers faced increased competition from global competitors. In Slovakia, for example, orders were lost as competitive pressures deepened and downward pressure on contract prices made their continued participa-tion in export contracting more difficult. For others, orders were simply lost as long‐term and more recent buyers moved their orders to Asia. Between 2002 and 2011, Slovakia lost 16,000 apparel jobs and value added to the economy declined except for two years (2008 and 2011) (Figure 5.15).

During the 1990s, industrial restructuring in general, and change in the apparel sector in particular, were characterized by privatization, fragmentation of ownership and integration into broader European and global networks. For example, in the Prešov regional clothing cluster in eastern Slovakia, the economy was historically dominated by a small number of large SOEs, but in the 1990s the network of branch plants associated with the core enterprises in Prešov was fragmented and recon-stituted as a group of smaller, private firms. The OZKN enterprise was typical of this process, with its branch plants spread throughout the region (Popjaková 2000). From the early 1990s, large SOEs such as OZKN and their branch plant economies were first broken up into individual,

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Figure 5.15 Value added in the Slovak apparel industry, 1995–2011. ŠÚSR (various years) Ročenka priemyslu SR, Bratislava: ŠÚSR. Note: In Slovak koruna, 000s, value added data from 2008 recalculated from euros.


plant‐level production units and then privatized (Smith 1998). In OZKN’s case, six separate state‐owned enterprises were established in 1990, carved out of the previously integrated OZKN production complex, and in 1995, the main plant in Prešov, as well as its former branch plants, were priva-tized in a typically politicized privatization process common at the time (Smith 2003).11 In addition, a number of new firms emerged. Established during the early 1990s by managers formerly working at OZKN, some of which were able to draw on their OPT‐focused networks established in the 1980s, these firms invariably involved joint ventures with Italian and German co‐owners. In these cases, managers were able to leverage existing knowledge, production experience and contracting networks to establish new private firms as participants in international production networks. In the process, each new firm had to reassess its product lines as former CMEA markets were lost and buyers from Western Europe often required changes in specific product ranges. In certain cases these product switches were dramatic. One plant, for example, which produced children’s clothes as part of OZKN diversified after privatization into a wide range of male and female clothing for domestic and largely EU markets, with its original products accounting for only about 5% of the firm’s output by the late 1990s. In these cases, firm continuity masked fundamental product shifts and different requirements for enhanced quality and flexibility. In other cases, the product shifts required the downgrading of product styles and quality. The core and branch plants which were most effectively able to respond to the changing external contracting environment were often those which were privatized by former apparel managers and production engineers, rather than those which underwent more speculative and polit-icized processes of privatization in which managers were often installed with only limited experience of the apparel industry.

Many of the new firm managers coming out of state enterprises were able to maintain their well‐established contacts and through them access to western markets. A clear example of this process is the case of a German‐Slovak joint venture investment in Prešov to produce men’s (and later women’s) trousers for export to Germany. In the early 1980s, the German investor contracted the main OZKN plant in Prešov to produce trousers for export to Germany and, working with a small group of managers,the German industrialist developed close working relationships and ‘trust’ with the Slovak managers. During the early 1990s, the German contracting firm found that continued management changes and a financial crisis in OZKN created difficulties for reliable supply of trousers and threatened the via-bility of its supply system. While in many firms, the result was the exit of buyers, this did not occur with OZKN. Instead, working through two former OZKN managers who had left the state‐owned enterprise in the early 1990s, the German producer established a greenfield joint venture plant in Prešov to replace its OPT‐oriented contract production at the OZKN plant.


The Slovak former OZKN managers became managing directors and local operational managers of the new plant established in late 1993.

Former SOEs depended on close working relations among the integrated core and branch plants. With privatization, these horizontal relations of supply, sub‐contracting, and work sharing became resources for the now independent managers (see Pickles 1995). Close contacts were sustained between many such production units, with labour and contract sharing occurring as contract demands created the need for additional capacity or shortened delivery schedules. Sub‐contracting labour and contract sharing thus become ways of managing uneven contract flows, uncertainty and risk in the much more tenuous European buying networks.

These relationships between contracting firms with Western contacts and other firms in the production networks, such as smaller local producers, allowed flexibility but also depended on tenuous and often asymmetrical power relations. While the new private firms that spun off from OZKN were able to leverage relatively stable orders, shared knowledge, and – at times – investment capital, the sub‐contractors were often in more precarious posi-tions, dependent on the periodic flow of sub‐contracts yet dependent on the horizontal commitments in the regional economy. For example, the Slovak‐German joint venture discussed above had been operating at full capacity on two shifts for most of the late 1990s and early 2000s, and in order to meet increased orders for export to Germany one of the Slovak managing directors built upon his close links with another plant in the former OZKN complex in Michalovce. The Michalovce plant (which typically specialized in the production of work garments and jeans) was contracted to produce 600 pairs of trousers per day in the mid‐1990s that would then be exported to the German parent firm for sale to German retailers. The same manager had also been acting as the export agent of the Michalovce plant, given his pre‐established close contacts with other actors in the branch plant struc-ture of OZKN and with EU buyers as part of a network of relations built up in the 1980s, particularly those in Germany. While long‐standing relations between key firms in these networks of Slovak firms are important in estab-lishing ‘trust’ on which to base contracting relations, tight turn‐around time, relatively poor remuneration and very limited control over the design/production process characterized sub‐contracting relations and produced a kind of dependent system of ‘putting out’; a regionalized system that – with increasing costs pressures in Slovakia – became geographically extended to neighbouring Ukraine (see Chapter Seven). In addition, as the volume of orders diminished and contract prices tightened as trade liberalized and new low‐cost competitors emerged, sub‐contracting to more peripheral firms in these localized production networks also diminished.

More generally, the continuation and reconstitution of apparel produc-tion networks were increasingly based on OPT and contract production arrangements with Western European buyers and joint venture owners.


The result was a profound pulling apart of the relationship between the textiles and the apparel sectors in both Bulgaria and Slovakia. Domestic employment and production in textiles production, which had been an important component of state socialist integrated apparel production systems, reduced significantly in both countries (Figure 5.16, Table 5.1). The very significant decline in textile activity resulted from the increasing reliance on imported (often pre‐cut) cloth under OPT contracting and customs conditions. In Chapter Six, we discuss some of the limited ways in which Slovak and Bulgarian firms have upgraded into full‐package pro-duction with greater responsibility for sourcing fabrics. However, in the Slovak case, the requirement for high levels of fabric quality to produce a key export product such as tailored men’s and women’s suits for the Italian market has meant that this increasing level of firm responsibility in

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Figure 5.16 Employment in Bulgarian textiles and apparel, 1980–2012.

Table 5.1 The development of the textile and apparel industry employment in Slovakia as a share of industrial employment, 1989–2012

Employment

1989 1996 2000 2003 2012

Textile and apparel industry

9.3 10.4 10.5 10.4 4.2

Textile 6.3 4.5 4.0 4.1 1.2Apparel 3.0 5.9 6.5 6.3 3.0

Source: Data provided by the Ministry of Economy of the Slovak Republic 2004, and Štatistický úrad Slovenskej republiky (2013) Štatisticka rocenka 2013, Bratislava: ŠÚSR.


the apparel segment of the chain has not translated into a rejuvenation of the extensive local sourcing of textile inputs.

In the immediate aftermath of 1989, scholars and policy‐makers in both Western and Eastern Europe denigrated the scale, scope and sustainability of SOEs and planned production. Others questioned the overly simple transition logics of ‘From Plan to Market’ (World Bank 1996) and the social consequences the resulting policies produced (e.g., Smith and Pickles 1998). This transitology had important effects on the apparel industry. For example, in 1994, in the context of a perceived crisis of employment and output in the industry the Bulgarian government declared that its apparel industry was dead. In practice, by the mid‐1990s workshops that had been quickly closed down after 1989 were being re‐opened throughout the mountain regions of the south. As a result, the apparel industries of the region emerged as an important component of the overall development model of post‐socialism at the very time that state policies withdrew from the sector.

It was precisely the focus on extensive industrialization and core indus-tries in engineering, steel and weapons production in the context of the Cold War (Smith 1998) – what Kaldor (1990) has described as the war economy of state socialism – that continued to shape the privileging in policy discourses of certain “strategic” segments of industry after 1989. As a result, the sectoral focus of such discourses shifted to a new generation of the commanding heights or lead industries and sectors of the economy, including automobile production, financial services, information technol-ogies, electronics, and discourses around the creative economy; thereby overlooking the apparel sector as a policy focus and an industry critical to employment opportunities in peripheral regions.

From MFA Phase‐Out to European Union Accession and the Economic Crisis12

Surviving and negotiating the economic crisis of the early years of post‐socialism involved privatization and the reconfiguration of production net-works and contracting systems. These forms of restructuring enabled parts of the apparel production system to undergo expansion, while links with integrated textiles largely collapsed, apparel factories became dependent on imported bundled inputs, and design and marketing functions were lost to international buyers. The effects on value capture were drastic; an industrial revitalization whose form was no longer balanced across the value chain, but limited to sewing and externally driven contracting and prices. However, as we note later and in future chapters, product‐specific specialization (such as high quality tailored garments (e.g., suits) and workwear/protective clothing), which were derived from particular skill‐sets and specializations


under late socialism, provided a resource in the Slovak context for the sus-tainability of some parts of the industry. Employment grew earlier in the 1990s in Slovakia and particularly (slightly later) in Bulgaria (as also in Romania), but this growth was a symptom of the constrained position firms found themselves in, rather than of a dynamic industrial revitalization. As a result, the primary pressures on the industry during the 2000s were derived from six key dynamics, which have dramatically transformed the industry through a series of crisis tendencies.

First, particularly with the removal of quotas on imports to major mar-kets in 2004, a race to the bottom in contract pricing emerged globally. Significant segments of export production saw increasing competition from elsewhere (notably, but not only, China) as the liberalization of the trade regimes took effect (see Chapters Three and Four).

Second, EU enlargement in 2004 (Slovakia) and 2007 (Bulgaria) led to increasing wage pressure in the industry (although not only in the apparel sector), with higher wage demands and migration opportunities creating tightening labour markets for low‐wage industries such as clothing (see also Plank and Staritz 2009; Plank et al. 2013). Firms experienced upward pressure on wages and social payments at the very time that contract prices were being squeezed by lead firms, and energy and other input costs were rising. The result was devastating for some of the residual state‐owned and private firms that could not leverage social networks and upgrade into higher quality production, or develop a presence in domestic markets, pro-ducing a concentration of the industry around fewer producers and more stable contracting arrangements (see Chapter Six).

Third, Euro‐zone accession in Slovakia added to the cost pressures for clothing producers. In particular, the relative export competitiveness of Slovak firms was further undermined through the appreciation of the Slovak koruna against the Euro in the run‐up to Euro‐zone integration.13 The effects of this were heightened because many production contracts with West European buyers had already been negotiated in euros.14 While some firms were able to negotiate currency appreciation and wage inflation pressures through a twice‐yearly system of contract price renegotiation with their EU15 buyers,15 the export competitiveness of many firms was affected.

Fourth, currency appreciation occurred at the same time as national leg-islation increased the minimum wage level in Slovakia, which increased wage levels for the lowest paid segment of industrial workers in Slovakia, among which clothing workers were a significant group. Following an eight‐year period of wage limitation under the neo‐liberal Dzurinda governments (see Stenning et al. 2010), the social democratic‐nationalist/populist coali-tion which came to power in 2006 increased the national minimum wage by 10.2% in October 2006 (to €220) (Barošová 2007) and by a further 4.1% to €308 in January 2010.16 This reflected not only changing national political priorities but also a political settlement following the 2006 election involving


a stronger role for national trade unions and greater positional power for organized labour.

This was compounded by a fifth dynamic involving a tightening of local labour markets as a result of labour out‐migration following EU member-ship and sectoral restructuring, particularly as small firm development and shifts into tertiary sector employment became more important (see also Plank and Staritz 2009). Despite the fact that for many workers the expected benefits of migration to the EU15 were not always realized,17 out‐migration and sectoral restructuring both served to create a situation in which factory managers found themselves having to provide additional wage and non‐wage benefits in order to deal with a tightening labour market for apparel workers. The managing director of one large, former SOE in eastern Slovakia, for example, estimated that wage inflation (despite the fact that apparel workers remained the lowest paid of all manufacturing employees) along with currency appreciation, had increased total operating costs by 22% in 2008 alone.18

Sixth, and finally, the global economic crisis had a significant impact on these regional production systems, as core markets in Western Europe con-tracted and orders were lost. According to data from EURATEX,19 EU household consumption in textiles and apparel fell in 2008 and 2009 for the first time in seven years, and 2011 consumption remained below levels achieved in 2007. The economic crisis increased pressure on the industry, which, in the case of Slovakia, led to significant reduction in exports to core markets in EU15 countries of ‐32% between January 2008 and the low of May 2009.20 This was accompanied by extensive downsizing and bankruptcy in the industry. In Slovakia, in the context of increasing global competition resulting from the phase‐out of quota‐constrained trade and the more recent decline of export markets in the EU15, demand has fallen and employment in key plants in the industry is estimated to have fallen by over 6,000 employees since 2005 (see Appendix 1), with total employment losses being much higher. During the height of the economic crisis, national pro-duction fell in Slovakia by 36% in textiles and apparel at the lowest point in February 2009 and by 10.7% in 2009 as a whole (compared to 2008). Exports to the main EU15 markets fell by 7% between 2007 and 2008 and have not returned to early 2008 levels except for one month (November 2010), with significant monthly fluctuation.21 Overall, Slovakia’s share of the EU15 apparel market has fallen from 1% in 1995 to 0.5% in 2011, although, as we note in Chapter Six, there are certain product niches which have proved very resistant to these wider changes. Indeed, since December 2009 there has been a slow return to positive export growth in the Slovak apparel sector. In Bulgaria, the employment effects of the 2008 economic crisis have been significant, with apparel employment falling from 143,000 in 2007 to approximately 100,000 in 2012 (see Figure 5.7). This reflected a similar impact of the crisis on Bulgarian apparel exports to the EU15, which


fell by 6% between 2007 and 2008 and by 19% in the first five months of 2009 (month on month with 2008).22 We return to this deep crisis in the Bulgarian apparel sector in Chapter Nine.

The increasing costs and other pressures on the industry in the 2000s have meant that many large former SOEs, with significant firm‐level overheads and requiring large orders from Western buyers and retailers to sustain production, either downsized employment or were forced into bank-ruptcy (see Chapter Six). For example, in 2007, the OZKN enterprise in Prešov, discussed above, entered bankruptcy, involving the redundancy of the remaining 440 employees following the loss of its main, long‐standing export markets in the EU15.23

The ways in which firms have adopted strategies in the attempt to cope with these dramatic waves of crises – post‐socialist economic crisis, MFA phase‐out and attendant global pressure on apparel contracting prices, and the 2008 global economic crisis and related slump in demand for apparel products in core markets – are the focus of Chapter Six. That chapter exam-ines these dynamics in relation to the strategies for upgrading, downgrading and backsliding which have been deployed in the apparel sectors of Bulgaria and Slovakia since 1989.

Conclusion

In this chapter, we have examined how waves of post‐socialist and global economic crises, and other external pressures, have articulated with the actually existing transitions in the apparel industry in Slovakia and Bulgaria. We have argued that economic geographers and political econo-mists studying the transformation of GVCs and GPNs can benefit from a contextual and embedded analysis of the complexities and dynamic rela-tions involved in political economic circumstances such as post‐socialism. For example, we have shown how the very possibility of integration into GPNs was only realized because of the embeddedness of those produc-tion systems in the fabric of the state socialist economy and the party state. Consequently, the opportunities arising for apparel firms after 1989 were shaped by a combination of new and old social forces, the legacies of state priorities and state investment programmes in the planned economy, established and new institutions and practices, and by forms of capital that emerged in the spaces of privatization at home and the “opening” to the global economy that 1989 represented. The conjunctural moment which these legacies of state socialism and the planned economy created provided certain forms of relational assets on which the transition to capitalism could build when structuring the apparel export economy into the form that it takes today. These legacies have also provided some of the resources which firm managers have used to weather the waves of crises which have


impacted the industry, particularly post‐socialist economic crisis, quota phase‐out, trade liberalization and intensifying competition, and the global economic crisis.

Notes

1 In the early 1970s, the central government acknowledged significant differences in the economic status of Bulgarian regions (MRDC 1996) and in 1979, in the ‘New Economic Program’ deliberate efforts were made both in agriculture and in industry to make rural areas of the country more self‐sufficient (Koulov 1992). Three related policies were designed to slow rural to urban migration, raise the rural standard of living, and address the needs of the most disadvan-taged communities. The first was the Border Regions Policy, which encouraged industrial branch plants and infrastructure investment in 97 obstini (districts) along the southern and western borders of Bulgaria (MRDC 1996). The second was the Mountain Regions Policy that included, additionally, some of the more remote Balkan obstini. The third, the Social Industries Policy, targeted obstini with high concentrations of Muslims and Roma.

Together, these policies of industrial allocation, credits and financial support constituted an explicit industrial location policy that from 1981 began to decen-tralize small assembly operations to border, mountain, and ethnic villages. The regional headquarters, through which workshops received orders, enjoyed some level of autonomy and engaged in specialized production for both CMEA markets and markets outside of the CMEA system. In 1988, the policies covered 54 obstini along the western and southern borders of Bulgaria and affected 570,000 people in 1,028 settlements (Koulov 1992: 397).

2 By collectivism, we mean the state’s ideological commitment to state ownership of the means of production.

3 Forced industrialization involved the planned allocation of industrial investment in what were often agrarian districts and was a central element of the extensive growth model of state socialism, which centred on the expansion of the produc-tive forces and of industrial labour (see Smith 1998).

4 In 2005, 89% of employees in the apparel industry in Púchov were women. See also Plank et al. (2009) for a parallel argument relating to Romania.

5 See Domański (1997) for a wider view and Smith (1998) for a discussion of this in the Slovak context.

6 This process of co‐ordination was always partial and contested under state socialism as analyses of plan bargaining and factory hoarding of inputs attest (see Burawoy and Lukács 1992).

7 OZKN was established in 1948 following the nationalization of two smaller garment manufacturers.

8 This was, of course, not the case for all Bulgarian firms, and not generally found in Greek and Turkish management systems, nor in de novo private enterprises in Slovakia. However, our interviews with Turkish‐owned and managed firms in south‐eastern Bulgaria in the 1990s and 2000s showed that several continued to underwrite social wages, largely as a means of keeping actual wages (and hence social insurance costs) at a minimum.


9 See Petrović (2013) for a discussion of the role of regulatory institutions and the symbolic collective worker in post‐socialist former Yugoslavia.

10 In on‐going research at the Centre for Advanced Study and the Department of Anthropology at Kliment Ohridiski University, Sofia, Kazalarska (2013) has documented the institutions that contributed to the production of these forms of socialist fashion. These include the central dress institution in the country (the Center for New Assortments of Products and Fashion (CNAPF) (1960–1991), renamed in 1963 the Center for New Products and Fashion (CNPF)). This centre, in conjunction with the fashion magazines Bozhur (1956–1991) and Lada (1959–1992), was the main unit fostering state policies on fashion and industrial design.

11 OZKN was bought by Dušan Migaš, brother of the head of the Slovak Parliament at the time. Migaš became President of the board of directors of OZKN and his wife, at the time, became enterprise director. Similarly, one of the branch plants of the network in Svidník was privatized in part by a former minister in the communist state and father of Ivan Lexa, who was Deputy Minister of Privatization at the time the enterprise was sold (and latterly became the controversial head of the Slovak Secret Service).

12 This section is in part updated and revised from a section of Smith et al. (2014).13 Between 2005 and 2008 the Slovak koruna appreciated in value against the

euro by 24% (Kubosova 2008; see also Plank et al. 2012)), and this continued in 2008 (16% in May 2008 alone), just prior to the European Central Bank locking the euro‐koruna exchange rate for the 1 January 2009 conversion to the Euro.

14 Interview with senior manager, German‐Slovak joint venture, Prešov, June 2008; interview with senior manager, German‐Slovak joint venture, Spišska Nová Ves, June 2008.

15 Interview with senior manager, Italian‐Slovak joint venture, Prešov, June 2008.16 See www.sktoday.com/content/2088_minimum‐monthly‐wage‐slovakia‐rose‐

307–70.17 Interview with senior manager, German‐Slovak joint venture, Prešov, June

2008.18 Interview with managing director, former state‐owned enterprise, Michalovce,

October 2009.19 Interview with senior personnel, EURATEX, Brussels, July 2012.20 The Slovak experience was mirrored in other countries in ECE, although in the

case of Poland, clothing exports to EU15 markets increased over this period, as they also did in Romania after 2010 (see Chapter Three).

21 Industrial production data for February 2009 are derived from Štatistický úrad Slovenskej republiky (2009a) and for 2009 as a whole from Štatistický úrad Slovenskej republiky (2009b). Trade data are extracted from Comext; the Eurostat trade database.

22 Apparel exports from the largest exporter in the region, Romania, also fell by 11% between 2007 and 2008 and by 21% in the first five months of 2009.

23 Most notably this involved the loss to Chinese producers of orders from the Spanish retailer Induyco, which combined with continuing high operating costs to undermine the financial viability of the firm (Buzinkay 2007).

Part ThreeIndustrial Dynamics, Regionalization and the Conjunctural Economy of Global Production Networks


Theorizing Transition and the Dynamics of Capital: The Diverse Trajectories of Post‐socialist Firms

Chapter Six

Introduction1

In this chapter we focus on firm‐level strategies and industrial upgrading in order to problematize two aspects of the current state of GVC research. We show how linear models of upgrading can be better understood in terms of a diversity of firm accumulation strategies and a multiplicity of chain trajec-tories and network interactions that emerged in response to changing patterns of competition and governance in global contracting. Then we show some of the ways in which many post‐socialist firms were, first, forced to adopt, and then made use of, a diverse array of functional, process and product downgrading strategies in order to remain viable in business terms.

We make three main arguments about upgrading and its diverse and constrained dynamics. First, as outlined in Chapter Five, the expansion of European production networks and the internationalization of ECE manu-facturers have been built on prior histories of contracting between state socialist enterprises and trade organizations in ECE and their Western buyers, speaking to the long histories of articulation of capital across European space. Second, increased competition and variable trajectories of upgrading/downgrading have produced a diversity of strategies and organi-zational forms in the industry, which problematize any singular logic of

(with Robert Begg, Milan Buček, Poli Roukova, and Rudolf Pástor)


industrial upgrading. This diversity of trajectories is, in part, related to the degrees and forms of articulation with international and domestic markets and with other producers in the industry. Third, the experiences of apparel firms in Slovakia and Bulgaria raise questions about models of regional change in the industry based too narrowly on wage costs and wage differen-tials, on the one hand, and overly narrow conceptions of upgrading, on the other hand. While these remain important, there are particularities about the apparel industry in the region that illustrate the broader logics that are shaping the current geographies of industrial activity, a point we also return to in later chapters.

We have focused on the meteoric renewal, retraction and recent restruc-turing of the apparel industry in Bulgaria and Slovakia, described in the early 1990s as dying or moribund. We considered the ways in which the industry has been sustained yet restructured and the extent to which the particular forms of reinsertion into international production networks have enabled the industry to adjust to competitive pressures and the challenges associated with wider political economic forces, such as EU enlargement, the 2008 economic crisis and the liberalization of trade. In this chapter, we draw upon the three sets of firm‐level accumulation strategies mapped out in Chapter Two (in situ restructuring within firms; relocation of production; and the establishment and deepening of strategies of inter‐firm networking to transform economic organization and the profit strategies of firms) to demonstrate how legacies of state socialist industrialization, the de‐ industrialization after 1989, the subsequent reinsertion of the industry into export assembly production networks and trade liberalization and economic crisis have shaped the particular forms of industrial resurgence, have produced diverse strategies for managing opportunity and risk and have shaped the geographies of production, trade and regional development in the two countries. Understanding the ways in which these accumulation strategies interact with each other has important consequences for firms and regions with diverse upgrading and downgrading trajectories. In so doing, we examine the question “upgrading for whom?” (Bair 2005; see also Smith et al. 2002), turning to processes of differentiated inclusion in global value chains and production networks.

Industrial Upgrading, Regional Transformations and the Diversity of Industrial Trajectories

Existing approaches to industrial upgrading emphasize the importance of understanding three issues in explaining the extent to which upgrading takes place: (1) value chain position; (2) inter‐firm learning; and (3) forms of governance. As we showed in Chapter Two, researchers have defined four

theorizing transition and the dynamics of capital 139

types of firm‐level upgrading in global value chains: product, process, functional and chain upgrading (Humphrey and Schmitz 2002). The implicit normative expectation in much of this work has been that firms and countries (less so regional economies) that upgrade do so in order to pro-duce higher value‐added products or to take on more sophisticated functions over time, and this captures a higher proportion of value in the chain. At the same time, firms and countries that are unable to add functions, change products or change their relationship to others in the chain may see orders decline, their costs squeezed and their employment prospects diminish.

This approach to global value chains has been exceptionally generative of analyses that avoid what Agnew (1994) called the territorial trap by moving beyond the national economy and the specific focus on national firm‐ behaviour as foundational concepts for analysis. By focusing on the array of network rela-tions that structure the production and circulation of value, GVC scholars have been able to assess the asymmetries of power between lead firms and suppliers (Gereffi 1994, 1999) and the different forms of governance that marshal and exercise this power (Gereffi et al. 2005). However, until recently, GVC research has also tended to freeze complex and diversified circuits of economic activity into fixed geographical frameworks where consumption is presumed to be largely located in the North and production has been increas-ingly out‐sourced to cheap labour markets in the South (Leslie and Reimer 1999). In other words, the GVC literature, which links local suppliers in the ‘periphery’, on the one hand, and global buyers in the ‘core’, on the other, has implicitly portrayed the global sourcing system as made up mainly of two camps: lead firms from the advanced economies and ‘generally‐acknowledged weak’ manufacturing suppliers from the developing countries. Recent GVC analysis is now focusing on the effects of the rising powers of Brazil, India, China and South Africa (the BICS), the new patterns of consumer demand in the South, the emergence of regional production networks and the growing importance of domestic sourcing, further increasing the need to reassess how this North–South dualism has shaped the model of the chain in ways that now make revision of the concept of upgrading necessary.

The shift in analytical focus in GVC research from an earlier emphasis on the significance for economic development of the difference between buyer‐driven and producer‐driven commodity chains (Gereffi 1994), to one oriented towards understanding the mechanisms whereby industrial upgrading can be achieved has produced a series of rich contributions to exploring the developmental implications of upgrading (Tokatli and Kizilgun 2004; Bair 2005, 2009a; Gereffi et al. 2005; Tokatli 2007a, 2007b; Cattaneo et al. 2010). These contributions have paid particular attention to the increasingly expanded integration of producers and workers in various parts of the world into export‐oriented production networks (e.g., see Leslie and Reimer 1999; Begg et al. 2003; Smith 2003; Smith et al. 2003; Bair 2005, 2009b; Smith et al. 2005).


However, Tokatli (2013) has pointed to several weaknesses in conven-tional GVC studies of upgrading. These include an inaccurate under-standing of the diverse and somewhat complicated ways in which apparel firms try to upgrade; the limited success in showing precisely how upgrad-ing is related to additional value capture in the industry; and the tendency in the literature to black‐box so‐called high‐value functions like design, branding, marketing and retailing (also see Tokatli and Kizilgun 2004, 2009, 2010; Tokatli 2007a). Tokatli (2007a, 2013) has further stressed that despite the focus on power asymmetries and chain governance within the global apparel industry, questions about the exact manner in which global buyers make their suppliers act in certain ways and prevent the latter from encroaching on their core competencies have not yet been thoroughly answered. Bair (2005) and Plank and Staritz (2009: 66) have similarly argued that attention is needed beyond the black box of the firm to consider also who benefits from upgrading. And, as Pickles (2012) has documented, the recent history of trade preferences, rules of origin and other trade rules has been one that locks in Southern markets for Northern textile producers while constraining upgrading opportunities for many new entrants into CMT and OEM export production. From this perspective, opportunities for upgrading and a high road to development are highly uneven; high-lighting the need for a focus on differential inclusion into GVCs and GPNs.

Equally important in understanding regional industrial performance is the possibility that functional, product and process downgrading may operate as important business strategies for firm survival and employment maintenance. Introducing downgrading to the debates about upgrading decentres the commitment to linear logics of development that have become so much a part of recent GVC literatures, focusing attention instead on the historically and regionally specific conditions within which production con-tracting and industrial networks have emerged. Just as all upgrading strat-egies do not always lead to market success, so too some experiences of ‘downgrading’ can result in expanded contracting and sustained employment; a point also made in Gibbon’s (2008) work on clothing firms in Mauritius (and outsourcing to Madagascar) and Gibbon and Ponte (2005). Equally, Ponte and Ewert (2009: 1648), in their study of the South African export wine sector, have argued for a need to “break away from normative views of upgrading as ‘moving up the value chain’ or as always producing ‘value added‐products’”, and embrace a view that a “better deal” for developing country firms “may entail sometimes processes of functional downgrading and periods in which even product downgrading may be the best option available”.

While Gibbon and Ponte argue that upgrading becomes an empirical question of how suppliers negotiate the “structure of rewards” (2005: 93), we wish to think differently about the diversity of trajectories of upgrading and downgrading in GPNs. For us, the key issue remains not only the form


of insertion of firms (and regional economies) into global production net-works, but how this insertion into a structure of rewards is embedded in the territorial configuration of value generation and contemporary and past institutional and state governance arrangements. In some respects, this is the agenda favoured by GPN analyses of “strategic coupling” of regional/local assets with priorities of global firms (Henderson et al. 2002; Coe et al. 2004; Yeung 2009). But our argument is also broader in that understanding the diversity of adjustments in global industries and the specific processes of transformation in the ECE apparel sector requires understanding the embeddedness of decision‐making and the over‐determined nature of pro-duction outcomes. In so doing, we show how individual firms and regional production complexes are differentially included in global production net-works, and how a range of processes, including the complexity and contin-gent nature of upgrading, are shaped by institutional, state and geographical legacies and social forces ‘beyond’ the economy (e.g., regional ethnic resources (see Chapter Nine)). We also show how diverse and uneven patterns of regional and firm‐level upgrading can simultaneously generate competitive advantage for some and disadvantage for others, proliferating or locking in specific forms of production in particular regions.

We pay particular attention to the diversity of firm‐level and networked industrial trajectories in globalizing industries in ECE, particularly by focusing on who benefits from upgrading at social and regional levels (see also Smith et al. 2002; Bair 2005). This requires an understanding of how the diversity of upgrading/downgrading trajectories is linked to wider processes of industrial transformation. We do this in three ways. First, we investigate the role of foreign direct investment, the position of supplier firms in the supply chain and their proximity to ‘core’ capital. Second, we show how historical legacies of industrial production, product mix and labour organization have affected firm and regional participation in global production networks. And third, we show the critical importance of interro-gating the product specificity of upgrading trajectories. Throughout, we are interested in the ways in which decisions about upgrading and downgrading are affected by the location of ECE producers close to their major markets and by the resulting firm and inter‐firm efforts to reduce the turnover time of capital as industry demands for more seasons and faster delivery increase (Plank et al. 2012). Geographical proximity to core markets plays a critical role in this process of risk management. The way in which the landscape of profit gradients is shaped has much to do with the ways in which GPNs are embedded in proximate territorial and geographical contexts.

Proximate sourcing has enabled post‐socialist apparel firms to persist and maintain their position in production networks despite trade liberalization and regional and global financial crises in part because they have down-graded their production processes, product mix or technical capacities. Geographically proximate sourcing has also allowed Western buyers and


partners in joint ventures, especially with Slovak firms, to manage their own requirements to minimize capital at risk in supply chains by developing regionalized production networks that respond rapidly to market require-ments and quick stock replenishment needs, even as they expand their global sourcing footprint. In this sense, regionalized sourcing networks have – for the moment at least – become more, not less, important in the buying strategies of lead firms focused in particular product areas and business strategies (such as “fast fashion”). At the same time, as ECE apparel manufacturers have reorganized to meet these emerging niches, they have done so in conditions of trade liberalization, economic crisis and overall declines in contract prices. The resulting shifts in relative production costs have increased the level of precariousness faced by many firms and workers.

In making these arguments, we focus on the need to understand industrial upgrading as one of several potential outcomes experienced in apparel industries. The specific firm pathway depends on a range of possible choices and conditions: the management of precarious contracting by firms integrated into CM and CMT assembly production and unable to upscale capacity, technologies and skills; the role that geographical and market proximity has played in enabling some firms to undertake functional and process forms of upgrading; the partial emergence of own product development and diversification of production profiles; and the turn to domestic production for some firms.

Negotiating Assembly Production: Post‐Socialist Downgrading from Fully Integrated Production to Outward Processing

GVC analysis has often failed to focus on the historical conditions in which capitalist firms emerge, either from their agrarian roots (e.g., Bair and Werner 2011, on Mexico) or, in our case, from their state socialist origins. As we mapped out in Chapter Five, the incorporation of ECE apparel production systems into European production networks was built on prior histories of investment and fully‐integrated production systems supplying CMEA markets. By the 1980s contracting between state socialist enterprises and Western buyers began to be important to some state‐owned enterprises, but these arrangements focused entirely on process and product downgrad-ing, as former full‐package producers adjusted their enterprises to hard currency stitching contracts. To deal with this wider context of uneven restructuring and upgrading/downgrading relations, we use a heuristic model (Figure 6.1). This ideal‐typical model represents the diverse adjustments made by apparel firms in ECE as they became integrated into broader European production networks. Firm types are arrayed along two axes in terms of their mix of domestic and export market activities, and


their position in the apparel value chain. We highlight five main types of firm, each of which reflects distinct mixes of production process and market, and in ways that allow us to represent functional upgrading and downgrad-ing as potentially successful business strategies:

1. negotiating assembly production;2. functional upgrading and market proximity;3. diversification and own product development;4. low value domestic production strategies; and5. the emergence of full package ‘network organizers’ involved in the

co‐ordination of regional production systems, which are considered further in Chapter Seven as they relate to cross‐border arrangements between Slovakia and Ukraine.

In Slovakia, the engagement with export production for non‐Soviet markets began in the early 1980s when German buyers began to make use of OPT arrangements. Unlike the earlier full‐package production, export contract-ing for European buyers was largely bundled assembly work, later CM and CMT. The two main production locations were Trenčín and Prešov (see Chapter Five). In the Trenčín region, Ozeta and Makyta were the main enterprises, with the former producing men’s clothing and the latter women’s clothing. In Prešov, the main producers were OZKN and its network of branch plants across eastern Slovakia and the Vzorodev co‐operative

Position in supply chain

Full bundle assembly

CM CMT

Full packageODM OBM

Export 100

Domestic 100

(1) OPT producers @ bottom of supply chain

(2) OPT producers upgrading into full-package export and/or domestic ODM

(4) Domestic producers upgrading into ODM, with OPT

(3) OPT producers upgrading into domestic and export OBM

(5) Large full-package former SOEs/branches diversifying positions and product niches from OPT to domestic OBM. Development of network organizer role.

(4) Low-end domestic market

(4) Domestic producers upgrading into export markets and OBM

Figure 6.1 Ideal‐typical forms of firm transformation in the East European apparel industry.


(see Chapter Five). This structure of large SOEs and their branch plants has been an important factor in shaping the nature of restructuring in the industry after the collapse of state socialism. These factories and their spin‐offs continued to dominate the local industry in both regions throughout much of the 1990s, although in recent years two of the three firms have filed for bankruptcy and restructuring. More importantly perhaps, they also became the basis for the establishment of a host of new private firms that were either created through the privatization of the branch plant network of enterprises such as OZKN or through the establishment by former man-agers in the main SOEs of new, independent factories (see Chapter Five). The particular skill and product profiles of production under state socialism have affected the form that post‐1989 OPT and other export production have taken, with a focus more on higher‐value tailored garments, suits, and trousers, than on lower‐value knitwear such as t‐shirts.

In Bulgaria, while higher‐value tailoring also exists, assembly firms have tended to shift into other product areas, particularly in knitwear, women’s shirts and t‐shirts. This kind of production has been connected to the particular role of Greek and Turkish buyers operating in the region (see Chapter Eight). These producers have made extensive use of the small and medium‐sized enterprises that were formerly part of the state‐owned subsidiary networks of workshops established in the 1970s and 1980s (Begg and Pickles 1998; Pickles and Begg 2000; Pickles 2002; see Chapter Five). This extended economy of workshops and small factories offered low‐cost factory space and equipment in places with existing labour pools of seam-stresses, technical workers, and managers, and its location in border areas offered important advantages in the timing and flexibility of inputs, deliv-eries, and access – directly and through Turkey and Greece – to important export markets in the EU and the United States.

Typically, firms that rely on OPT assembly‐only contracts are in the most precarious position as cost pressures increase (scenario 1 in Figure 6.1). About half of the firms surveyed in both Slovakia and Bulgaria in 2003 reported using bundled inputs, with many of these sourcing few or no inputs themselves; just over two‐thirds of Bulgarian firms and almost half of Slovak firms reported relying entirely on 100% bundled inputs. In western Slovakia as cost pressures increased, producers relying on bundled assembly, CM, and CMT production lost orders to lower‐cost locations in eastern Slovakia or in parts of the former Soviet Union, particularly to Ukraine (which we explore in more detail in Chapter Seven). Because such firms relied on relatively simple sewing activities, the possibilities of adding value in produc-tion were limited. Such firms tended to sew garments from patterns and designs provided by buyers and contractors. Fabric and yarn inputs were generally supplied already pre‐cut by the contractor. Contract prices typi-cally declined and operating costs (especially energy) increased, reducing operating margins. Tightening access to capital, strict conditionalities on


production and delivery further constrained opportunities for functional and product upgrading, locking many such firms into dependent contracting relations, sometimes with unscrupulous and precarious buyers. These kinds of firms experienced intense price pressure during the 1990s and 2000s; many went bankrupt while many of those that survived did so by squeezing wages and avoiding the costs of basic compliance with health and safety reg-ulations. As one of the managers of an Austrian‐owned firm in Bratislava explained:

The firm is really thinking about what we will do. We may close … Buyers have learned to be very flexible and have shifted from long‐standing commitments to a much more flexible locational strategy. Small firms need contacts to cre-ate new orders … Firms are too focused on OPT, and increasingly they must shed their sub‐contracting arrangements as contracts decline. Small firms are shifting down the value chain and this is the last step in the existence of such firms.2

In similar firms in Bulgaria, the degree of desperation was even sharper. Although many such firms had long‐term supply contracts with the same Western buyers, not all have been able to translate these into processes of firm learning and product development. They continue to rely on OPT and have determined that – as a low‐cost strategy – this is currently their best option. As one manager explained in a discussion of contract negotiations, “We are the weak side of the contract relationship … we have to be like dip-lomats [in our negotiations with buyers].”3

In the face of such pressures, some small firms work co‐operatively to pool capacities to meet buyer delivery and volume demands. Many out-source simpler and lower‐value tasks to firms and workshops in small vil-lages or in surrounding towns, or in some cases in other countries (such as in Prešov, Slovakia, where the use of larger firms in Ukraine and Belarus is increasing). Such firms reduce their costs and increase their flexibility by tapping into low‐cost labour pools, often in economically lagging regions. However, such sub‐contracting increases transaction costs, as well as logis-tics costs and delivery times which, in turn, reduce the benefits of proximate supply chains.

One of the largest former state‐owned enterprises in the Prešov region in eastern Slovakia (OZKN) typified this precariousness prior to bankruptcy in 2007. Across its core and branch plant network, OZKN employed 5,000 workers in 1989. By 2004, it was employing nearly 900 people and pro-duced a range of men’s suit products for various EU markets. Production primarily involved sewing and assembly (93% of total production in 2003), with limited responsibility for sourcing of inputs. By the mid‐2000s, the firm’s main customers were two leading Spanish department stores which together accounted for 45% of its total production. But rapid change in its


other markets and customers made it difficult to develop longer‐term rela-tionships with buyers. These were largely market‐based relations, rather than those developed through strategic partnerships. In response, OZKN turned to high quality clothing, offering buyers quick turnround and flexi-bility. Delivery time on men’s suits was 4–5 weeks, and, while in the late 1990s OZKN was producing only single colour suits, by the 2000s it was producing a range of colours and styles, some under its own brand, combined with export assembly production for its Spanish customers (a combination of scenarios 1 and 3 in Figure 6.1). Own‐label suits accounted for only 5% of overall activity, but they did allow the company to diversify risk, albeit in a small domestic market. Consequently, as one manager explained, the firm was “OPT‐bound with limited opportunity to expand beyond its [current] … own brand production. The limit is largely the cost of advertising.”4

Many large and small OPT‐reliant firms have lost key orders as com-petition has made it difficult, if not impossible, to move away from reli-ance on assembly contracts. In 2007, OZKN lost its primary contract with Spanish Induyco, resulting in bankruptcy and the loss of the remaining 440 jobs.5 Induyco relocated its main contract for these product areas to China as OZKN found that it was unable to meet the increasingly tight contract prices due to firm overhead and operating costs (Buzinkay 2007). Despite attempts to upgrade in product areas by introducing new product profiles for the domestic market, firms such as OZKN’s remained precarious. The global economic crisis had a particularly significant impact as Western Europe demand declined. Downsizing and bankruptcy followed, with 50% employment loss bet-ween 2004 and 2011 (Appendix 1) (see Figure 5.4).

Domestically‐owned firms without market and buyer proximity have struggled. Product mix and ownership have been crucial to a firm’s ability to respond to increasing labour costs, particularly as higher wages in growth sectors have affected general labour market conditions. As the general director of one large, former SOE argued, “Our mistake was that we focused on export markets and not so much on the domestic market.”6 Faced with a significant increase in costs due to wage increases and currency apprecia-tion, this firm lost its key orders from long‐standing West European buyers and employment fell from 1,300 in 2002, to 700 in 2005, and 260 in 2010. It is doubtful that a focus on the relatively small domestic market would have improved this firm’s prospects, absent close connections with foreign buyers.

As the western and central regions declined in the late 1990s and early years of the 2000s, employment in the east Slovak apparel sector stabilized for a few years (Smith et al. 2014). EU membership in 2004 resulted in increasing wages and other production costs, and exchange rate apprecia-tion all underpinned the decline of some segments of the apparel industry


in this part of the country. More recently, these regional production complexes have suffered from increasing wage pressure, exchange rate appreciation prior to joining the Euro‐zone, sectoral restructuring into new industrial activity such as electronics and automobile production and increasing tertiary sector activity (Pavlínek 2014), and following the global economic crisis, this has resulted in demand slumps in core markets impacts.

What these transformations mean for the sustainability of labour‐intensive OPT apparel production in Slovakia and Bulgaria remains an open question, but the reliance on a model of development wedded to EU15 export markets integrated through European production networks exposed producers across the region to demand‐side shocks. More recently, export demand in some sectors of Slovak industry has started to increase, with industrial production increasing by almost 23%, mainly in electronics, machinery and transport equipment (Štatistický úrad Slovenskej republiky 2010). Sectoral restructuring has created new opportunities for workers, further pressurizing apparel firm managers into trying to retain their workers, with important regional consequences.

Functional, Product and Process Upgrading and Market Proximity

While the experience of downgrading, back‐sliding and even bankruptcy was common among firms dependent on OPT contracts, others success-fully implemented in situ strategies of firm‐level upgrading. Such strategies have built on OPT contracting and have invested to capture higher‐value production by upgrading functionally, adding new sewing processes, including buttonholing, embroidery, washing, laundering, labelling, packing and bar‐coding (signified by scenario 2 in Figure 6.1). Closer relationships with key buyers and joint venture investors have often been crucial. Western buyers are increasingly looking to reduce their own transaction costs and to outsource input sourcing and logistical functions to suppliers now that the customs benefits of full‐bundle OPT assembly production have ended. Such buyers seek to shed traditional co‐ordinating functions to their sup-pliers. One result has been the deepening of relations with domestic input suppliers (such as button‐makers and thread suppliers) and service pro-viders (such as washing and laundering facilities, cutting machine vendors, software firms, and technical and logistical support companies).

In recent years, firm‐level and district‐level sustainability have been related to the ownership structure of firms, the associated degree of integration into West European production networks and corporate struc-tures, and the resulting product mix. Relational proximity has been crucial to all, as firms are repositioned as preferred suppliers. Foreign investment and


ownership, and product specificity and product profile have been crucial. Several such firms in eastern Slovakia are positioned in West European mar-kets as producers of relatively high‐quality and high‐value clothing prod-ucts, often designer brand men’s suits and trousers, men’s shirts and hosiery with, for example, close relations with Italian brands of men’s and women’s tailored garments. In one such firm in east Slovakia, and despite significant formal changes in ownership over time,7 production of higher‐value men’s tailored clothing in association with a range of local sub‐contractors in east-ern Slovakia and firms across the border in western Ukraine (see Chapter Seven), enabled the development of close production arrangements with the Italian market. This has also meant increasing local economic dependency on this firm as the main local employer. The local industrial structure in this primarily rural region is highly dependent on the industry, with 67% of manufacturing employment in the apparel industry. However, even this proximity to foreign buyers in production networks is coming under pressure and some job losses are occurring, particularly among factories in the sub‐contracting network used to sustain production at peak times.8

Foreign ownership of firms is valuable, providing knowledge and links to major markets. In eastern Slovakia, Italian joint ventures with Slovak firms established by managers from former SOEs, a German‐Slovak joint venture and Austrian‐owned greenfield investments have each been crucial to stabi-lizing employment in the region (Figure 6.2). In other cases, by working

Figure 6.2 Production line at a German‐Slovak joint venture, Prešov. Photo: Adrian Smith.


with their respective Italian and German partners to respond to increasing cost pressures and by out‐sourcing some production to cross‐border fac-tories in western Ukraine, some firms were able to establish themselves as preferred suppliers. Close buyer proximity also allowed managers to stabi-lize orders and finances by negotiating year‐round orders and reducing seasonal fluctuations.9 Such arrangements also benefit buyers by providing rapid stock replenishment in EU15 markets. As one managing director argued:

Our one advantage compared to Asia is that we are able to react [to orders] in two weeks, sometimes within one week, and when this flexibility is combined with quality in terms of both sewing and finishing [colour‐fastness and washing specificities], we are more competitive.10

Close links with key buyers have also allowed some process upgrading to meet the increasing demands of quick response supply and fast fashion, even in higher value segments such as tailored suits. In order to deal with reduced stock inventory among retailers, joint venture firms have been able to adopt quick response approaches to supply complex products in two to three weeks.11 As noted by Plank et al. (2009), higher‐value production has allowed pro-ducers with some flexibility to manage increasing costs and competition. Slovak firms, in particular, have been able to exploit their close proximity to Italian and German buyers and their particular product niche (high quality men’s trousers, suits and shirts; and women’s pantyhose) to stabilize orders. However, as costs rise, even some of the more successful firms that have been able to reposition themselves as strategic partners have reduced wages and benefits (see Gereffi et al. 2005).12 Some functional downshifting of tasks to suppliers has occurred (especially washing, packaging, labelling, and quality control), but other key functions such as design and high‐end fabric sourcing remain the primary responsibility of the buyer. Pickles (2012) has called these continuing limits to firm upgrading “dependent and constrained upgrading”.

While much of this upgrading remains focused on sewing rather than extending upstream and downstream, it has involved the incorporation of higher value activities and new technologies (especially for tailored garments). As the turnover time of capital in the supply chain declines, Slovak and Bulgarian firms have been able to exploit their geographical proximity, response times and speed of delivery and, in the process, they have taken on a variety of additional value‐added functions. As the Slovak co‐owner of a joint venture producing men’s and women’s trousers for the German market argued in relation to managing competition from China, “Our philosophy is to ensure quality and create flexibility” and that flexi-bility was based primarily on the short lead‐times of one week from order to delivery of 1,000 pairs of trousers in three colour ranges.13 It also coincided with the need of buyers to off‐load some of the transaction costs and market


risks of managing complex supply chains, down‐shifting these costs and risks to their key suppliers (Zhu and Pickles 2015).

Outerwear and work‐wear manufacturers have also built on their earlier experience and personal contacts with buyers to extend technical and process capacities. The recent growth in technical textiles and specialist operations such as weather‐proofing, testing technologies and the use of new materials under licence to brands such as GORE‐TEX has been p articularly important for some firms. As costs have risen, they have main-tained their research and development facilities locally, while outsourcing parts of the production to factories in Ukraine.14

Diversification and Own‐Product Development

The development of own‐product activity was a central element of state socialist production and continues to be part of the industry (scenarios 3 and 4 in Figure 6.1). While many private firms were forced to work for low‐value OPT stitch‐up contracts, firms have increasingly been using the expe-rience and knowledge of style, patterns, fabric selection and production methods developed from export contracts to develop in‐house capacity for own‐design manufacturing (ODM) and, less commonly, own‐brand manufacturing (OBM). Some firms have explicitly linked these ODM and OBM capacities to domestic retail demand. Here we ask, to what extent are own‐brand production and product development emerging, and if their development represents an upgrading of activity?

Domestic Brands: Pierre and Makyta

Domestic brands are apparent in virtually every high street, especially in Bulgaria (see Chapters Eight and Nine). Such domestic outlets while small in total volume can be more profitable than larger export contracts on tight margins. Controlling input supplies and focusing on lower‐priced quality niche markets have enabled such firms to maintain smaller facilities and shorter runs, but improve cost structures. One such firm is the men’s shirt manufacturer, Pierre of Plovdiv (Figure 6.3).15 The firm is a privately owned Bulgarian company specializing in the production of, and trade in, men’s shirts with the brand name of Pierre. In 1991, the manager of Pierre was working as a translator for two American visitors who were looking to source shirts from Bulgaria. Recognizing a market opportunity, she decided to set up her own business in 1993, initially focused on the careful selection of fabrics but producing under OPT from a former SOE in the nearby district of Haskovo. In 1998, the firm moved to its present location in Plovdiv and began own‐brand production. The firm was able to capitalize itself, buy its


own 600 sqm factory and equipment, stabilize access to credit, design in‐house, source its own inputs, and train and retain a high quality workforce (with virtually no turnover over an eight‐year period). The firm director had consciously opted out of OPT production because contract prices had dropped so low, volume demands had risen beyond the capacity of middle‐sized firms, and the penalties imposed by buyers were too risky for smaller firms to bear. Thus, instead of aiming at export markets, Pierre focused on domestic markets as a basis for the later development of a more limited export profile, with its own chain of retail outlets offering full‐service tai-loring from design to delivery, while also supplying distributors in larger towns such as Burgas, Dobrich, Smolyan, Sliven, and Panagyurishte. Central to the firm’s business strategy has been its ability to produce for a particular loyal clientele (middle‐ to high‐quality business shirts) where volume is limited and prices are relatively low, but margins are much higher.16 The opening of its own retail store in Strasbourg in April 2008 failed in 2011, and export production (~10% of total) was refocused on the original individual corporate Bulgarians working abroad in Norway, Italy, Sweden and the United States. Domestically, the firm has targeted very specific kinds of clients, largely in major state and international organiza-tions, or in private and foreign firms.17 Pierre has also taken advantage of the recent tendency for larger and more prestigious companies to provide their employees with work clothing embroidered with company logos,18 while combining with a long‐standing ishleme link with the old state firm Harmanli Haskovo, for which it originally served as a sub‐contracting work-shop. This ishleme contract accounted for 10% of total production, but as demand dropped during the financial crisis, OBM production was adjusted



CMCMT Full package ODM

OBM

Export 100

Domestic 100

OPT contractor upgrading into full-package and OBM for domestic market

Domestic producer with OBM export markets

Figure 6.3 Trajectories of transformation: Pierre.


down, some workers lost their jobs, and by 2014 the proportion of ishleme production for Harmanli had risen to 30% of total annual output.

In Slovakia, despite the growth of many small boutiques, the domestic retail sector19 has been closely associated with the factory stores of former SOEs such as Makyta from Púchov (Figure 6.4). Makyta was the largest apparel firm in Slovakia with 2,600 employees and a network of 45 shops in Slovakia and 12 in the Czech Republic. In 2009, it lost significant export orders, resulting in the shedding of approximately 700 employees (EMMC 2009; SITA 2009). But like many former SOEs, it combined its OPT pro-duction with OBM activity for the domestic market. Much of the OBM production was sold via this network of retail stores. By 2013, however, the retail network had been reduced to 11 shops in Slovakia. Additionally, growth in domestic markets and the success of EU exporters to them are now beginning to attract interest from EU apparel suppliers such as the outdoor apparel supplier Sympatex Technologies, which has expanded its sales structure throughout Eastern Europe in response to rising demand for high‐quality performance products (“UK: Sympatex Grows Eastern European Sales Structure”, just‐style.com, 25 May 2005).

I‐Tran: from OPT to ODM

Some firms used OPT production to develop ODM and to a lesser extent OBM for export markets (see Figure 6.1). Working either through German and Italian retailers and catalogue firms or through access to domestic and former Soviet Union markets, these producers have established in‐house design capacity, or have upgraded already present design capacity due to their

Position in supplychain


CMCMT

Full package ODMOBM

Export 100

Domestic 100

Large full-package former SOEs/branches diversifying positions and product niches from OPT to domestic OBM. Development of network organizer role.

Figure 6.4 Trajectories of transformation: Makyta.


experience as ODM firms under state socialism. Those with access to markets in the EU have been able to develop relationships with retailers in Italy and Germany to allow their products to be sold under the brand name of the West European retailer. Others have pursued a similar strategy but built on an articulation with markets outside the core EU context. I‐Tran, for example, was established out of the privatization of a branch plant of the Slovenka SOE (Figure 6.5).20 Following privatization, it undertook sewing of pre‐cut fabrics largely on the basis of OPT contracts. However, the capacity of the privatized firm outweighed its space requirements. The firm therefore leveraged the sale of the excess buildings for conversion to other commercial and residential uses, using the funds generated to buy state‐of‐the‐art equipment, including upgrading existing and purchasing new knitting machines. This enabled I‐Tran to develop an extensive range of own‐design thermal knitted products. The firm was able to draw upon the owner’s historical connections to Russia where he had formerly been a Czechoslovak trade representative. Consequently, the firm has pursued new markets for its own‐design products in the former Soviet Union to good effect and has increased the value of production in recent years, even though employment reduced from 1,200 prior to 1989 to 224 in 2004 and 151 in 2012. The technological investment enabled the firm to stabilize production while reducing employment numbers. This ODM activity is combined with OPT sewing production for German, Austrian and French brands, which normally accounts for approximately 25% of produc-tion (although this increased to 45% during the recent economic crisis). The firm uses OPT production to maintain activity throughout the year but it recognized that “it is impossible to grow the firm on OPT contracts”. In this way, the firm articulates a range of markets, products and technologies as part of a diversification strategy to avoid reliance on a single source of revenue and



CMCMT

ODMOBM

Full package

Export 100

Domestic 100

Turn to OPT after 1989. Now OBM upgrading into West European and Russian export markets.

Large full-package former SOE diversifying product from OPT to export OBM and ODM.

Figure 6.5 Trajectories of transformation: I‐Tran.


orders. Capturing value in the circuit of capital in this way is not then a simple linear process of upgrading; it is the result of a complex articulation of a range of firm strategies across product categories, process upgrading and investment in new technologies enabling access to new markets.

Lifeline

Perhaps the most dynamic – albeit rare – example of own brand development was that of a company in eastern Slovakia (Rakovec nad Ondavou), Lifeline Slovakia, which was able to expand its initial activity in OPT production for Western buyers into a major international retailing outlet (Figure 6.6).21 In order to do so, the firm adapted the Zara and Mango models of quick response ‘fast fashion’ business practice and a model of retail store franchising. A system of rapid stock replenishment of fashion items was introduced and the firm moved away from its origins in OPT export production following its establish-ment in the early 1990s by a former manager at a SOE in nearby Vranov nad Topľou. Recognizing the limits to OPT production, Lifeline made the decision in the late 1990s to outsource production and, instead, focus on developing its own brands and the development of a franchised network of stores oriented to the women’s 18–30 market, linked into electronic point of sales (EPOS) sys-tems with close daily monitoring of store sales profiles to enable rapid restock-ing of popular lines (Figures 6.7 and 6.8). In the space of ten years Lifeline established itself as an emerging branded retailer on the Slovak, Czech, Ukrainian, Polish and Russian markets. It also began to develop its franchise network in the Middle East (Egypt and Saudi Arabia) and built a manufac-turing and design presence in China, with virtually all products sourced there. This involved a dramatic shift away from its origins in OPT production in eastern Slovakia, and involved a form of value chain upgrading into retail and



CMCMT

Full packageODMOBM

Export 100

Domestic 100

OPT producers upgrading into full-package and OBM

Full-package producers upgrading into OBM and fast fashion retail

Figure 6.6 Trajectories of transformation: Lifeline.


Figure 6.7 Lifeline retail store in eastern Slovakia. Photo: Adrian Smith.

Figure 6.8 Fast fashion domestic orientation of Lifeline stock, Photo: Adrian Smith.


brand activity. Lifeline specialized in the development and retail of relatively low‐cost, young women’s fashion designs. The firm had limited in‐house pro-duction capability and used a small network of contractors in eastern Slovakia for quick response replenishment, Lithuania (through a Danish partner with whom the original OPT relationship was established in the early 1990s), and more recently in China for knitwear. By late 2008, all design and production activity had been moved to China, with design and production located in China to reduce lead times, while the Slovak site specialized in head office activities, strategy, marketing and logistics operations for store replenishment.

Lifeline used the knowledge and contacts established during OPT pro-duction and earlier in state socialist trade links established by the owner, to develop its own‐brand lean retailing system for post‐socialist markets. However, the firm entered bankruptcy proceedings in 2009. Despite new investment from Egypt and Saudi Arabia to expand the franchise of retail outlets into the Middle East, but because of the economic crisis the firm experienced difficulties in accessing credit to fund any additional retail development. The business model had been predicated on the growth of retail space and when this became impossible due to the credit tightening associated with the crisis, the firm found that it was over‐leveraged and was forced to close. Consequently, unlike some of the firms discussed above who used OPT contracts during the crisis to sustain production as demand for their own products diminished, Lifeline was unable to pursue this strategy. In becoming effectively specialized in retail and OBM, despite generating significant value capture capability for a period of time, the economic crisis undermined this strategy and the firm had no OPT ‘safety net’ to fall back on as other producers did.

Low‐Value Full‐Package Domestic Market Producers

If, as we have seen, assembly producers for export markets occupy multiple positions in the production network, so too do own‐brand and full‐package firms operating primarily in the domestic market. However, like export pro-ducers who consolidated their operations around particular markets and particular products, domestic markets also experienced sharper competition. Indeed, the role that domestic markets play in global production networks is often over‐looked, with the focus primarily given to export production in stimulating industrial upgrading.

After the collapse of state socialism in 1989, domestic markets for lower‐end and lower‐quality products became an important niche opportunity for local producers. In some contexts, a second‐hand clothing market devel-oped, involving the import of clothing from the EU (Walton 2002). In other contexts local producers supplying ‘own‐brand’ or no‐brand low‐cost clothing increased alongside design‐oriented firms supplying new social


elites (scenario 4 in Figure 6.1). Perhaps the clearest example of this range and diversity of firms is illustrated by the garage firms of Haskovo, Bulgaria. As we discuss more fully in Chapter Nine, these garage producers are small family firms operating out of innumerable garages in the basements of houses in three districts of the town of Haskovo, in south‐east Bulgaria (Figure 6.9). One district is a predominantly Bulgarian Muslim neighbour-hood, a second is predominantly Turkish Bulgarian, and a third is a community comprising both groups. The garage firms emerged in the 1990s from a combination of rural economic crisis, a collapse of production, mass unemployment and urban migration among these ethnic minority popula-tions. They established themselves as an important element of the regional economy and the primary anchor of the large market in Dimitrovgrad, close to Haskovo. Virtually all of the production of these garage firms is sold through the Dimitrovgrad market involving commercial buyers and whole-salers who come from all over Bulgaria and from elsewhere in the Balkans, including Turkey, Greece, Serbia and Romania. The manager of the market estimates that up to 80% of clothing sold in small retail outlets in Bulgaria comes through the market, while about 30% of market sales are for export to similar small retailers in neighbouring countries.

Full‐Package Export Production and the Emergence of Regional Production Networks

A key element of full‐package production is the emergence of local suppliers of fabric and trim, technical and on‐site support services, logistical and quality control services, and – in more limited cases – design capacities.



CMCMT

Full package ODMOBM

Export 100

Domestic 100

Low-end domestic market

Domestic ODM producers upgrading into OBM

Figure 6.9 Ideal‐typical forms of firm transformation in the Bulgarian apparel industry: garage firms of Haskovo.


Such upgrading emerged in ECE for a number of reasons (scenario 5 in Figure 6.1). With more than two decades of business experience, some buyers were more likely to trust local assembly firms to provide the required quality of inputs and final product. This has been a process enhanced by negotiating with buyers to be able to source inputs, by the development of local supply infrastructures and by organizational changes that allow quick response and delivery times.

Slovak and Bulgarian firms have responded to shorter response and delivery requirements of their buyers, while expanding the range of services they provide. Crucial to a firm’s ability to make such changes is access to local credit and financing or credit notes from buyers that allows them to purchase inputs and wait for payment from buyers. The stabilization of the Bulgarian banking system, with improved conditions of credit, has per-mitted an increasing use of local sourcing and an expansion of foreign investment in the textiles sector, notably from Italy (see also Sellar 2012, on regionalized banking systems supporting the textiles and clothing industry).

Access to credit and buyer–supplier collaboration have expanded, enabling suppliers to provide a wider range of services and to compete for higher volume or higher value contracts. Cutting capacity has become ubiq-uitous as firms move away their earlier reliance on fully bundled, pre‐cut cloth assembly. In many cases, enhanced cutting capacity is linked to the growth of CAD‐CAM technologies and the emergence of local agencies supplying CAD‐CAM technologies, software development systems and support services. Finishing activity has also become more widespread, espe-cially in those firms that act as regional network organizers, outsourcing production to other units to meet order fluctuations from West European buyers. Sometimes such service enhancements are quite simple. In one Slovak‐German joint venture firm, for example, the development of in‐house washing, packing and labelling facilities enhanced the firm’s role as a quick response supplier to its German partner. Often such strategies also involved the expansion of co‐ordinating roles for Slovak firms, integrating cross‐border production networks in Ukraine, as we discuss in Chapter Seven.

Conclusion: Understanding Diverse Trajectories of Industrial Upgrading

Upgrading is the term often used to refer to the ways in which a firm’s compet-itive position is changing within international systems of contracting and trade. But this focus on position within global value chains is precisely what makes the concept a difficult one to use in efforts to understand industrial competi-tiveness, regional linkages and future prospects in the ECE apparel industry.

The fully integrated production system of state socialist industry prior to 1989 ‘downgraded’ in the early 1990s as markets collapsed and new stitching


contracts from Western European buyers transformed regional economies into assembly platforms. The consequences have differentially affected the surviving firms, some of whom have been able to expand employment even as the total value of production has declined. Paradoxically, process and prod-uct downgrading have resulted in industrial expansion as business growth and employment growth are combined with declines in product unit values, deskilling of jobs and tenuous contract futures. Sustaining production and growing employment has come at the price of decreased profitability, low wages, poor working conditions and uncertain futures. But jobs have been sustained in conditions of regional economic involution.

Chinese and other Asian imports into EU markets have forced prices down and increased competition in those markets, and the 2008 economic crisis also reduced demand. However, while many firms in ECE lost contracts and some closed their doors, others continue production and diversify their activities by supplying additional services and flexibilities not currently avail-able with production sourced from Asia, but they do so with considerably fewer workers. Particularly important in this process are the locational advantages of proximity and the shortened time‐to‐delivery ECE producers can guarantee, but higher value-added activity typically also comes with stronger local linkages but overall weaker regional employment effects.

Regional proximate producers that entered European production networks out of necessity after the collapse of 1989 did so on the basis of minimal value‐added assembly contracting. In recent years some of these firms have leveraged their ability to mobilize cheap yet relatively skilled labour pools, quick response production, small batch contracts and rapid delivery time to increase their workforce skills, levels of capitalization and compete for higher value‐added export contracts. Others have leveraged their position as low‐cost exporters to create a tentative foothold in domestic markets or to realign their export profile towards non‐European markets, particularly those in the former USSR and the Middle East. In all cases, whatever business strategy has emerged has been accompanied by shrinking employment and, at times and paradoxically, by increased competition for skilled workers.

Notes

1 Parts of this chapter are significantly updated, restructured and revised from Pickles et al. (2006), incorporating new interview material and other data, and wider arguments.

2 Interview with firm manager, Austrian‐owned firm, Bratislava, Slovakia, November 2003.

3 Interview with firm manager, former SOE branch plant, Dimitrovgrad, Bulgaria, May 2004.

4 Interview with commercial manager, OZKN, Prešov, Slovakia, June 2004. The Ukrainian venture was never completed as OZKN spun into financial crisis.


5 See www.modaes.es/empresa/20121030/el‐corte‐ingles‐culmina‐la‐integracion‐de‐induyco‐con‐la‐compra‐del‐100‐del‐capital.html. Last accessed 30 June 2014.

6 Interview with General Director, large former state‐owned enterprise, Michalovce, Slovakia, October 2009.

7 Following privatization in the early 1990s, the firm was run as a joint venture with the Italian fashion company GFT, which later went bankrupt. GFT were bought out by Mediconf (Dunford 2006) and the Slovak factory has increas-ingly focused on the production of high‐quality men’s suits and garments under the Italian brand, as well as others including Calvin Klein and Armani. The brand was later transferred to a new Italian company, Gruppo HIB, which was associated with the owners of the Bucalo brand and Mediconf. Interviews with key informants in the firm indicate that recent ownership changes in late 2011 follow a further round of complex cross‐ownership changes, involving a Singapore‐based holding company.

8 Interview with joint owner, small clothing producer, Prešov, October 2009. Employment in the former SOE continued to decline over the late 2000s and early 2010s and is estimated to now be around 300 employees primarily involved in finishing work (labelling and packaging) for production from Ukraine.

9 For example, in one firm, a shift into women’s trouser production had been agreed with the German joint venture partner and main customer so that the firm continued to produce men’s trousers as it had for nearly twenty years but diversified into this new segment to provide greater financial stability and to build on its emerging production capacity in western Ukraine (interview with senior manager, German‐Slovak joint venture, Prešov, October 2009). Another example, involving a process of shifting into new activity, has involved an Italian‐Slovak joint venture manager establishing leisure industry activity in the local area (interview with managing director, Italian‐Slovak joint venture, Prešov, October 2009).

10 Interview with senior manager, German‐Slovak joint venture, Prešov, October 2009.

11 In one Italian‐Slovak joint venture firm, quick response tailored garment man-ufacturing accounted for up to one‐third of production in 2009 (interview with managing director, Italian‐Slovak joint venture, Prešov, October 2009).

12 In one firm this involved the cancellation of several employee benefits including free massage and sauna usage and subsidised vacations and other leisure activ-ities, and reduced pension benefits (interview with senior manager, German‐Slovak joint venture, Prešov, October 2009).

13 Interview with joint owner, German‐Slovak joint venture, Prešov, Slovakia, July 2008.

14 Interview with managing director, Dutch‐Slovak joint venture, Prešov, Slovakia, October 2009.

15 Interview with director, apparel firm, Plovdiv, Bulgaria, May 2004 and later interviews in 2008, 2011 and 2014.

16 Interviews with firm manager 2004, 2008, 2011 and 2014. Also www. pierre‐shirts.com/

17 These currently include the Bulgarian Parliament, the Ministry of Foreign Affairs, the National Audit Office, the National Electricity Company Municipality Bank, the Bulgarian Red Cross, Ecopharm, Sofia University Kliment Ohridsky,

http://www.modaes.es/empresa/20121030/el-corte-ingles-culmina-la-integracion-de-induyco-con-la-compra-del-100-del-capital.html

http://www.modaes.es/empresa/20121030/el-corte-ingles-culmina-la-integracion-de-induyco-con-la-compra-del-100-del-capital.html


New Image – Bulgaria, Media Link PLC, Aviostart PLC, Global Biomet, Cinemax, National Health Insurance Fund, Euro Catering Service, Porsche Inter Auto, Optix PLC, Unipharm PLC, Flying Cargo – Bulgaria, Youth Theatre, the Embassy of Republic of Poland, and the British Embassy.

18 Some of these corporate clients include Nestlé, Ovaras, Famileks, Perperikon, Victoria Group, Kross‐3 Bosch, Deka Trade, Eltrade, Pizzeria Verdi, the Alati chain, Riviera Restaurants, VIP Catering, Moni Commerce, Orak Engineering, Limagrain, Casino Ritz, and PIC Computers.

19 The Slovak retail network was also transforming over this period with the development of new Western‐owned hyper‐markets such as Tesco and Carrefour, with implications for the domestic supply chains of large Slovak SOEs who were experiencing greater competition in the domestic market as a result.

20 Interview with manager and owner, knitwear firm I‐Tran, Turzovka, Slovakia, October 2013.

21 This section is based on a series of interviews with the managing director and owner of Lifeline Slovakia, in addition to other press sources.


Border Reconfigurations and the Frontiers of Capital

Chapter Seven

Introduction1

Central to understanding the relationships between GPNs, apparel production and ECE regional transformations is the manner in which different economic and political‐juridical territorialities are articulated and disarticulated across borders. The differential inclusion of ECE economies into the economic space of the EU Single Market prior to EU enlargement was a central mechanism by which production relations were organized throughout the region. This involved embedding capitalist practices in the former state socialist industrial economy. However, these emergent forms of capitalism and the state socialist legacies in which they were embedded also required the increasing articulation of what Mezzadra and Neilson (2013: 70) have called “the relationship between borders and frontiers of capital”. In the ECE case, such bordering practices remain crucial to the dynamics of the apparel industry, not least through cross‐border production complexes.

Mezzadra and Neilson emphasize

[a] tense balance and dramatic unbalance between political borders (which means primarily, in the modern age, the borders of states) and what we call

(with Robert Begg, Milan Bucek, and Rudolf Pástor)

border reconfigurations and the frontiers of capital 163

the frontiers of capital, traced not only by capital’s expansionist drive but also by its need to organize space according to multiple hierarchical criteria. (2013: 66; emphasis in original)

In this chapter, we explore this dynamic relation between economic and political‐juridical territorialities through the lens of the cross‐border production practices established by Slovak apparel firms in Ukraine. We emphasize how the (dis)articulation of economic and political‐juridical spaces has provided bordering arbitrage opportunities for Slovak firms to engage with economic spaces in Ukraine in the context of deepening cost and competitive pressures on those Slovak firms. We examine three primary dimensions of this reading of the border. First, it resulted in the creation of a range of bordering practices by Slovak firms engaging Ukrainian firms primarily in the western Transcarpathia region in a new division of labour of out‐sourced production. These new cross‐border divisions of labour became a key way in which apparel firm managers in Slovakia attempted to negotiate rising cost pressures and proximate regionalized sourcing models. Second, negotiating cross‐border production relations was a politicized and mediated process involving the embedding of Slovak managers in a range of commercial and cultural practices used to negotiate the border. Third, this was a prelude to more recent attempts on the part of the EU and certain Ukrainian political and economic elites to further align the respective economic territorialities of these two polities, which has most recently taken the form of the negotiation of a Deep and Comprehensive Free Trade Agreement (DCFTA) as part of the highly contested EU‐Ukraine Association Agreement, signed in 2014. In making these arguments, we therefore open up the firm and network focus of GVC and GPN research to a consideration of the geo‐politics and geo‐economics of the border in globalizing production in ECE (Glassman 2010; Smith 2015). Our argument is that cross‐border networks of producers and sub‐ contractors structure a landscape of comparative advantage for producers close to the EU’s major markets, in turn, allowing buyers to manage the turnover time of capital while adjusting their supply chains to the demands of rapid stock replenishment and fast fashion (Abernathy et al. 2006; Plank et al. 2012). These proximate sourcing trends involve three related goals: (1) the reduction of production costs by sourcing from trans‐border sub‐ contractors; (2) the reduction of the aggregate turnover time of capital; and (3) the attuning of time‐to‐delivery more closely to market demand.

The chapter is organized as follows. The first section returns briefly to the global context of post‐MFA liberalization, increased cost competition and delocalization strategies before turning to a product‐specific level analysis of trajectories of changing export production from Slovakia to the rest of the EU. The second section explores how these changing and divergent product‐specific trajectories need to be understood within the context of


cross‐border outsourcing from Slovakia to Ukraine and the emerging forms of geo‐economic and geo‐political production networks. We examine the ways in which cross‐border production as a bordering practice is related to the changing processes of European integration, the EU’s economic and trade policies towards its neighbouring states in the former Soviet Union and historical legacies of cultural, political and economic connections between Slovakia and Transcarpathian Ukraine. The third section examines the trajectories of cross‐border production arrangements between Slovak and Ukrainian apparel production as a way of negotiating increasing competitive pressures. The fourth section explores the limits of these cross‐border and triangular production arrangements,2 and the conclusion brings the discussion back to ways in which the (dis)articulation of economic and political‐juridical territorialities is being reconfigured in contemporary Europe.

Regionalization and Globalization: Apparel Sourcing, Trade Liberalization and the Spectre of China

One of the most important consequences of increasing liberalization, internationalization and deepening competitiveness in the global apparel industry has been, as we have seen, the relocation of apparel production away from the core sites in Central Europe to lower‐cost locations in the former Soviet Union and South Eastern Europe, creating a form of region-alized delocalization (Begg et al. 2003; Labrianidis and Kalantaridis 2004; Pickles and Smith 2011). The result is a complex re‐scaling and re‐ordering of the economic space of capital in the regional apparel economy and the restructuring of the geo‐politics and state practices on the border. These have been deepened as trade policy and preferential access agreements have been extended to neighbouring countries. While questions of price and produc-tion cost are central to sourcing decisions, other factors such as quality and ability to meet strict delivery demands remain central elements in shaping the geography of production relocation and cross‐border sub‐contracting in ECE (see also Abernathy et al. 2006; Pickles 2006). Rather than a simple model of a race to the bottom, with firms chasing the lowest production costs, sourcing decisions are always mediated by the ‘stickiness’ of the industry in particular places in ways that balance quality, cost, capacity, capability and time to delivery. Western buyers are not the sole drivers of such cross‐border contracting, which is increasingly managed by ECE firms seeking to extend their own historical spatial divisions of production through cross‐border networks in order to meet the increasing demands from buyers for price, fabric and stitching quality and delivery requirements. This cre-ates additional demands on, and opportunities for, local firms to respond


quickly to increasing buyer‐driven demands, extend their own control in production networks and re‐build the technical capacities and industrial know‐how required to manage such extended production networks.

As noted in Chapter Six, Slovak apparel producers have focused on production processes and products in which they have experience and expertise developed under state socialist divisions of labour. Slovak apparel production and exports to the EU have been dominated particularly by men’s and women’s tailored garments (suits, trousers and jackets). These products alone accounted for 52% of the total value of Slovak garment exports to the EU15 in 1995, although since then the share of these product categories has fallen, in part due to a rapid surge in exports of hosiery between 2005 and 2010, associated with Italian new foreign direct investment in a number of key factories, the most significant of which were privatized former SOEs located in the chemi-cals and synthetic yarns cluster of Humenné in eastern Slovakia (Table 7.1). One reason for the increasing role of hosiery exports from Slovakia over this period was the close links between the production of synthetic yarns and the hosiery manufacturing process (Smith et al. 2014). Unlike other garments, the production of pantyhose and tights involves vertically integrated and capital‐intensive manufacturing of synthetic yarns, the process of knitting, and the production of the final output. Higher levels of capitalization in this product sector mean that labour costs play a less important role in the overall cost structure of the industry than in other apparel production processes involving a greater intensity of sewing and assembly. Delocalization from Italy to Slovakia was also important because it enabled smaller batch production and rapid delivery to be developed for increasingly fragmented European markets.

The decreasing absolute and relative significance of men’s and women’s tailored apparel in Slovakia’s exports to EU15 markets reflects the impact of increasing competitive pressures from China. However, pan‐European and North African/Turkish regionalized sourcing patterns remain important in these products. This is especially apparent in higher unit value production and production serving higher‐quality market segments requiring smaller batch production and quicker response time. For many Slovak firms, the

Table 7.1 The three most important 4‐digit apparel exports from Slovakia to the EU15, 1995, 2000, 2005, 2010 and 2013 (% of value of total Slovak clothing exports to the EU; ranked by importance in 1995)

1995 2000 2005 2010 2013

Men’s suits, trousers, jackets

37 34 30 16 12

Hosiery 1 4 12 25 4Women’s suits, trousers, jackets

15 12 10 7 11

Source: extracted from Eurostat Comext database.


development of cross‐border production arrangements with Ukraine has been one way in which they have managed these increasing competitive pressures in this product niche. Later we examine the ways in which Slovak firm managers are negotiating these bordering practices, but first we set cross‐border sourcing in its wider geo‐economic and geo‐political context.

Cross‐Border Production, Geo‐Economic/Geo‐Political Integration and New Spatial Divisions of Labour

Cross‐border production arrangements between Slovak and Ukrainian pro-ducers have emerged as a strategic response to the competitive pressures of liberalization and price competition in certain clothing product segments. Industry‐ and firm‐level responses have turned to production outsourcing from eastern Slovakia to western Ukraine (Transcarpathia). By drawing on their long‐standing socialist inter‐firm social networks, Slovak firms now operate as co‐ordinators of emerging cross‐border networks of triangular production that combine reduced cost, quick response capabilities and small‐batch flexibility. As such, they provide a partial alternative to wholesale relocation of production to lower‐cost producers in Asia and elsewhere, thereby retaining – for the present – some levels of production capacity in the European periphery.3 The result is a complex, yet changing, pan‐European spatial division of labour in which cross‐border management of apparel production networks has expanded.

Cross‐border triangular production relationships have been established within the context of already existing contracting relations between EU buyers and manufacturers and ECE producers (see also Labrianidis and Kalantaridis 2004; Kalogeressis and Labrianidis 2009). We highlight three primary dimen-sions: (1) cross‐border outward processing of low‐value, labour‐intensive parts of the production network; (2) production structured through cross‐border ownership of firms and the emergence of logistics hubs; and (3) cross‐border production networks. Each provides different kinds of economic opportunities for upgrading and value capture. Regardless of the particular form taken, cross‐border delocalization has enabled the reduction of labour and other pro-duction costs, while retaining proximity to the main markets and the ability to meet the increasingly short time‐to‐delivery requirements of many EU buyers.

Cross‐border Outsourcing and Trade Integration

By the early years of the twenty‐first century the regional production networks in the Slovak apparel industry were experiencing a number of com-petitive pressures. Trade liberalization between the EU and the applicant


states increased regional competitive pressure, especially felt from lower‐cost producers (e.g., Romania and Bulgaria). At the same time, the removal of quotas on imports into the EU market resulted in tightening price competi-tion from Asian producers. Tightening labour markets in the apparel sector in Slovakia (see Chapters Five and Six) resulting from expected wage and labour mobility benefits of EU enlargement and employment opportunities in other sectors, led to wage growth in the Slovak garment industry. The turn to cross‐border sub‐contracting with companies in Ukraine emerged in this context (see also Kalantaridis 2000; Kalantaridis et al. 2003).4 German and other West European lead firms and retailers had earlier experimented with sourcing from Ukraine, but language barriers, uncertain liability, trade and property laws, border management issues, as well as corruption, meant that this never became an established practice. Instead, a series of intermediaries emerged in Slovakia to either broker the sourcing of products for firms from Germany and other West European countries, or to organize sub‐contracting for primary suppliers located in Slovakia. For a period of time, lower‐cost Ukrainian migrant labour was also used on the margins in some of the Slovak‐based enterprises, but workplace regulation and minimum wage levels meant that the benefit to managers of cross‐border labour market strategies was more than offset by production relocation to Ukraine.

By the mid‐2000s, firms across Slovakia were involved in the active organization of, and planned development for, cross‐border production arrangements (some also with Belarus). As one key informant explained, “The clothing industry is a fast train from Brussels to Eastern Europe passing through Slovakia on its way to Ukraine. The clothing industry [in Slovakia] must take advantage before it shifts again”5 (see also Kalantaridis 2000; Kalantaridis et al. 2003; De Costa 2005). Between 1995 and 2005, while the value of EU15 apparel imports from Slovakia increased by 27%, apparel imports from Ukraine increased by 127%, albeit from a base about half that of the total value of EU15 apparel imports from Slovakia. Since 2005, EU15 apparel imports from both countries have fallen, but to a much higher degree from Ukraine than from Slovakia.6 However, Slovak imports of apparel from Ukraine grew rapidly over this period (226%), suggesting the deepening of triangular manufacturing arrangements in which – following EU enlargement – Slovakia became the conduit for the entry of articles of apparel from Ukraine organized by Slovak‐based firms.

An indication of the increasing degree of cross‐border processing trade in apparel between Slovakia and Ukraine is provided by Figure 7.1. After 2005, Slovakia experienced an increasing and deepening trade deficit with Ukraine in apparel and a continuing trade surplus in textiles. In other words, textile products were being exported to Ukraine at increasing levels from the mid‐2000s for sewing and assembly into garments which were being increasingly re‐imported back to Slovakia with entry into the EU Single Market after 2004.


Much of the increase in Ukrainian apparel exports has been in the same products in which Slovak exporters have traditionally specialized but which declined in significance as Slovak exports shifted towards new products such as hosiery (Table 7.1). Just over half of the value of both Slovak and Ukrainian apparel exports to the EU15 in the mid‐1990s was men’s and women’s tailored garments (suits, trousers and jackets). By 2005, the share of these product categories involved in Slovak apparel exports to EU15 markets had fallen to 40% and the share of Ukrainian apparel exports to EU15 had increased to 63%. The increased proportion of Ukrainian exports of tailored garments was taking place through triangular trade with Slovak intermediaries acting as ‘middlemen’ for EU15 buyers.

These border arrangements were negotiated by Slovak and West European firms and took into account changing international trade agreements. An initial bilateral trade agreement for textiles and apparel was established bet-ween the EU and the Ukrainian government in 1993. This agreement was negotiated in the context of the collapse of the Soviet Union and Ukrainian independence and was extended in 1999 to further liberalize textile and apparel trade between the EU and Ukraine by increasing EU import quotas and by reducing tariffs. A further bilateral agreement was signed in 2000 involving the reciprocal liberalization of textiles and apparel trade. In 2001, Ukraine implemented tariff reductions on textile and apparel imports from the EU and the EU lifted quantitative quota restrictions on textile and apparel imports from Ukraine. Between 2001 and 2004, Ukraine continued to reduce tariffs to match those with EU ‘most favoured nation’ (MFN) status (average tariffs of 4% on yarns, 8% on fabrics and 12% on apparel)

–15000000

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Figure 7.1 Slovakia’s balance of trade in textiles and apparel with Ukraine, 2000–2012 (constant euros). Elaborated from Comext database.


while the EU lifted all quantitative import restrictions (quotas) and accorded MFN status on Ukraine, reducing tariff levels by a further 20% to 9.6% on apparel.7 Consequently, when Slovakia joined the EU in 2004 and adopted all of the external trade arrangements of the EU, Ukrainian exports to Slovakia entered the Single Market which led to a very sizeable increase in Slovak imports of apparel from Ukraine (Figure 7.2).

The EU’s outward‐processing trade arrangements with Ukraine continued to encourage Slovak sub‐contracting with Ukrainian firms, especially in Transcarpathia, where social and economic links were deepening. In March 2005, an agreement was signed, lifting the remaining restrictions on textiles and apparel trade (the EU’s surveillance of Ukrainian import levels). The EU Trade Commissioner at the time, Peter Mandelson, suggested that: “This agreement is an important step in strengthening and liberalising the economic and trading relationship between the EU and the Ukraine. It should pave the way for more far‐reaching economic links that can benefit both partners” (quoted from www.eu.int/comm/trade/issues/bilateral/countries/ukraine/pr090305_en.htm; last accessed 2006; no longer an active link).

Trade liberalization in textiles and apparel between Ukraine and the EU was also part of a broader geo‐economic and geo‐political strategy under the EU’s European Neighbourhood Policy (ENP) and Eastern Partnership. These relations culminated in the signing of the EU‐Ukraine Association Agreement and associated DCFTA in 2014, which provides for full tariff removal over a ten‐year transitional period for some goods and a variety of other mechanisms to facilitate cross‐border trade, as part of the establish-ment of what is known as “deep integration without EU accession”.8 It is also linked to long‐term historical connections between Slovakia and the pre‐Second World War First Czechoslovak Republic and Transcarpathian

1999

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Figure 7.2 Slovak apparel imports from Ukraine, 1999–2012 (constant euros). Elaborated from Comext database.

http://www.eu.int/comm/trade/issues/bilateral/countries/ukraine/pr090305_en.htm;

http://www.eu.int/comm/trade/issues/bilateral/countries/ukraine/pr090305_en.htm;


Ukraine. During the First Republic, the western segment of contemporary Ukraine (Transcarpathia) was part of the territory of Czechoslovakia, a point to which we return below.

Emerging Cross‐Border Economic Spaces and Production Regimes

What are the nature and organization of the cross‐border production relations established between Slovakia and Ukraine, and how does this organization contribute to the geo‐economic and geo‐political management of the external border for apparel production? What are the implications of this cross‐border formation for sustaining the apparel industry in Slovakia in the face of increasing competitive pressures from elsewhere in the global economy? In this section, we highlight three ways in which Slovak producers are managing these pressures by utilizing cross‐border arrangements to negotiate their stra-tegic position enabling the continuation of proximate models of sourcing and rapid delivery times. The forms of cross‐border production highlight the ways in which the disjuncture between the frontiers of capital and the boundaries of political formations are negotiated in order to provide contracting and investment opportunities in economic spaces outside of, but articulated with, the regimes of EU trade and production. As in our earlier analysis, we empha-size the product specificity of these forms of cross‐border production as well as the pro‐active nature of Slovak firm managers in responding to changing cost structures, buyer demands and contract squeezing arising from increasing competitive pressures. Cross‐border production is not in this sense a universal strategy of EU and Slovak capital to articulate the opportunities created in the border space. Rather, it is emerging among particular fractions of capital and in particular product niches in which there is increasing competitive pressure in core EU markets (men’s suits and trousers, for example), but where time‐to‐delivery, stock replenishment and product quality consider-ations continue to shape geographically proximate sourcing decisions. Consequently, cross‐border production and its links to Slovak apparel fac-tories, particularly in east Slovakia, put in question recent predictions of the mass collapse of the industry in ECE in the face of increasing competitive pressure from low‐cost Asian producers.

Sub‐contracting Production

Those Slovak firms with historical ties or current operations in Ukraine have initiated arm’s‐length cross‐border sub‐contracting with Ukrainian firms. Much of the activity involves firms in the east Slovak apparel district of Prešov sub‐contracting directly with former SOEs in Uzhgorod, just


across the Slovak‐Ukraine border (Figure 7.3). Geographical proximity enables sub‐contractors to meet tight contract deadlines, increases the ability of Slovak firms to contract for larger orders, adds capacities that may not be present in a single enterprise, and allows firms to take advantage of scale economies. Cross‐border production enables firms to take advantage of wage rate and energy cost differentials between Slovakia and Ukraine.9 For example, at the time of the emergence of cross‐border sub‐contracting, wage differentials were estimated to be of a magnitude of 1:4 between Ukraine and Slovakia (Benková 2004).10 Differential energy costs were also important. In Slovakia, industrial energy prices have been fully liberalized in recent years, resulting in significant increases in the base costs of apparel (and other industrial) producers.11 More recently, while high inflation levels in Ukraine have generated upward pressure on industrial wages and created limits to the ability to establish long‐term contracts for production,12 exchange differentials have ensured the continuing competitiveness of Slovak‐Ukrainian cross‐border production. For example, one Slovak firm manager reported that the decreasing purchasing power of the Ukrainian currency vis‐à‐vis the euro due to shifts in the exchange rate meant that even though his firm had reduced production by 40% in Ukraine, the finan-cial benefit had increased by 100% over the same time scale.13

As a result, some managers of Slovak firms sub‐contracting to Ukraine have begun to find that free capacity even in the main apparel‐producing region in western Ukraine is limited and have begun to look elsewhere. For example, the manager of one Dutch‐Slovak‐owned firm producing trou-sers, jackets and coats for the EU market, which in the early 2000s employed

Figure 7.3 Slovak‐Ukraine cross‐border production complex.


230 in Prešov directly and a further 370 people in local village workshops, described his experience as follows:

We established OPT [production] in the Ukraine in the autumn [of 2003]. Entry into the EU means [that there are] not many more years for clothing [production] in Slovakia. My costs here [in Slovakia] are €0.12/minute [about €290 on a 40‐hour working week] and I can do a jacket in 100 minutes [€12]. The €250 minimum wage here means a girl [sic] needs to live with her par-ents. Even when I pay 30% more than the minimum wage, it is not enough. In the Ukraine the same process takes 159 minutes to produce a jacket, so to break even I need to go to €0.09 per minute. Wages in the Ukraine are only €50 minimum or one‐fifth of here. If I can find a partner to produce at €0.06/minute with my technology and management I can do much better. This is possible in Belarus, where I am now focusing my attention.14

In 2004, the geographical extension of the arm’s‐length sub‐contracting strategy of this firm was a direct response to the perceived saturation of sub‐contracting production possibilities in western Ukraine and – the manager hoped – would provide more direct market and transport links to Russia. However, by late 2009, this firm was consolidating production arrangements in western Ukraine and, as we show below, was establishing a joint venture.

Virtually all of these cross‐border sub‐contract arrangements involve sewing operations, and in many cases even fabric cutting is carried out in the Slovak factory. Slovak contractors for EU markets are thus becoming organizers of out‐sourced triangular production arrangements. Some of these parts of the supply chain used to be performed in Slovakia, but are now being increasingly undertaken in a cross‐border manner. For example, one Prešov‐based manager argued that his firm has effectively replaced sub‐contracting arrangements in east Slovakia with those across the border in western Ukraine.15 Inevitably, out‐sourcing of this kind is impacting negatively on levels of production and employment in east Slovakia.

Emerging Cross‐Border Direct Ownership

The dynamism of cross‐border contracting is also exemplified by the shift among some of the largest Slovak firms away from arm’s‐length sub‐ contracting and into direct or joint equity ownership in Ukrainian subsidi-aries. There are a number of reasons for such a strategy, not least to ensure greater control over production processes to improve the quality of gar-ments. Quality in Ukrainian firms is widely reported as being uneven and difficult to guarantee, requiring significant input of labour time. However, ensuring quality is particularly important in markets such as those for


tailored garments in the EU, on which much of the cross‐border activity has been focused. The clearest example of the direct ownership strategy is exemplified in one Slovak firm owned by a former manager of the now bankrupt former SOE, OZKN in Prešov.16 The firm produces high‐quality brand‐name men’s and women’s suits and trousers primarily for the Italian market. The firm has majority ownership of a plant in Vynohradiv in Transcarpathian Ukraine where it employs 1,200 workers, in addition to a subsidiary in Bulgaria. Cross‐border sub‐contracting operations first began in 1993 with CM production in Ukraine. In 2000, the firm sub‐contracted production to 25 firms in Prešov. By 2004, they had halved the number of Slovak sub‐contractors as a result of the new focus in Ukraine. As a consequence, the firm was able to reduce production costs by between one‐third and one‐half, even with the EU’s external tariff on apparel imports from Ukraine.

This firm has focused on securing quality improvements, has pursued direct ownership and technology transfer programmes in order to do so and has slowly shifted to greater levels of local sourcing of inputs in Slovakia and to a position as a full‐package producer demanded by EU customers in Germany, Italy, Holland and the United Kingdom. However, local sourcing of inputs in Ukraine is limited by an underdeveloped supplier base. As De Costa (2005) noted, “Should Ukrainian CMT‐clothing producers move to local sourcing, a substantial revamp of the dyeing industry will be necessary, as well as the setting up of special washing services and upgrade of the local accessories sec-tor (for buttons, zips and other embellishments).” According to the owner and managing director of this firm, ensuring their continuing production in Ukraine involved significant investment in quality improvement. The firm invested in new machine services and quality control personnel on site in the factory. As a result of this, the firm’s operations in Ukraine were running with only 1% quality losses. Despite several years of problems involving worker mistrust of management, a programme of fixed payment days for wages was introduced to improve worker ‘motivation’ and product quality.

Other east Slovak producers followed later in establishing cross‐border joint ventures. For one of the largest companies in the textiles, apparel and footwear sectors – a producer of high quality protective clothing and jackets using Western brand water‐resistant fabrics in partnership with a Dutch brand owner – a key motivating dynamic was the shift in the koruna–euro exchange rate in 2008, prior to Slovakia joining the Euro‐zone. At this point it became clear to the firm that the long‐term competitiveness of its opera-tions was unsustainable.17 The firm established a joint venture with its Ukrainian partner firm in 2010, with which it had shared production since the late 1990s. The Prešov operations were refocused on rapid response manufacturing with small orders and the more technical and specialist requirements of its customers, with the majority of more standard produc-tion taking place in the Ukrainian joint venture.


Cross‐Border Network Organizers and Logistics Hubs

Cross‐border triangular production arrangements also emerged as ‘hubbing’ strategies of some EU firms’ delocalized apparel production in the early 1990s. With increasing price pressure from buyers and rising production costs in parts of western Slovakia, some Slovak firms re‐positioned themselves as “network organisers” (Yoruk 2001), building logistics centres to co‐ ordinate cross‐border production arrangements. These network organizers, working predominantly on trousers for export, relocated sewing operations from Slovakia to Ukraine, while operations in Slovakia concentrated on cutting, sourcing, quality control, packing, logistics and customs management.18

For firms such as these, triangular production relationships have been established between factories in Slovakia, affiliates in Ukraine and buyers in the EU. In turn, EU buyers and manufacturers are increasingly turning to producers in Slovakia to contract their apparel production in Ukraine. As we have seen, two primary advantages are gained through these relationships. First, contracting costs are reduced and, second, the challenges of such sourcing encountered earlier by West European buyers are deferred to Slovak managers who are better placed to work with Ukrainian factories because of their historical, cultural and linguistic links. For example, in one large, former state‐owned Slovak enterprise producing jeans, leisure wear, suits, military clothing and work‐wear for German and Slovak buyers, managers were also working as intermediaries for the German buyers in Ukraine. This followed the earlier failure of the German buyers to establish sub‐contract production directly in Ukraine. The Slovak managers more easily negotiated the chal-lenges of cross‐border sourcing, including delivery delays due to limited transparency in Ukraine‐Slovak border customs clearance protocols.19

Since EU enlargement and the phasing‐out of quotas, the pressure on some buyers in Western Europe has become so great that they have moved to contracting directly, side‐stepping intermediaries in Slovakia. For example, one of the largest UK suppliers of men’s trousers to leading high street chains closed its Slovak operations, moving direct sourcing to factories in Ukraine. This firm was a subsidiary of E Walters UK, a supplier to the Marks and Spencer store chain. It began sewing operations in Trenčín in the early 1990s. E Walters UK first outsourced production and later packaging, pressing, warehousing and logistics to its subsidiary, Walters SK, which in turn imple-mented its own pan‐regional ‘hubbing strategy’.20 This involved the moving of sewing operations to a number of part‐equity and independent producers in Ukraine. The Slovak site focused on a hub‐ organizer role involving the co‐ordination of production using the company’s electronic management system. It also organized fabric and trim sourcing and cutting, finishing and logistics. This was driven in part by rising costs in west Slovakia where the subsidiary was located, the need to increase capacity and by improvements in the availability and quality of inputs in Ukraine (see Pickles et al. 2006).


As cost pressures push the industry further east, internal and cross‐border processes of delocalization are deepening. Walters illustrates both processes. According to the Managing Director of E Walters International, continued decline in retail prices in the United Kingdom was compounded when quotas ended.21 Buyers were working on what were often referred to as ‘China prices’ and sales declined, resulting in the need to drastically reduce overheads (by an average of £1 million each quarter). In the face of these concerns, the UK banks reduced financing while increasing the performance targets the company was expected to meet. Under the combined pressures of price competition and credit squeeze, the UK firm went into administration in August 2005, was bought out by the Walters family and one other person, and in 2008 was taken over by another major UK apparel manufacturer in order to gain access to Walter’s Chinese operations and integrate them into its own extensive international production network.22 With the rapid increase in facilities and staffing costs (especially of key English‐speaking personnel) that followed EU accession, the Slovak hub – an innovative response to regional competition in the 1990s – has now been closed.

In other cases, attempts to develop Slovak‐based operations involving cross‐border production arrangements with Ukraine continue. One German‐Slovak joint venture producer of men’s and women’s trousers has seen the transformation of its Prešov operations into a logistics and technical centre, while production is increasingly being relocated to a key partner immediately (3 km) across the border in western Ukraine. The managing director recognized that the firm cannot compete on the ‘China price’ but can in relation to “quality and flexibility/delivery time”.23 This required a number of crucial changes, including the transfer of production technol-ogies to Ukraine to ensure increased efficiency and productivity and to establish production in Ukraine that was of equal efficiency to that in east-ern Slovakia. It also required the deepening of the value chain in Ukraine, notably the development of laundry facilities in the region (owned and operated by another German firm) to allow for adequate and high quality garment finishing. It also relied on what was described as deepening “mutual trust” arising from business networks drawing on past trans‐regional family connections. Cross‐border out‐sourcing has enabled this firm to sustain and even grow employment levels at its operations in Prešov (197 employees in 2004 and 224 employees in 2012), while also expanding the value of its production (from €1.7m in 2004 to €2.7m in 2012).24

The Limits of Cross‐Border Production

There are also limits to regionalized relocation strategies that involve cross‐border arrangements. These reflect the ‘stickiness’ and embeddedness of apparel production in the wider social economy. In the apparel sector,


reliability and quality remain central criteria in sourcing decisions, providing limits to the extent to which further relocation and delocalization of production are currently possible. For example, the manager of one Slovak firm that employs 250 workers and produces sportswear and nightwear for French and German markets, argued that:

Many customers and buyers are afraid of producing in Ukraine. The quality of management is poor and buyers have to supply their own managers. Some buyers also have had bad experiences, such as only receiving back produced goods using 1/3 of the material supplied. Together, the additional costs of transportation, border transfer and management reduce the cost advantage of producing in Ukraine.25

The commercial director of another firm, one of the largest producers of women’s apparel in Slovakia, suggested that:

In Ukraine, [this firm] … works with three companies, but production is not so stable and quality is uneven. [This firm] … is looking for new partners. We employ a Serbian engineer on‐site to guarantee quality of production. This person remains permanently on‐site in Ukraine.26

Another firm, which, when interviewed, was working at very high capacity in Slovakia, attempted CM production in Ukraine in the mid‐1990s but found the experience difficult.27 Citing border delays and the preference to keep a “clean table” rather than operate through quasi‐legal networks and contacts, the firm preferred to outsource excess orders to workshops in the Prešov region and elsewhere in Slovakia, rather than pursue cross‐border delocalization.

Similarly, the owner of a small ski jacket and embroidery factory, which provides embroidery services to a number of other Prešov‐based apparel manufacturers, initially feared that the consequences of EU membership for Slovakia would be a full‐scale delocalization of production to Ukraine, Belarus and Bulgaria.28 However, the manager believed that his firm, as well as others, increasingly had been able to guarantee very high levels of prod-uct quality and service required by EU buyers. Consequently, he was able to respond to price competition by diversifying into markets in the EU, and in some of these markets he found a preference for jackets produced in Slovakia over those manufactured in Ukraine. Other leading east Slovak producers, such as a key Italian‐Slovak joint venture, have also found that tightening labour markets and increasing wage costs in western Ukraine, have limited the competitive advantage of Ukrainian production to such an extent that they have brought all production back to the factory in east Slovakia.29


For other firms, the cost advantages of producing in Ukraine are significant and offset the disruptions of cross‐border contracting and issues of quality control, especially when firms are able to negotiate these apparent border problems using networks and contacts in Ukraine. Indeed, becoming highly adept at negotiating cross‐border contracting practices, especially those on the border with customs officials, has become a key aspect of ensuring the success of such operations. For example, one manager described his firm’s experience as one of negoti-ating highly specialized local knowledge of undertaking business in Ukraine.30 Part of this negotiation of the border involved deciding to work with a Ukrainian contracting firm adjacent to a more minor border post at Velkyyj Bereznyj (Figure 7.3), a border crossing which is north of the main Uzhhorod crossing, to allow for easier and more expeditious border crossing of key staff (such as engineers and managers), replacement machinery and small amounts of finished goods. Reports of excessively lengthy delays at the main border crossings peppered many of our inter-views with firm managers.

The other side of this experience, especially in much higher‐cost western Slovak regions such Bratislava, is that firms find that they are unable to compete either in terms of quality or cost. For example, average monthly manufacturing wages in Bratislava are approximately double those found in the east Slovak region of Prešov (in 2013, average monthly manufacturing wages in the Bratislava region were 1,319 euro, compared to 714 euro in the Prešov region), and also higher in the apparel sector (Table 7.2), reflecting the feminization of low‐paid work in which 87% of clothing

Table 7.2 Regional average monthly wage levels in selected branches of the Slovak economy, 2013 (in euro)

Industrial production

Apparel production

Total Women Total Women

Bratislava 1319 1083 653 683Trnava 950 768 496 493Trenčín 868 685 527 508Nitra 812 659 475 465Žilina 912 702 561 500Banská Bystrica 789 665 474 463Prešov 714 565 515 464Košice 970 743 513 484Slovakia 916 718 520 487

Source: elaborated from data provided by Štatistický úrad Slovenskej republiky (2014).


workers were women in 2013. The result has been a significant loss of orders and downsizing of employment, and further reductions in employment and plant closure among the larger former SOEs in higher labour cost locations in western Slovakia.

Conclusion

Strategies of upgrading, cross‐border production and proximity to EU markets in apparel product segments that require rapid re‐stocking all remain crucial in explaining the continuing presence of some parts of Slovak production in the face of increasing competition from lower‐cost producers in the global economy. As wages and standards of living in ECE increase, especially following EU membership, and as other parts of the economy and labour mobility place increasing demands on regional labour markets and reduce the supply of low‐cost, primarily female, labour for the industry, the apparel industry continues to experience intense pressures to restruc-ture its production networks and the geographies of sourcing. But, to the extent that production costs continue to shape the geographies of export production in conjunction with other demands on buyers and producers, such as proximity to market, time‐to‐delivery and garment quality, the “golden bands” of European apparel production continue to supply core markets in the EU as alternatives to the relentless pursuit of lower‐cost production sites elsewhere in the global economy.

A key dimension of such regionalization strategies has involved the cross‐border management of deepening production‐sharing arrange-ments. Notwithstanding the very significant challenges to which managing cross‐border relations between Slovakia and Ukraine give rise, negoti-ating this border has enabled many Slovak firms to retain their ability to continue production and access lower costs opportunities, upgrade the quality of that production to the levels required by EU buyers, while also ensuring the maintenance of proximate sourcing and the turnover time of capital. As such, it has created a deepening cross‐border apparel produc-tion complex captured in Figure 7.3. Border delays have challenged this system, but this chapter has discussed some of the ways in which these constraints have been negotiated, drawing on the cross‐border cultural economy of border linkages going back to the First Czechoslovak Republic.

The increasing geo‐economic and geo‐political articulation of economic and political‐juridical spaces found on the EU and Slovak‐Ukrainian border has provided opportunities for Slovak firms to extend their production networks into Ukraine in the context of deepening competitive pressures. Slovak firms have been engaging Ukrainian firms in a new division of labour of out‐sourced production relations across this border space, in part, to tap


into lower‐cost labour reserves to the east. These new cross‐border divisions of labour have become a key way in which Slovak apparel firm managers have attempted to negotiate rising cost pressures in Slovakia and proxi-mate regionalized sourcing models. Consequently, negotiating cross‐border production relations has been a politicized and mediated process involving the embedding of Slovak managers in a range of commercial and cultural practices used to negotiate the border.

The extent to which such cross‐border geographies can withstand competitive pressures remains an open question. While the end of quota‐constrained trade in the global apparel industry has seen falling shares of core EU markets in some product areas, where sourcing strategies rely much less only on factor labour costs and price, and where time to delivery is more critical and quality considerations may be higher, cross‐border arrangements have been developing to reposition the industry. Such cross‐border arrangements have been introduced as one way of tapping into lower cost but regionalized production possibilities. There has been scope for industrial upgrading for some producers, as they have been able to capture new aspects of the apparel value chain through strategically implementing cross‐border arrangements and introducing new logistics systems. At the same time, however, for other firms, competitive pres-sures have been too high to continue activity and plant closure, job losses and downgrading have been the result. Recognition of these diverse responses to the end of quota‐ constrained trade and the changing geographies of contracting and production in Europe – many of which are related to product specificity – has, therefore, to be central in any continuing assessment of the role of apparel production in ECE regions in a quota‐free world.

Notes

1 Parts of this chapter are significantly revised and updated, to incorporate new interview and other data, from Smith et al. (2008b), as well as incorporating new conceptual material and frameworks.

2 Triangular manufacturing involves lead firms in core markets placing orders with manufacturing firms in established supplier locations who then further out‐source production to new locations to increase capacity or reduce costs. See Gereffi (1994) on the emergence of triangular manufacturing in Asian apparel production, and Kalogeressis and Labrianidis (2009) on south‐eastern Europe.

3 They also have their origins in more recent OPT‐like arrangements between the EU and Ukraine which, we will argue, are playing a decisive role in the compet-itiveness of Slovak firms.

4 Another response has been contraction around core enterprise activity, the closure of branch plants and bankruptcy, which we discussed in Chapter Six.


5 Interview with chief inspector of labour, Labour Inspectorate, Trenčín, November 2003.

6 EU15 imports of clothing from Slovakia fell by 19% between 2005 and 2012, while those from Ukraine fell by more than double (46%). All data elaborated from Comext database.

7 Interview with DG Trade officials, European Commission, Brussels, 2007, and with officials at Cabinet for European Commissioner for Enlargement and European Neighbourhood Policy, Brussels, 2012.

8 Interviews with DG Trade officials, European Commission, Brussels, 2007 and 2012. For a more general treatment of the background of Ukraine‐EU relations, see Sellar and Pickles (2002).

9 Exchange rate differentials – while critical in relation to Slovak‐EU contracting (a point we return to later) – were not of particular importance in providing the original motivations for Slovak managers to invest or sub‐contract in Ukraine. However, more recently they have become of much greater importance.

10 Benková (2004: 10) argued that wage levels at the time in western Ukraine were around $80 per month compared to $330 in Slovakia.

11 Benková (2004) argued that electrical power costs in Ukraine were 60% lower than in Slovakia, gas was 50% lower and water costs were about 80% lower.

12 Interview with managing director, apparel producer, Prešov, October 2009.13 Interview with managing director, apparel producer, Prešov, October 2009.14 Interview with managing director, apparel producer, Prešov, July 2004.15 Interview with managing director, German‐Slovak joint venture apparel

producer, Prešov, June 2008.16 Interview with joint owner and senior manager, apparel producer, Prešov,

June 2004.17 Interview with managing director, Dutch‐Slovak joint venture, Prešov, October

2009.18 One UK firm which was at the forefront of this hubbing strategy had to

withdraw from these operations (see Pickles et al. 2006) because of changes in UK bank policies on extending lines of short‐term credit. The firm eventually went bankrupt in the context of the global liberalization of textiles and apparel trade in 2005.

19 Interview with senior managers, apparel producer, Michalovce, July 2004.20 E Walters had its origins in the industrialization of marginal Welsh regions

in the 1950s and 1960s, during which time it was reportedly at the forefront of state‐led industrialization in Welsh regions with high unemployment (see www.ceredigion.gov.uk/utilities/action/act_download.cfm?mediaid=31890& langtoken=eng for a brief elaboration; accessed 31 March 2014).

21 Interview with managing director, E Walters International, January 2006.22 See www.albionltd.co.uk/about‐us/ for brief discussion of this development

(accessed 31 March 2014).23 Interviews with managing director, German‐Slovak joint venture, Prešov, June

2008 and October 2009.24 Interview with firm economist, German‐Slovak joint venture, Prešov, March

2014.

http://www.ceredigion.gov.uk/utilities/action/act_download.cfm?mediaid=31890&langtoken=eng

http://www.ceredigion.gov.uk/utilities/action/act_download.cfm?mediaid=31890&langtoken=eng

http://www.albionltd.co.uk/about-us/


25 Interview with owner and managing director, apparel producer, Stará Ľubovna, June 2004.

26 Interview with commercial director, apparel producer, Púchov, November 2003.

27 Interview with managing director, apparel producer, Lipany, June 2004.28 Interview with owner and managing director, apparel producer and embroidery

factory, Prešov, June 2004.29 Interview with managing director, Italian‐Slovak joint venture, Svidník,

November 2013.30 Interview with managing director, German‐Slovak joint venture, Prešov,

October 2009.


Regionalization and the Palimpsests of Production: Delocalization, Legacies and Firm Differentiation

Chapter Eight

Introduction

Throughout ECE, liberalization and marketization policies implemented after 1989 devastated many local economies. Fully‐integrated production systems collapsed, overall industrial capacity declined, social infrastructure and services weakened and unemployment grew. In some peripheral regions, mass unemployment became the norm, deepening historical pat-terns of uneven development. In these regions, post‐1989 labour market restructuring was thus one dominated by economic and social adjustments to de‐industrialization and its attendant gendered, ethnic and regional forms of social and class re‐composition.

Yet, as we have shown in Chapters Four and Five, and largely hidden by the more general crisis of regional decline, some apparel enterprises and apparel regions were able to sustain minimal levels of state underwriting, contract-ing and employment. Crisis and collapse freed up factory space, machinery and large numbers of long‐term skilled workers. In some cases, these ‘resources’ permitted state and former‐state firms and managers to struggle along in difficult circumstances. In other cases, new, small, private, locally‐owned enterprises emerged based on ad‐hoc contracting or new buyer relationships.

(with Robert Begg and Poli Roukova)

regionalization and the palimpsests of production 183

In Chapter Seven, we showed how Slovak enterprises restructured their state socialist regional structures of production through the geographical expansion of firm networks in order to take advantage of historical links and available production capacities in western Ukraine. As a regional production network, the Slovak industry slowly shrank in the 2000s but, in the process, expanded capacities, new international linkages and experimentation with new markets at home and abroad all contributed to a quiet transforma-tion of the industry and its competitive position regionally. In Bulgaria (as well as Romania), the situation was quite different. The collapse of the commanding heights of the state socialist economy along with its social industries led to mass unemployment. Economic involution was, as a result, followed by a kind of ‘defensive restructuring’ in conditions of extreme financial difficulty (see Burawoy 1996, for a more extended discussion of this process). Both well‐established North European and US brands and predatory Greek and Turkish firms moved into this void, setting up green-field factories to source low‐cost products, while workshops and factories struggled to regroup workforces and machinery in conditions of limited capital and lines of credit. The result was a boom in apparel employment (Chapter Five).

In this chapter we focus on the situation in two oblasti (Kardzhali and Haskovo) in the south central region of Bulgaria (see Figure 5.6). The industry in this region has parallels with the eastern Slovakian industry in the roles played by regionalization and transborder processes, but in south central Bulgaria these emerged in a very different context. It is on the significance of the role played by context that we focus here. We highlight how the diversity of economic formations within the region influenced the processes and patterns of post‐socialist economic integration into global production networks. We show how these geographical relationships pro-duced what we call ‘palimpsest landscapes’, that is, regional geographies in which the legacies of past processes shape the present forms of integration into global production networks, not as determining influences, but as relational assets. These legacies and assets are not the dead weight of history or sedimented past practices, but living social relations and networks, and processes of conversation and co‐ordination (Massey 2005; Neilson and Pritchard 2009, see Chapter Two).

The relational assets of traded and untraded interdependencies (Storper 1995a, 1995b, 1997) provide regional resources through which global production networks link to specific places. There are many ways in which such relational assets are activated in firms and regional economies, including the ways in which network resources obtained from prior alli-ances provide differential access and benefits, and also produce capacities that increase the proclivity of firms to form further alliances (e.g., see Bair and Gereffi 2013, and Yeung 2005, for a broader argument). In the discussion which follows we first highlight how the legacies of state


socialist industrialization shaped the forms of emergent international apparel contracting in the 1990s and beyond. Second, we examine the role that relational assets in domestic and agricultural economies played in apparel export production, how these were affected by labour demands in other sectors, and how other income‐generating activities of workers effectively subsidized the low‐wage economy of largely female factory work. Here we show how the apparel export economy in south central Bulgaria depended on historically produced ethnic minority populations and their cross‐border links with Turkey.

Post‐Socialist Transformations on the Periphery

In the 1980s and 1990s, the Bulgarian economy suffered several major rolling crises. In the late 1980s, the effects of state disinvestment and the beginnings of internal hollowing out of the state by party cadres, nomenklatura and enterprise managers did serious damage to the long‐term viability of many enterprises. After 1989, loss of CMEA markets and state funds, and wholesale ‘stealing of the state’ led to economic involution as enterprise capacities were run down, investment capital dried up and both the produc-tive and social infrastructures of the urban and rural industrial economies decayed.

The liberalization of the economy thus came at a time of state weak-ening and oligarchic emergence. After 1989, many state‐owned and former state‐owned full‐package and integrated enterprises collapsed while others restructured by focusing on new assembly contracts for export markets. For most, export performance was limited and markets continued to decline. The currency crisis of 1996–97, however, stimu-lated internationalization as unused plant and currency devaluation created opportunities for firms able to persist despite the lack of state support, capital investment and credit availability. Uncertainty abounded, but costs were low and apparel manufacturers found ready and willing West European and Greek and Turkish buyers for low‐cost stitching work.

In these conditions, the residues of former state socialist enterprises also served as incubators for new kinds of firms operating on smaller scales. Access to low‐cost equipment and plant combined with widespread experience in textiles and apparel production among managers, technicians, accountants and sewing workers led to a rapid expansion of workshop production, which in turn increased the relative importance of apparel employment relative to overall manufacturing employment (see Figure 5.7). The result was a structural transformation of the industry as state‐owned enterprises, with their fully integrated and full‐package systems of manufac-ture geared to guaranteed production quotas were replaced, on the one


hand, by empty shells of larger enterprises and struggling and isolated textile manufacturers and, on the other, by the initially slow, then after 1994/1995 rapid, increase in the number of firms and workers operating on uncertain and low‐value assembly contracts for foreign buyers.

Industrial Collapse and Mass Unemployment in Peripheral Regions, 1989–1998

Bulgarian state firms worked within a distributed system of production, with central factories in the towns and small workshops (tsehs) in many villages. With the loss of CMEA markets and political struggles over control of enterprise resources after 1989, many branch plants and workshops closed (see Begg and Pickles 1998; Pickles and Begg 2000). The resulting de‐industrialization had strong sectoral and regional differences. The commanding heights industries, in particular, were relatively better able to maintain their political connections and hence better able to safeguard their budgets from the central state as the economy declined after 1989. Between 1989 and 1996, Bulgaria’s ‘central districts’ experienced relatively slower declines.1 Although they contained 59% of the population, “the concentration of funds in production and material infrastructure [was] 4.3 times higher than the national average” (MRDC 1996: 17). By contrast, the mountainous regions, which had been the focus of border industrialization programmes, had “funds in material production and infrastructure three times lower than the national average” (MRDC 1996: 27), with those with the most depressed status being Pernik, Vidin, Kardzhali and Smolyan; all of which were peripheral regions with high concentrations of ethnic populations and apparel activity, and unemployment rates that increased rapidly during the transition. The consequences were particularly serious in the village economies. Farm co‐operatives and small‐scale manufacturing workshops offered the primary, and in some villages the only, source of waged employment. In 1996, the Ministry of Regional Development and Construction argued that it was precisely these branches and regions that were most exposed to the critical events of transition: “The affiliate economy existing there was the first to sustain the economic crisis. The affiliates and departments of large enterprises from central districts have been closed nearly 100 per cent” (1996: 22). Massive labour shedding occurred as a consequence of rapid de‐collectivization of state farms, loss of CMEA markets for apparel, textiles, and tobacco, and the peripheral nature of workshops and branch plants within the command economy structure.

In Kardzhali oblast, the commanding heights industries were lead and zinc mining and refining. Between 1991 and 1998, they declined substan-tially less than the massive collapse of employment in collective agriculture and the smaller, but significant decline in manufacturing employment


(Table 8.1).2 In manufacturing branch plants and workshops, the ability of enterprises to protect themselves politically was much weaker and, as a consequence, the industry experienced a 43% decline in employment bet-ween 1991 and 1998, and by 1999 unemployment rates in the oblast ranged from 9.7% to 26.8% and the real wages of those in employment declined (Begg and Pickles 1998; Wyzan 1997).

As local and CMEA demand for products declined in the early 1990s, the collapse of state structures and the extent of unemployment created oppor-tunities for foreign buyers to contract at low prices and for local entrepre-neurs to re‐start small‐scale sewing workshops with limited capital, particularly where factories and workshops had been abandoned along with their machinery by state enterprises. The ‘moribund’ apparel sector turned quickly and increasingly to export production for department stores, mass merchandisers and discount chains in Europe and the United States. This amounted to a structural and geographical reorganization of the industry. In 1989, Bulgaria employed 80,467 people in 91 apparel firms or 884 people per firm (National Statistical Institute 1991: 145). The initial decline in production and employment that accompanied the loss of CMEA markets was gradually reversed by a turn to Western export contracts, but also by a restructuring of production. By 2000, there were 8,795 registered apparel firms (Clean Clothes Campaign 2001) employing 113,102 people (National Statistical Institute 2003) or about 13 people per firm. By 2012, the apparel industry employed 101,204 people or 21% of Bulgaria’s manu-facturing workforce (National Statistical Institute 2013).

Throughout the peripheral and mountain regions of the country, these small‐scale, low‐cost factories and workshops were sustained, in part, by the close articulation of industrial and agricultural work. In south central Bulgaria, tobacco farming had only been partly collectivized, with co‐operatives operating more as buying co‐operatives than collectivized production units. Here farmers retained greater levels of private control over their land and work‐time, and households controlled more of their production than in the state sector (Begg and Meurs 1998). After 1989, with de‐industrialization and mass unemployment, agricultural production on private plots became a

Table 8.1 Economic involution and employment decline, Kardzhali, 1991–1998

1991 1998 Change (%)

Agriculture 27,816 2,065 –93Manufacturing 19,950 12,969 –43Metallurgy and Mining 4,329 3,899 –10Total 75,364 38,840 –48

Sources: National Statistical Institute. Statisticheski Sbronik Kardzhali 1996 Sofia: 30; Territorial Statistical Office Kardzhali. Mimeo No. 220, 247.


more important part of household incomes and demanded a larger proportion of women’s labour time, particularly as apparel jobs were lost and real wages for those in work declined.

Industrial Resurgence and Tightening Labour Markets in Regions of Mass Unemployment, 1989–1998

De‐industrialization, unemployment, peripheral regional decline and declining real wages between 1992 and 1998 provided the conditions for the incubation and explosion of low‐wage, short‐term export contracting for apparel assembly. Between 1992 and 1998, apparel employment in the Kardzhali region increased by 164%, compared to a 52% increase in the country as a whole (Table 8.2).

The expansion of OPT apparel contracting for simple assembly work for export markets re‐fashioned production systems and geographies of apparel throughout the region. The once integrated full‐package textile and apparel complex was transformed into a disaggregated system of independent small‐scale apparel assembly producers using in most cases bundled inputs for sewing (ishleme in Bulgaria) in economically and organizationally isolated textile factories struggling with loss of orders and the flood of lower‐cost imports.

EU customs regulations and local conditions that combined mass unemployment and available skilled labour pools resulted in attractive labour market conditions for Bulgarian and foreign producers. The legacy of a flexibly organized and spatially distributed structure of factories and work-shops provided the conditions for growth: many small workshop sites were available, managerial and worker skills remained resident in the community, and established supply, transport and marketing systems were still in place. State socialist regional investment policies during the 1980s had left an uneven legacy of equipment in urban factories and small village workshops,

Table 8.2 Change in manufacturing employment by selected branch, 1992–1998 (%)

Branch Bulgaria Kardzhali

Food, beverage, tobacco –5 44Textiles –46 –90Apparel 52 164Leather and footwear 0 –28Total –10 2

Sources: National Statistical Institute. Statisticheski Sbronik Smolyan 1994 Sofia: 30; National Statistical Institute. Statisticheski Sbronik Kardzhali 1996 Sofia: 30; Territorial Statistical Office Kardzhali. Mimeos Nos 220, 247, 1999; National Statistical Institute. Stasticheski Godishnik (1994: 187; 1999: 46, 47).


and some of this equipment provided necessary capital for newly established firms working on sewing contracts for new markets in Western Europe. Kardzhali’s border location was also attractive to foreign investors, being within easy trucking distance of other factories and port facilities in Turkey, Greece, and other parts of Bulgaria.

These conditions were compounded by the Bulgarian economic crisis of 1997. In the 14 months between December 1995 to February 1997, the Bulgarian currency (the lev) fell in value from 70.4 leva to the US$ to 2,045.5 leva to the US$. As a result, the official dollar value of the average monthly wage collapsed from over $127 to under $25, during a brief period of hyper‐inflation. Although a new government introduced a Currency Board in July 1997 and the currency stabilized, GDP fell by another 7.2% in 1997.3 Registered unemployment remained high throughout the period and the real unemployment figures (including discouraged workers, ‘early retirees’, and those no longer eligible for unemployment benefits and hence registration) were much higher.4

One result was a rapid increase in the number of new firms and work-shops, as local and foreign entrepreneurs swiftly moved in to take advantage of contracting opportunities. Thus, from the early 1990s, initial small‐scale industrial persistence was complemented by rapid internationalization and a wave of new firm creation geared towards export markets. Indeed, the emergence of the new private firms was so rapid that it was referred to locally as ‘Klondike’ capitalism. By 2012, apparel employment accounted for 20% of total manufacturing employment nationally, while in some obstini in the south and north‐west, it accounted for over 50% of manufac-turing employment (Figure 8.1). In these areas, apparel production for export thus came to dominate the regional economy.

While this rapid expansion of ishleme production was driven primarily by export processing based on cheap and initially abundant, ‘disciplined’, female labour, such generalizations obscured the actual diversity of industrial forms that were emerging. Five main forms of apparel industry restructuring were the most important (Table 8.3): (1) the re‐assembly of state socialist factories as sewing shops, working first on contract for foreign buyers and later for Bulgarian markets (paralleled directly in Slovakia); (2) new domestically‐oriented, often branded, workshops; (3) foreign investments, typically of one of two types – direct investment in large factories for direct export (mainly Turkish) and smaller‐scale workshops operating on week‐to‐week contracting and direct export (mainly to Greece); (4) Bulgarian‐owned village workshops in former state‐owned facilities or former public buildings operating on short‐term full‐bundle export contracts (ishleme), sometimes independently, sometimes as sub‐contractors for the first and third type of firm; and (5) home‐made and small‐scale family‐oriented garage produc-tion. In each case, different articulations of ownership and production resulted in the development of related, but distinct, industrial forms and


regional trajectories. In situ restructuring combined with new networked forms of production activity, often building on distinct sets of relational assets. In each case, the articulations of capital stretched deeply into community and household economies.

Some firms were sustained by minimal levels of state underwriting, contracting and production, guaranteed by the access that former SOE

0 10 20 30 40 50 60

North Central RegionGabrovoRasgrad

RuseSilistra

Veliko Tarnovo

North-West RegionMontana

LovechPleven

VidinVratsa

North-East RegionDobrich

ShumenTargovishte

Varna

South-West RegionBlagoevgrad

KystendilPernikSofia

Sofia capital

South-East RegionBurgasYambol

SlivenStara Zagora

South Central RegionHaskovoKardzhali

PazardzhikPlovdiv

Smolyan

Figure 8.1 Apparel employment as a percentage of total manufacturing employment, 2012 (by Bulgarian oblast and obstina). Adapted from Bulgarian National Statistical Institute Data, 2013.

Tabl

e 8.3

Di

verse

appa

rel fi

rm ty

pes i

n sou

th ce

ntra

l Bulg

aria

Ind

ust

rial

for

mP

rod

uct

sM

arke

tsO

wn

ersh

ipW

orke

rsC

once

ptu

al i

ssu

es

(1)

Form

er st

ate e

nter

prise

–

Mir,

Dim

ana

Stan

dard

ized l

ong‐

run

suits

, jack

ets,

trous

ers

Long

‐stan

ding e

xpor

t co

ntra

cting

with

socia

list

era b

uyer

s

Nom

enkla

tura

, ext

erna

l, sh

areh

older

(s)Re

sidua

l wor

kforce

, pr

edom

inant

ly fem

ale,

and a

geing

Func

tiona

l and

prod

uct

down

grad

ing as

econ

omic

strat

egy

(2)

Dom

estic

bran

ded

firm

–Fla

irSp

ortsw

ear

Dom

estic

Limite

d fun

ction

al, pr

oduc

t, an

d/or

proc

ess u

pgra

ding

(3)

New

FDI fi

rms,

parti

cular

ly fro

m Tu

rkey a

nd G

reec

eLo

w‐va

lue, o

ften t

‐shirt

s an

d knit

ted s

ports

wear

Expo

rt to

Turke

y and

Gr

eece

Fore

ign (i

) Tu

rkish

corp

orat

e (e

.g., S

ahinl

er)

(ii)

Turk

ish an

d Gre

ek

priva

te en

trepr

eneu

rs

Ofte

n cap

tive f

emale

wo

rkers

in sm

all to

wns

and v

illage

s

(i)

Trans

fer of

tech

nolog

y, kn

ow‐h

ow, a

nd

mar

ketin

g net

work

s(ii

) Hy

per‐e

xploi

tatio

n of

capt

ive la

bour

force

(4)

Ishlem

e villa

ge w

orks

hops

(a)

cont

ract

ishlem

e ca

ptur

ed su

pplie

r(b

) lon

g‐te

rm re

lation

s wi

th sh

ared

buye

r/pr

oduc

er ris

k

Full‐

bund

le re

ady‐

mad

e ga

rmen

tsSh

ort‐t

erm

sub‐

cont

racti

ng fr

om

“mot

her‐p

lant”

and n

ew

cont

racti

ng fr

om Tu

rkish

, Gr

eek a

nd ot

her

Euro

pean

buye

rs

Tech

nician

s or m

iddle

man

ager

sM

ixed p

rior e

xper

ience

or

none

, you

nger,

fem

ale, w

ith in

creas

ing

num

bers

of m

ale

oper

ator

s

Artic

ulatio

ns w

ith ag

raria

n wo

rk re

gimes

; con

tracti

ng

unce

rtaint

y and

wor

king

cond

ition

s; en

try of

fly‐b

y‐nig

ht G

reek

firm

s

(5)

Gara

ge fir

ms ‐

Djen

ny,

Julie

tLo

w va

lue fa

shion

shirt

s, t‐s

hirts,

unde

rwea

rLo

cal m

arke

ts, es

pecia

lly

Dim

itrov

grad

mar

ket

Dire

ct fam

ily‐o

wned

, ty

picall

y with

stat

e soc

ialist

te

chnic

ian ex

perie

nce

Fam

ily m

embe

rs,

includ

ing ch

ildre

n afte

r sch

ool o

r dur

ing

vaca

tions

. Som

e ne

ighbo

urs.

Inde

pend

ent p

rodu

cers;

re

giona

l mar

ket o

r lar

ge

local

firm

s (e.g

., Elm

as Te

x)

or jo

bber

s; fu

nctio

nal

upgr

ading

in lo

w‐va

lue

prod

uct a

reas

; arti

culat

ion

with

hous

ehold

econ

omies


managers had to contracting relations or long‐standing business relations. In some cases, these ‘resources’ permitted state and former‐state firms and man-agers to struggle along in generally unfavourable circumstances, often under conditions of branch‐specific forms of re‐monopolization, dependent largely on national markets. In some cases, firms were able to continue operations through managerial privatization, which took several forms. Some larger firms were ‘simply transferred’ to former managers or went through formal privatization procedures. In some cases, closed workshops were re‐opened by former managers producing for niche markets, based on former international contacts and contracts. Other privatized units were able to establish new markets, usually on a contract basis, either through national buying organiza-tions, international distributors, or direct brand name marketers, with smaller workshops surviving by using ad‐hoc and uncertain contracting. The new small and medium‐sized assembly operations invariably worked under short‐term contracts to supply international buyers and marketing firms geared to new geographies of consumption in the West, and were driven largely by cheap and relatively disciplined labour pools. As a result, in villages where workshops were closed in 1989, by the mid‐1990s there was an expanded demand for labour as workshops re‐opened to supply foreign sewing contracts.

In each of these emergent firm types, the demand for female factory workers re‐emerged in a region still typified by mass unemployment, high levels of dis-couraged and ‘retired’ workers, and lack of formal waged work in many house-holds. Low‐wage, relatively skilled industrial labour pools thus drove this resurgence, with all the consequences so frequently associated with despotic production systems (Burawoy 1985). Labour demands were high, working conditions rigorous and wages were relatively low (albeit in a highly depressed regional economy in which jobs were scarce). At the same time, managers invested little in workforce training and development, depending almost entirely on previously trained socialist‐era apparel workers. The result was the rapid emergence of tight labour markets for apparel workers in conditions of large‐scale unemployment. This paradox is only understandable if the link between low‐wage and unskilled work is re‐framed in favour of a much more nuanced understanding of labour market dynamics in low‐cost assembly production. Here skills, albeit relatively limited in scope, are critical for the effective operation of firms and hiring practices are geared to collecting and ‘stealing’ the best skilled workers, creating new forms of work arrangement and organizing production accordingly. In particular, demand increased for workers with sewing skills who would work long hours for low wages on relatively insecure and ‘flexible’ work contracts. The resultant tightening of local labour markets, combined with highly differentiated and competitive market conditions, also led some firms to turn to higher‐value production and to compete more vigorously for ‘skilled’ reliable workers who could meet the demands of contract work that increasingly demands higher quality apparel (see Lovasz 2000, for a similar argument about Hungarian apparel firms).


In practice, even these various types of new firm exhibited a range of organizational forms, distinct forms of ownership, varying levels of capitali-zation, supplying different end markets and market segments, and multiple and changing labour demands and practices. They were variously articulated with and dependent upon broader social conditions and practices, having a long pre‐capitalist history in the region. Some were small operations run on short‐term and uncertain contracts usually by local, former SOE employees capitalizing on their previous experiences and contacts. Some were more substantial enterprises employing from between 20 and 250 workers and also drawing on equipment, workers and contacts developed in the state system. Still others were new factories built with or by foreign firms who had strong links with international retailers, wholesalers or name‐brand com-panies (such as Nike, Fila and Adidas). The main foreign investors were Turkish, Greek and Italian, often in joint ventures with Bulgarians. All firms produced for foreign markets and few did more than assemble imported cut pieces to order. All were, in different ways, integrated into the commodity circuits of global apparel assembly. All depended on low‐wage, ethnic, female workers in a variety of contractual arrangements, including putting‐out, short‐term contract home‐work and factory employment.5

Where new economic opportunities emerged, household and gender rela-tions were also restructured. Labour markets and enterprise behaviour showed signs of increasing differentiation as enterprises articulated in various ways with national and international suppliers and markets and with local social conditions. This differentiation was both a product of, and a problem for, the thesis that ECE is emerging as a ‘cheap labour’ region. What at first appeared to have been a form of defensive restructuring in a regional branch plant economy now appeared more complex, as ownership and organiza-tional forms diversified, work regimes were transformed, and workers showed marginally improved signs of being able to bargain collectively for better working conditions. At least relative to others in the region whose primary experience of transition was unemployment and economic hardship, female apparel workers were employed, received benefits and increasingly seemed to be gaining some marginal advantages in bargaining power. The implications of such labour market segmentation in the 1990s and early 2000s remained unclear, particularly as the bulk of the population still experienced mass unemployment and the effects of EU accession were still to come.

Domesticating Ishleme

The post‐socialist apparel firm was also shaped by socialist legacies in sev-eral other ways. In particular, successful manufacturing in an uncertain and highly competitive, low‐value export‐dependent environment necessitated that managers articulated the structure and practices of private production


with the broader social conditions of workers’ lives. As we have seen above, these forms of flexibility were not absent from the socialist enterprise, indeed, managing production to the plan meant co‐ordinating management, work and workers’ lives in a variety of ways to ensure social compliance with the demands of quota storming. The post‐socialist firm by no means aban-doned some of these forms of social co‐ordination and community embed-dedness. Instead many private firms – although by no means all – built their enterprises in ways that were very similar to the SOEs in which they had formerly worked, appropriating the paternalistic relations of socialist work-places and their bargaining practices in order to manage workers and work regimes to meet the increasingly rigorous demands of low‐price export con-tracts and their quality and delivery requirements.

Creed (1998) has shown more generally how formal economic relations under state socialism were ‘domesticated’ through the village and household economies, and it is this domestication of the transitional economy and of capitalist economic practices that occurred in Kardzhali in response to post‐1989 economic decline (see also Stenning et al. 2010, for a parallel argument for urban households in Poland and Slovakia). In a sense, deep economic decline was ‘absorbed’ (with great hardship) by the multiple and adaptive nature of village economies and marginal household practices and budgets. There were three main ways in which people in the region diversi-fied their economic practices in articulating this transformation to export production and to which firm managers both had to adjust and, in turn, were able to incorporate into their business strategy: (1) the role of social networks and state regulations; (2) re‐peasantization and the articulation of factory work with agrarian labour demands in the face of the deepening of subsistence production and growing dependence on natural resource extraction; and (3) the increasing dependence on ethnic and trans‐national networks for alternative forms of cash income generation, such as migrant labour remittances, pensions and petty‐commodity trading. These are crucial elements of any understanding of the ways in which labour market flexibilities were structured in Bulgarian apparel firms and how the new industries became embedded regionally and socially. They highlight the importance of understanding the articulation of emergent capitalism in ECE with the wider social relations of socialism and post‐socialism in a relational manner, including domestic and gendered relations.

Deepening Social Networks and the Cultural Economy of Peripheral Apparel

Early post‐socialist reforms in Kardzhali led to what Burawoy (1996: 1109) has described (in the Russian case) as “a process of economic degeneration in which the economy feeds on itself” through a reworking


of exchange relationships instead of a fundamental change in the relations of production. In this process of economic involution, the role of powerful economic actors in orchestrating relations of exchange and the social net-works that support them has been crucial. This was certainly the case in the large state enterprises in the commanding heights of the economy and in many core enterprises of lower‐value‐added branches in Bulgaria. These networks, in their very structure, disadvantaged Kardzhali and ethnic Turks during the early transition (Pickles 1995; Begg and Pickles 1998; Begg, Meurs, and Pickles 1999). Branch plants were closed to pro-tect the jobs and wage bills of core enterprises and workers, the resources of state enterprises were ‘pirated’ and, because of their already marginal-ized socio‐economic status and regional isolation from the main centres of industry and power, ethnic Turks and communities were unable to benefit from this phase of accumulation.

In the face of these processes of economic marginalization, mountain, border and ethnic communities in particular were forced to deepen their reliance on social networks that had sustained them in their defence against the nationalist ethnic cleansing policies of the Zhivkov‐era socialist state. In Bulgaria, ‘close’ networks or blizki are important aspects of all forms of economic practice, and are structured in terms of family and locality networks, age, school, army and marriage cohorts, even year‐of‐birth affiliations (see Creed 1998; Cellarius 2000; see also Ledeneva 1998). These relations continued to operate as stronger or weaker func-tioning systems of reciprocity, trust and borrowing, which individuals, families and whole communities could call upon in times of need. Besides providing material and social support, such blizki also operate as channels of communication and exchange, operating as networks in which the chance of interaction, contact and support are more likely to occur than among individuals not so ‘networked’. It was these blizki networks (liter-ally ‘close ones’) that tended to reproduce themselves and deepen in times of duress (Czako and Sik 1995). The loss of jobs after 1989 brought serious economic hardships to many families, increases in alcohol and cig-arette consumption and family violence, but especially in the villages, such close networks of reciprocity were also deepened to manage the uncertainty of periodic or long‐term ‘non‐work’ and the low wages if calls to return to work did occur.

They were also important in shaping the positional power of workers in local industries. Social networks sustained many of the practices of state socialist labour policies and regulations (see Chapter Three). Despite its severe weakening, the state still regulated labour markets in important ways. Schooling was mandatory for everyone until 18 years of age and, although it was possible to leave school earlier to take a job, only those who were 17 years old could apply for work permission. This was given only in certain


circumstances and then only for a working day of between six and seven hours. Labour laws also gave every worker the right to form or join a trade union and for such a trade union to be represented in the factory. Historically, management and trade union compacts were common as trade unions operated as the infamous ‘transmission belts’ of party power. While labour–management relations gradually became more openly conflictual after 1989, legacies of ‘transmission’ politics and trilateralism remained, as did the broader paternalistic attitudes towards workers on the part of former managers and state officials who became owners of private companies. Consequently, as discussed in Chapter Three, while pressures increased to maintain the low levels of wages, this occurred within labour markets that were much more regulated and normed than was the case in many export‐producing platforms in other parts of the world.

In some enterprises, attempts to restructure work practices in order to meet international quality controls, to retain workers, to ensure workers remained on premises, or to capture some portion of wages back from workers resulted in the expansion of services for workers on‐site. In enterprises with strong orders, strict quality demands, and fixed dead-lines, managers and owners added coffee bars, restaurants, shops and other facilities to the factory. In other enterprises, where workers had been hired from a wide area and therefore had to travel long distances to work, providing free or heavily subsidized food became an essential pre-requisite for maintaining quality production throughout the working day. Reminiscent of integrated state socialist firms, these socialized factory operations nonetheless represented new forms of factory regime aimed explicitly at the restructuring of shop‐floor relations and the extension of control systems to production.6 In turn the provision of these dimensions of the social wage enabled apparel firms to ensure a relatively skilled, loyal and compliant workforce.

Re‐peasantization, Factory and Farm

Clarke (1998) and Smith (2000) have each argued that in Eastern Europe neo‐liberal policies of labour shedding and wage squeezing promoted a reversion “to subsistence production as wages [fell] … below the minimum necessary for physical survival” (Clarke 1997: 25). Economic immiseration led to a return to the land and produced a re‐peasantization and a rural pro-letariat (see also Stenning et al. 2010). The experience of mass regional unemployment led to increased dependence on available material and social resources (land, natural resources and social connections). Thus, the Bulgarian Development Cooperation Report for 1998 suggested that, during the 1990s, the “majority of Bulgarians became reliant on survival strategies,


such as household/urban agriculture” (1998: 11), with more than one third of households producing their own fruits, vegetables, and preserves on small plots. Of course, household and dacha production was always an important supplement to household incomes throughout the communist period (Meurs 2001), but between 1989 and 1996, income from household plots rose from 14.7% to 22.6% of average income and the contribution of salaries and wages fell from 55.9% to 39.5% (hermes.nsi 1999), creating what Meurs (2001) called a “truncated transition”.

The story is made more complicated by the uneven levels of access to land and the ability and resources to farm. Those with resources were able to farm while those in greatest need as a result of loss of employment income were often unable to either gain access to sufficient land or, where land was available, did not have the resources or know‐how to cultivate it (Clarke 1998; Stenning et al. 2010). Those with resources to farm increased their levels of activity and dependence on production. Those most in need and lacking resources, especially those in peripheral regions who had lost their jobs in apparel and other social industries were, for the most part, unable to compensate for loss of waged income by turning to agriculture. The result was that, instead of a re‐peasantization or a deep-ening of subsistence production as a survival strategy, people without land and resources were forced to survive at much lower levels of economic well‐being and were, as a result, much more at risk of illness and malnutrition. As a result, their wage bargaining power was low and they were more willing to take the new apparel workshop jobs at very low wage levels.

Meurs (2001: 1) further nuanced this reading. Instead of a de‐ monetarization occurring in the rural economy, to which rural households must adapt, Meurs argued that rural households have “a logic of their own, distinct from the neo‐liberal logic of macro policies”. That is, household processes are not responses to state policies, but instead are adaptations originated by semi‐autonomous households that were only weakly integrated into the macro‐structures of central planning in the first place. Pre‐socialist and now non‐capitalist agrarian practices suffuse the rural household economy and cannot be reduced to either. Since these are non‐market processes, the trans-formation of the 1990s was based on the articulation of economic practices, both capitalist and non‐capitalist. The practices that sustained the partial autonomy of households from state structures prior to 1989 provided the resources for post‐socialist adjustments and the deepening of the apparel export economy after 1989.

One of the more complex stories of post‐socialist transformation thus has to do with this articulation of these private post‐socialist apparel firms with regional patterns of employment, welfare, allocation of labour and the gen-dered nature of each. Particularly in Kardzhali, by the late 1990s, assembly for export was soaking up a large percentage of the available manufacturing


workforce and this created local female labour shortages within Turkish communities (Table 8.4).

As a consequence, some firms increased pressure on working time and wages, while others drew on their experiences with state socialist practices of flexible labour arrangements to support workers despite low wages. But the struggle over working time and wages was not entirely one‐way. By the mid‐1990s, managers in the re‐emerging small apparel workshops producing for export found that they had to adjust their own work and production sched-ules to the seasonal demands of their workers who were engaged in household agricultural work. In villages and towns with tight labour markets, new private owners found the need to revert to the long‐standing practice of per-mitting female workers to schedule work‐time around the seasonal demands of tobacco and potato production. Smaller workshops, in particular, often started work early in the morning or in the afternoon to accommodate their workers’ needs to be in the fields, especially at planting and harvesting time. In turn, these organizational and managerial constraints generated financial benefits as flexibilities in work regimes and the timing of the working day were balanced by low wages, particularly where workers’ incomes were supplemented and under‐written by these external activities.

For female workers, flexible labour time permitted the women of the village to articulate formal and informal work regimes and to rely on multiple economic strategies at a time when other forms of household income (particularly male wages) might not be available. Indeed, one consequence of the labour shortage for enterprises with increasingly demanding international contracts was the emergence of sweating of labour

Table 8.4 Apparel employment by obstina, Kardzhali oblast, 1998

Apparel employment

Apparel as percentage of manufacturing employment (without metallurgy)a

Kardzhali Oblast 4945 48Ardino 27 8Djebel 361 51Ivailovgrad 52 14Kirkovo 384 75Krumovgrad 1 0Kardzhali 3612 60Momchilgrad 365 27Chernoochene 143 83

Sources: Oblasti i Obstni 1988: 37–8, 43–5. Territorial Statistical Bureau‐Kardzhali No. 220, 247.Note: a 1998 corrected for mining.


where workers had few other options, but where they did have other sources of income or other job opportunities workers were able to press for marginal improvements in wages and working conditions, and in some cases for the expansion of the social wage provisions of their contracts.

Ethnic and Trans‐national Networks

The highly racialized nature of the Bulgarian socialist regional economy was also a crucial element in shaping the regional economic transformation after 1989. The south central region of Bulgaria has a high proportion of Muslim and non‐Muslim Bulgarians, a large proportion of whom also speak Turkish as their first language and who have maintained long‐standing historical links with family members in Turkey. In all but one obstina (the predominantly Bulgarian‐speaking mining centre of Ivailovgrad), the Turkish‐speaking population comprises more than 54% and as high as 97% of the Turkish‐speaking populations (Table 8.5). This was important for the apparel industry for several reasons. This population had been subject to repeated nationalist efforts to assimilate, punish or expel them through the 1970s and 1980s. The most recent of these programmes – issued in response to the deepening crisis of the Zhivkov party apparatus – culminated in the 1989 expulsion and migration to Turkey of over 360,000 ethnic Turks and Roma, with over 100,000 coming from the Kardzhali region itself. While many subsequently returned, the loss of population compounded the economic difficulties of apparel enterprises throughout the region, but also – especially with returnees – deepened cross‐border economic and

Table 8.5 Ethnicity and unemployment in Kardzhali oblast, 1999

Region Total population Muslim (%)Unemployed in 1999 (%)

Kardzhali 213,806 75.6 14.1Ardino 18,174 95.4 26.8Djebel 10,994 93.6 16.8Ivailovgrad 10,555 21.5 17.7Kirkovo 33,112 93.1 13.8Krumovgrad 31,268 87.3 14.4Kardzhali 76,155 56.1 11.7Momchilgrad 20,836 89.2 14.9Chernoochene 12,712 97.3 9.7

Sources: Kardzhali Labour Office. Ravnishte na bezrabotitsa, predlagane i turcene na trudoviya nazar, 1999; Territorial Statistical Office Kardzhali. Mimeo No. 220, 247, 1999; National Statistical Institute. Oblasti i Obstini 1988: 37–45; National Statistical Institute. Statisticheski Sbornik: Kardzhali 1996: 115–16.


social ties with Turkish family members and businesses (Eminov 1997; Pickles and Begg 2000).

Following the expulsions and dispossessions, the Turkish minority after 1989 had only limited access to investment capital. Social networks, which had functioned primarily as channels for economic and political survival under the previous regime, were re‐worked in response to the rigours of post‐socialist economic marginality, in turn creating opportu-nities for Turkish‐speaking and Muslim communities in the region (Begg et al. 1999). One result, was the emergence of forms of merchant capitalism. The mass emigration/expulsion of ethnic Turks in 1989 and the subsequent return of some of those who had left created exchange and trading networks that had profound effects on the regional economy of Kardzhali. The refugees, émigrés and returnees of 1989 consolidated and extended cross‐border links that had been in place, albeit in attenu-ated form, throughout the period of state socialism. Villages of Bulgarian Turks in Turkey still maintained contacts with family members in Bulgaria and refugees entered Turkey through and with the assistance of these channels and networks. With the opening of markets and borders, the region became more deeply integrated into international capital circuits, and traders from Turkey and Bulgaria passed easily between the two countries, exchanging goods and money legally and illegally, and main-taining links among family and village social networks. As a result, after 1989, legal and illegal imports of consumer goods across the border from Turkey boomed. The markets for low cost clothing, shoes, toys, and appliances were quickly dominated by ‘Turkish traders’ selling imported goods at low prices (Chevalier 1999).

Local apparel producers oriented to domestic markets suffered from this competition as Turkish social and cross‐border networks and experiences fostered the rapid emergence of a petty merchant class among Turkish traders, some of whom were able to leverage their positions and markets into substantial sources of accumulation. New forms of investment followed as Turkish traders and entrepreneurs, along with Turkish corporate interests, entered the region’s apparel industry, either directly through investments in new apparel firms or indirectly in trading and labour arbitraging for firms.7 These were particularly important in Kardzhali, where Turkish‐speaking Bulgarians comprised 87% of the district’s population. Initially, Turkish investments in labour‐intensive industries in these regions focused mainly on sub‐contracting, but by the mid‐1990s FDI in new and re‐opened apparel factories was appearing in Kardzhali and Haskovo districts, and Turkish and Bulgarian apparel firms were operating in triangular production networks, producing knitwear mainly for US and Western European markets. As apparel enterprises became increasingly linked to larger national and international buying chains, the importance of these locally specific links and legacies did not diminish. Instead, the cultural economy of the border economy continued


to shape the form of struggles over wages, contracts and the competitive position of regional producers, as we go on to show in Chapter Nine, in relation to ethnic concentrations of garage firm producers.8

The Post‐Socialist Firm: Ishleme 2.0 and the Return of Stitch‐Up

Between 2002, EU accession in 2007, the financial crisis of 2008 and the present, the number of Bulgarian enterprises has declined and manufac-turing employment has dropped even more.9 Firm collapse and labour shed-ding in low‐wage industries and weak firms have contributed to overall wage increases for all of the regions of the country. Wage increases were also influ-enced by the new regulations against informal employment that came into effect in 2002 and were tightened at the end of 2004, which regularized employment contracts and reduced the ‘grey economy’ payments, contrib-uting further to the increase in overall manufacturing wages. In Bulgaria, firms pay social insurance on all registered worker wages and so the enhanced regulation of grey and part‐time cash wages also had the paradoxical effect of fixing the minimum wages paid in some industries and expanding the proportion of overtime and piecework wages paid in cash, which in the apparel sector not infrequently amounts to an additional 50% of the formal wages.10 The south central region of the country was particularly hard hit by enterprise closure and job loss, and, consequently, remains the lowest wage region in the country, despite overall increases year upon year until 2012.11

During the recent period, apparel employment has expanded markedly in traditional producing regions (Figure 8.2). In the south central region, post‐crisis apparel employment has grown significantly in Kardzhali, Haskovo and Plovdiv, while job losses have typified the more remote towns of Smolyan and Pazardzhik. Figures 8.3–8.5 show national statistics for sold quantities of goods and the value of goods sold. These data are partic-ularly useful in calculating unit values, which are presented for 2008–2012. Unit value calculations typically depend on export data and hence render a very partial picture of overall national production of which only a proportion is exported (Pickles and Smith 2011). Indeed, in those coun-tries where firms expand their penetration of domestic markets, such trade‐based unit value measures may represent a declining portion of total production. Using national production data alleviates this trade‐data problem. From these data, it is clear that post‐crisis Bulgarian apparel pro-duction has changed in two significant ways. First, production in low‐value products has expanded rapidly. Second, while higher‐value product output declined significantly from 2008 to 2009, subsequent years have seen a major rebound. These suggest quite different processes of emergence from the economic crisis than those identified in Slovakia, which were much more focused on either new production of hosiery based on Italian FDI or on the


continuation of contract relations in high‐value tailored products such as suits (see Chapters Six and Seven).

One characteristic of these changes was the expansion of low‐value manufacturing and a low road to regional development. The highest quantity of sold products was concentrated in low unit value product categories (t‐shirts, singlets and other vests, followed by men’s/boys’ underwear, women’s/girls’ blouses, and jerseys and pullovers (Figure 8.3)). Between 2008 and 2012, with the exception of jerseys, the top five

–1000 –500 0 500 1000 1500

GabrovoRasgrad

RuseSilistra

MontanaLovechPleven

VidinVratsa

DobrichShumen

TargovishteVarna

BlagoevgradKystendil

PernikSofia

Sofia capital

BurgasYambol

SlivenStara Zagora

HaskovoKardzhali

PazardzhikPlovdiv

Smolyan

North Central Region

Veliko Tarnovo

North-West Region

North-East Region

South-West Region

South-East Region

South Central Region

Figure 8.2 Absolute change in apparel employment by obstina and planning region, 2010–2012. National Statistical Institute, Sofia, 2013.


0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000

Men’s/boys’ knitted underwear

Women’s/girls’ knitted suits, jackets, skirts, trousers, etc

Women’s/girls’ knitted blouses

Jerseys, pullovers, etc

Women’s or girls’ knitted underwear

Men’s or boys’ woven trousers

Women’s or girls’ woven dresses and skirts

Women’s or girls’ woven trousers and overalls

Women’s or girls’ woven blouses

Men’s or boys’ woven shirts

Garments made up of felt

Other workwear

Knitted gloves

Men’s or boys’ woven overcoats

Women’s or girls’ woven jackets

Women’s or girls’ woven overcoats

Men's industrial and occupational jackets

Men’s or boys’ woven jackets

Men’s overalls

Men’s or boys’ knitted overcoats

Woven sportswear

Men’s or boys’ knitted shirts

Men’s or boys’ suits and jackets

Hats and other headgear

Men’s or boys’ woven suits

Women’s or girls’ woven suits

Women’s or girls’ knitted overcoats

Women’s industrial and occupational jackets

Women’s industrial and occupational trousers

Women’s and girls’ vests, pyjamas, etc

Apparel articles of fur or skin, except headgear

Men’s or boys’ knitted underwear, etc

0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000

T-shirts, vests, etc

2008 2009 2010 2011 2012

2008 2009 2010 2011 2012

Figure 8.3 Quantity of apparel product sold by product category, 2008–2012. National Statistical Institute, Sofia, 2013.


product areas all increased in sold value (Figure 8.4). The quantity of jerseys produced after 2009 declined, but with marginal increases in the unit value of the remaining production. But another aspect of the changes was the expansion of higher‐value production in products that



Women’s/girls’ knitted suits, jackets, skirts, etc










Other workwear

Knitted gloves




Men’s industrial and occupational jackets


Men’s overalls


Woven sportswear












0 40,000 80,000 120,000 160,000

2008 2009 2010 2011 2012

Figure 8.4 Sold value of Bulgarian manufactured apparel by product category, 2008–2012. National Statistical Institute, Sofia, 2013.


formerly were less important. This shift in product mix and value-added production is an important part of the story of post‐crisis rebound. In lower volume products, such as women’s/girls’ suits, jackets and over-coats and men’s/boys’ suits, jackets and overcoats, small increases in sold product corresponded with substantially higher unit values which

0 20 40 60 80 100 120 140



Women’s/girls’ knitted suits, jackets, skirts, trousers, etc










Other workwear

Knitted gloves




Men’s industrial and occupational jackets


Men’s overalls


Woven sportswear












2008 2009 2010 2011 2012

Figure 8.5 Bulgarian manufactured apparel unit value of sold product by product category, 2008–2012. National Statistical Institute, Sofia, 2013.


also increased between 2009 and 2012. This marks an important shift to higher‐value production following the crisis, perhaps more similar to the Slovak experience.

The post‐socialist apparel firm thus emerges in conditions in which historical legacies, institutional heritage and regional labour markets have shaped the opportunity structures and the possibilities for adjustment in changing market circumstances. One result has been the diversification of firm types and forms of organizing production. To illustrate this diversity of firm type and strategy we now return to the typology of firms in Table 8.3 and focus on four specific case studies of the post‐socialist, post‐crisis apparel firm to illustrate more concretely the ways in which these forms of embeddedness have continued to shape the structure of the firm, its pro-duction processes and its articulation with global production networks.

Flair

Flair is a classic example of a contemporary ishleme firm that has been leveraging export sewing contracts to create a foothold in expanding domestic markets.12 Established in the late 1990s as a spin‐off from a previous state firm, Flair expanded from 20 to 30 workers in the 1990s working largely on ishleme production contracts, to 300 workers in 2013 supplying sportswear and other clothing to major international brands including Espirit, Mango, Zara, and Benetton. The firm registered its first own brand in 2006. The manager indicated that the firm is in a good com-petitive position because of a combination of business strategies. First, emphasis is placed on quality, a wide range of models (track suits, t‐shirts, shirts, trousers, skirts and sportswear) and carefully chosen export markets focused on its Black Sea neighbours, including Russia and Ukraine, but also Germany, Greece, Cyprus and the Czech Republic. Inputs are sourced directly by Flair primarily from Turkey. Second, Flair also has committed to developing and retaining skilled workers. While most firms in the region shed workers following the 2008 financial crisis, and while Flair had to cut its costs, the firm retained all its workers, seeing its workers as its basic resource and most important asset. The firm has also committed to a flat structure of management with little hierarchy between managers and workers, with a focus on quality management. To manage cost pressures, all inputs are imported, including fabrics, yarn, thread, needles and machinery. Once a clear signal of a low‐road firm strategy, the import of inputs is now being integrated in important cost‐saving strategies to pro-tect what the firm sees as its basic resource: a skilled and loyal workforce. Only stitching and dyeing are carried out in Bulgaria. Third, the firm is investing in process and product upgrading. Flair received no national or local state support for investment in training or equipment, but is currently investing in new machinery and it is also entering professional sports


markets, sponsoring amateur and professional football, basketball, volley-ball, and mixed‐style fighting, supplying uniforms for each. Fourth, Flair owns several retail outlets, two locally in Haskovo, and others in Kazanluk, Gabrovo, Pleven, and Sofia. Finally, the firm is pro‐active in developing its brand and brand loyalty by positioning its products in a wide range of market outlets, including trade shows and exhibitions, internet outlets, and social media like Facebook.

Artex

Artex13 has adapted slightly differently to the challenges of export contracting by developing a complex trans‐border production network. Artex is the Bulgarian subsidiary of a German firm producing underwear under contract in Kardzhali. The German firm comprises 60–70% of the orders of the firm, with 15–20% being for a Swiss firm, Kalida. All orders are based on common styles, documentation, and processes, and so pro-duction processes and maintaining quality in them are relatively easy. Artex carries out stitching and a small amount of cutting for lace embellishment. The bulk of the cut fabric and embroidery is carried out by a Greek subsidiary, IncSanti, using imported fabrics from India and yarn purchased in Turkey. The Greek firm is located nearby across the Bulgarian‐Greek border. As Figure 8.6 makes clear, Artex Bulgaria’s place in the regional

Buying firmalbstadt,Germany

Order, contract, patterns,documentation

Full bundle inputsfrom swiss buyer

through hungariandistribution centre Hungary

Buying firmSwitzerland

Finished goods

EU international bordercrossing

Non-EU internationalborder

IncsantiGreek

subsidiary ofGerman firm Fabric

-India

Yarn-Turkey

Artex Bulgaria

Men’s underwear ishleme

LucenecSlovakia

Finished goods

Women’s under-wear

Romania

Cut and bundleinput supplier

ˆ

-Indian fabric-Tunrkish yarn

Figure 8.6 Production networks in Artex Bulgaria’s regional production system.


production system is entirely dependent on the flow of orders, patterns, documents, inputs and finished goods across a complex series of interna-tional borders. As a result, coordina tion and timing are crucial and risks of cost overruns or deadline penalties can be high. Artex operates with a one‐week warehousing buffer, while its buying firm in Germany provides weekly priority schedules for orders in process and upcoming. Artex and its equivalent women’s underwear supplier in Romania operate on just‐in‐time input delivery and fast turn‐around production. In a sense, the entire production system has been built to capitalize on EU accession and the effects of enhanced trade facilitation and customs union (see Chapter Four). For Artex Bulgaria, the arrangement poses several challenges, such as the requirement to meet tight delivery and production schedules and the fact that changes cannot be made to patterns and the construction process once contracted. But there are advantages, including regular orders, pri-ority scheduling and sharing, the externalization of input management, and inter‐firm learning from the German, Greek and Swiss partners. Even in design and construction, in practice, buyers and supplier do discuss the model designs and construction plans, and there is a great deal of inter‐firm sharing of information to ensure efficient operation across the net-work. Thus, for example, typically, for any new product line, Artex develops ten test pieces in the Bulgarian factory with corresponding specifications. These are then sent to the buyer in Germany for consideration before the final design and documentation are contracted.

Moduk

One firm illustrates particularly well the full range of experiences of post‐socialist apparel in Bulgaria. Moduk was established in 1991 by the former department director of the large SOE, Orfei.14 Orfei was the pivot of the national apparel industry. It was a SOE that employed 3,000 workers and produced 60,000 pieces per day, including orders for Puma. Some 80% of orders were for the USSR, and 20% for Western countries. During the state socialist period, the Bulgarian textile and apparel industry was heavily capitalized to levels that were uncommon in South‐east and Mediterranean Europe. But, after 1991, the national system paid little attention to textiles and apparel, a failing that disadvantaged skilled man-agers and technicians in the privatization process, allowing gatekeepers and nomenklatura at the upstream and downstream ends of the industry to control the process. Enterprises saw their assets stripped and their productive capacities weakened. To manage the risk of setting up independently, the manager and five workers took a one‐month vacation from Orfei, rented machines with a small bank loan, and produced underwear for the central general store in Sofia (SUM) and for the army. With profits higher than


wages in the first month, the team decided to continue production, maintaining the same production model until 1995. After 1995, Turkish and Chinese cheap imports increased the level of competition, leading to the creation of a joint venture with a Turkish firm which assisted with the capitalization of the 50 sewing machines needed for the 1.5 million piece t‐shirt order they received. Between 1998 and 2002, the size of the firm increased to 400 workers and 2 million pieces, mainly t‐shirts and pyjamas exported to the United States. Crucial to this period of growth was the Turkish partner’s commitment to make regular timely payments every Monday morning.

After 2002, with increased tariffs and the shift of orders from the Turkish partner to Egypt to capture the benefits of the US QIZ customs arrange-ment, the value of orders for the US market dropped by 24%. There were two consequences. First, Moduk accepted orders from other firms, including Tesco, and opened a second workshop with 200 workers. Second, they expanded their production processes from ishleme to ready‐made garments, including purchasing inputs and the development of on‐site cutting capacities, as well as sewing. This increased risk, particularly the additional costs of air freight on delayed production, delay penalties of 50% of the contract value, and lost goods in storage. Moduk adjusted by shifting back to ishleme production where profits were smaller, but orders were more certain and the financial risk was lower. It also started to work with a middleman (a trader), Balkantex, that set up and managed orders, contracts, and shipping with suppliers. But this was not an arm’s‐length relationship. Instead, Moduk worked only with trusted partners, those that insisted on high levels of compliance, and those that guaranteed con-tracts for a minimum of two months. In shifting back to ishleme, the firm committed to improving operational and product quality, shortening pro-duction and delivery times, extending its quality control system and staff training programmes, and seeking new strategic partners. In many ways, this is a form of ishleme 2.0, a new version of contracting for assembly. Instead of focusing on the three low‐road pillars of cost reduction, low wages, and simple tasks as in the initial forms of ishleme in the 1990s and early 2000s, ishleme 2.0 builds on quality, rapid turnover time, skill, and strategic partnerships as its four primary pillars. The technical core of the new ishleme system is a quality control system in which all operations are carefully defined and monitored in a card system for batch production to prevent errors and delays. Any errors are traceable to particular stations and operators, and intervention and training can follow immediately. The card system was adapted from one the manager used to use at Orfei, where the cards are diagnostic for errors and the basis for calculating operations, norm time, and wages. But, in this new ishleme arrangement Moduk has been able to work with direct sewing contracts while also


developing special collections with Tesco, with Espirit on own design production, and Moduk’s own brands of 100% knitwear.15

Arena

Not all firms have been limited to ishleme production. As the manager of Moduk indicated, “While the light industries branch has been under‐ estimated, clothing is like food. To succeed, firms need to offer the best training for workers and the highest quality of product.”16 Some firms have been able to build on local capacities and skills, institutional legacies of state socialism, and new end markets to expand their operations. Arena is one such firm.17 Managers at Arena have drawn on a wide range of local resources and institutional legacies. The private family‐run firm emerged after 1989. The owner had a background in construction, his wife in audio‐visual technologies, their mother ran the company shop and their two sons joined them in the factory. They started the firm with 25 workers drawn from local apparel enterprises. By 2003, it employed 179 workers and in 2013 there were 250. The firm has stable contracts with several major brands like Huber and Skinny, whom the firm has supplied since 2003, and the US‐based firm Hanro, with whom it has worked since 2007.

In many ways, Arena is a classic example of firm upgrading. In 2001, its initial expansion was driven by basic knitwear contracts for the German‐owned retail chain Metro Bulgaria. Process and product upgrading fol-lowed as new capacities and functions were added to meet the needs of new branded buyers; cutting capacity was added in 2007, pattern making in 2009, and in 2014 the firm added to its patterning services in‐house design, in conjunction with its long‐standing partnership with Huber. With the assistance of Huber and Hanro, services were expanded from sewing to include design, production, packing and shipping, focusing on on‐time delivery, its own trucking service and warehousing facilities for buyers who experience changes in market demand. Close working relationships with Huber have been maintained for over a decade. As a result, orders have been regular even through the financial crisis, allowing the firm to maintain employment and wages while other firms in the region could not. Huber provided technical support for the upgrading of processes and products as it sought to shift capacities from itself to its suppliers. Hanro and Huber also helped this process with the addition of special sewing machines for a new production line, and the addition of CAD‐CAM cutting equipment. Central to this partnership is the demand for quality (see also Chapter Six). To control the quality of product and service in a region with uneven transport facilities, poor power infrastructure and uncertain costing for


public and private services, Arena aims to be as self‐sufficient as possible. It purchased a large area of land at its initial opening, which it is able to use to generate rental income while still retaining land for expansion and development if needed. Because of uncertainty regarding municipal power provision, with brown‐outs being common, Arena built its own generator supplying 100% of its electricity needs. Since 2000, the firm has run its own trucking service, having experienced poor transport services, delays and the loss of product prior to that. But, at the heart of this commitment to quality and economic upgrading is the role of social upgrading and what the man-ager described as the need to recruit, train and work with staff so that everyone understands “how to work perfect”. The firm hires skilled sewers and aims at high rates of worker retention. It invests heavily in training, worker satisfaction and worker retention. To this end, the firm provides a wide range of social wages. In 2000, a new canteen was built, along with a coffee shop facility for workers, providing meals, medical care, transport to and from work, clothing at cost in the company store and a series of other social benefits.18 As a result, Arena has held on to 90% of its workforce for the past ten years.

Conclusion

Neo‐liberal structural adjustment in Bulgaria occurred in three phases: a period of rapid and intense economic decline after 1989 was followed by the financial crisis of 1996–1997 and the subsequent period of macro‐economic stabilization and economic integration into EU and also regional circuits of investment and trade. It was followed by a fiscal crisis of great significance (2008 to the present), the effects of which continue to work their way through the economy. While each phase has involved different mixes of macro‐economic and political policies, each has also resulted in a deepening crisis of infrastructural provision and economic opportunity in which income levels collapsed and education, health and social well‐being deteriorated.

Under state socialism, employment and subsistence practices embedded in household and village relationships marginalized the ethnic Turkish population of Kardzhali. This marginalization deepened even further with neo‐liberal economic adjustment policies, as we have seen, resulting in the collapse of employment and the rise of mass unemployment after 1990. One consequence has been a deepening articulation of an export‐oriented dynamic industrial branch with formal and non‐formal household economic practices geared to economic survival. Apparel enterprises experiencing an industrial boom in a regional context of mass unemployment, household poverty and predominantly female wage‐earners are, thus, reworking state


socialist forms of ‘domestication’ and producing new forms of industrial organization and practice.

Together these provided the conditions in which new firm development took place, and to which apparel enterprises must adapt. Seasonal agricul-tural labour demands necessitate flexible labour contracts, but also result in greater willingness among workers to tolerate variable working hours and periodic lay‐offs. Traditional and new natural resource uses undergird a household subsistence economy and reduce pressure on wages. Remittances, pensions and petty trading similarly inject new, albeit limited, resources into the household economy. The latter two also provide opportunities for learning about other economic opportunities that might otherwise not be available to village communities. Indeed, village life is ‘remote’ only in the sense of distance from urban centres. Culturally and economically, villagers tend to be highly integrated into national and international circuits of migration, employment and exchange.

As global production networks fuel the competition for contracts, suppliers have adapted to the diverse and changing demands of buyers. Flexibilities in the organization and contracting of production and workers are, therefore, increasingly important for survival in such markets. This is the model of ishleme 2.0. Export processing industries currently benefit from comparatively low‐wage labour in regions of high unemployment. But low wages in export production networks are sustained only to the extent that household budgets are articulated with non‐formal economic practices and dangerously low‐levels of consumption and well‐being (ITUC 2014). Ishleme firms thus articulate in diverse ways with the labour demands of household economies. In so far as they do, they reproduce and reconfigure the broader social and economic flexibilities that have sustained Turkish households during the worst years of state socialist political and economic dislocation and that are now necessary under conditions of highly segmented processes of labour market restructuring.

Earlier we have shown that ‘defensive restructuring’ (involving low‐wage, cost advantages and large‐scale worker flexibility) is the norm for peripheral regions in Slovakia. This has also been the story of economic change in the peripheral regions of Bulgaria with substantial ethnic Turkish populations. But highly segmented labour markets are tightening, firms are investing in capital deepening and in some cases better working conditions, wages and benefits are improving and local linkages to support training programmes and worker retention are being developed. In other words, a form of ‘offensive’ restructuring in the apparel industry might be emerging in specific segments of the industry around the demand for quality, speed of delivery and flexi-bility. But in this process the capacities of local people to shape regional futures remain important. ‘Export processing’ captures an economic aspect of the regional development model that has emerged. However, it is a form of


assembly for global markets predicated on pre‐existing industrial structures and social networks, and is articulated with household economies. Insofar as these articulations are resources for social action, the question of regional economic futures will also be open to transformation of one sort or another.

Notes

1 These were Sofia, Burgas, Plovdiv, Stara Zagora, Pleven, Varna, Veliko Turnovo, and Vratza.

2 Bulgaria has a complex hierarchy of administrative territorial divisions and responsibilities. About the size of Pennsylvania, it is made up today of 264 obstini, roughly counties, and 28 oblasti, roughly states. The 28 okrugi were used between 1964 and 1987, during which time the number of obstini varied. The reform of 1987 aggregated the 28 okruga into 9 oblasti with a total of 273 obstini. The latest reform in 1998 defined the current administrative territorial division with 28 oblasti and 264 obstini.

3 The Currency Board Arrangement (CBA) was established in July 1997, at which time the Bulgarian lev was pegged to the Deutschmark (1,000/1).

4 In a 1996 household survey in rural villages in the Rhodopes region, Meurs (2001) found that only 29% of working‐age men and 19% of working age women were engaged in wage employment, while most were surviving on income earned from farming their personal plots of land.

5 The boom in assembly operations is not unique to Kardzhali or Bulgaria more generally. In Bulgaria, all border regions in the Rhodopes have experi-enced a rapid increase in assembly operations for apparel, and leather and footwear.

6 Labour shortage in a growing industry combined with the permeability of the Bulgarian‐Turkish border provided some Bulgarian Turkish women with a dif-ferent option. Highly educated and well‐trained workers in Kardzhali apparel firms migrated to equivalent firms in Turkey where they commanded higher wages and, because of their skill levels, had better opportunities for promotion. Such labour migration further diminished the bargaining power of firms located in Kardzhali.

7 Larger‐scale Turkish investment has also entered the region, notably in the planned Turkish hydro‐electric and recreation complex in the hills above Kardzhali.

8 The situation in the south‐west region was different. There Greek firms entered the area quickly, but with limited social linkages and institutions on which to build. Instead, they established their export processing platforms with the introduction of Greek banks whose short‐term credit was a vital stimulus the boom‐time in that region. Employment relations were, as a result, much more arm’s‐length and despotic.

9 National Statistical Institute Multi‐domain Business Statistics Annual Regional Data NACE.BG 2013 Section D: Manufacturing, available at: www.nsi.bg/en/content/8143/section‐d‐%E2%80%98manufacturing%E2%80%99

http://www.nsi.bg/en/content/8143/section-d-%E2%80%98manufacturing%E2%80%99



10 Interviews with firm managers and trade union representatives in 2004 and 2013.

11 National Statistical Institute Multi‐domain Business Statistics Annual Regional Data NACE.BG 2003 Section D: Manufacturing: available at: www.nsi.bg/en/ content/8143/section‐d‐%E2%80%98manufacturing%E2%80%99

12 Interview with manager, Haskovo, July 2013.13 Interviews with manager, Haskovo, October 2003, May 2004 and July 2013.14 Interviews with manager, Haskovo, May 2003 and July 2013.15 Three brands were registered in 2010 and 2011.16 Interview with manager, Haskovo, July 2013.17 Interview with manager, Haskovo, July 2013.18 Such as an 8 March International Women’s Day visit to the beauty shop for

pedicure and manicure, and a 27 July summer holiday day bus trip to Greece.




The Cultural Economies of Post‐Socialism: Ethnicity, Garage Firms and Regional Markets

Chapter Nine

Introduction: Embeddedness and Relational Economies

As West European buyers expanded their apparel contracting into ECE in the 1980s, they did so through national state export agencies, adding offshore contracting to planned economy production, and – in turn – stimulating a general increase in both apparel production and employment. The offshor-ing of production from Western Europe had several important consequences for the Bulgarian apparel space economy and particularly for the ethnic regions of south central Bulgaria (see Chapter Eight). As Cellarius (2004) has shown, the cultural economies of these regions are complex, historically and culturally imbricated with material practices and intense ideological struggles. In the process, the formal economy has always articulated itself with these broader processes of cultural exchange, historical memory and ambivalence to state authority. Post‐socialist restructuring and economic integration into global production networks involve, in this sense, processes of differential inclusion, and it is to these that we turn in this chapter.

Our aim here is to show how economic integration into GPNs has been articulated with a series of interlinked production systems. These are differentially embedded in specific cultural histories and regional economic formations. In this sense, formal export production through OPT and

(with Robert Begg and Poli Roukova)

the cultural economies of post‐socialism 215

delocalization are important, but not the only, ways in which regional production systems are embedded in GPNs. Thus, Dicken and Thrift (1992: 283) have argued that while economic behaviour is always embedded in and shaped by cognitive, social, cultural and political practices, such forms of embeddedness are always also co‐constituted by scalar networks that shape local, regional and global economic geographies. More recently, Hess has cautioned against the dangers of “over‐territorialized” concepts of embed-dedness, stressing the importance of not assuming that embeddedness is always a form of spatial rootedness in place, particularly when it is then used to refer to the “evolution and economic success of regions built by locally clustered networks of firms … industrial districts, creative milieu, learning regions or local knowledge communities” (2004: 166). It is this broader relationality of embedded economic practices with which we are concerned here.

We address this concept of relational economic geographies in three ways. First, we show how the transnational nature of the ethnic structure of south central Bulgaria, which we examined in Chapter Eight, and the networks and location of the region at a transport crossroads to and from Turkey, were particularly important in the growth of a large‐scale trading and regional production network focused around one of Europe’s largest open‐air markets in Dimitrovgrad. Second, we show how those networks and Dimitrovgrad market together fuelled the growth of an apparel industry organized around home production and garage firms, which in turn under-wrote some of the skills and input costs of the OPT export industry in the region (this is typology (5) elaborated in Table 8.3). Third, we show how these inter‐firm linkages amplified the magnitude and effects of EU accession in 2007 and the global financial crisis in 2008 (Cattaneo et al. 2010; IMF 2013; see also Smith and Swain 2010). Here we contrast that amplification effect with the dampening effect of the broader cultural and institutional arrangements in regional production networks in south central Bulgaria.

Firm Diversity, Local Embeddedness and End Markets

As West European importers sought to counter East and South Asian price competition by turning to ECE assembly operations, the Bulgarian state used export contracts to stabilize rural, border and ethnic populations. A social policy of distributed production resulted in the founding of “daughters‐of‐the‐mother” plants in the regional capitals of ethnic, border and mountain regions as well as a dispersed workshop (tseh) economy often in remote villages (Begg and Pickles 1998; Pickles and Begg 2000). In Haskovo, a neighbouring town to Kardzhali, the dominant large state combinat, Mir, became the centre of branch plants and workshops in several


regional cities and villages throughout the region. But, as we documented in Chapter Eight, after 1989, employment in apparel declined precipitously as orders from CMEA markets were lost, domestic consumption and state procurement declined, centralized management systems were broken up and state infrastructures and enterprises were privatized at low cost or by stealth. This led to wholesale regional de‐industrialization and unemployment levels of 80–100% in the rural, mountain and border areas. The depth of economic involution in these areas was shocking and, combined with overall demographic decline, resulted in the rapid depopulation of village and rural settlements and rapid decline in urban populations as workers and students sought opportunities in major cities (particularly Sofia) and outside the country (Figure 9.1).

However, while economic involution devastated the local economies of whole villages and small towns, some found opportunities in the resulting surplus of low‐cost equipment, factory space and labour. Real wages and the value of the local currency had collapsed, and capital for investment was lacking, or had been stolen and redirected. But the workshops and equip-ment often remained, as did the large labour pools of skilled workers and machine operators. Consequently, in the towns and villages of regions most affected by the collapse, small‐scale apparel operators were creating a dramatic resurgence of the industry (see Chapters Five and Eight), leading

0

10,000

20,000

30,000

40,000

50,000

60,000

Town Village Town Village Town Village Town Village Town Village Town Village

Ardino Djebel Ivailovgrad Kirkovo Krumovgrad Kurdjali

1965

1975

1985

1992

Figure 9.1 Town and village population in Kardzhali by obstina (county), 1965–1992. Statisticheski Sbornik: Kardzhali 1996: 12–13.


to the increasing relative importance of apparel employment and an export boom in the period between 1995 and 2005.

The case of Haskovo region (oblast) was particularly illustrative. In 1989, Haskovo was dominated by a single large state firm, Mir (Figure 9.2), with five branch plants.1 By December 2000, the model of core enterprises (“mother plants”) with a series of supplier workshops (“daughters of the mother plant”) had already been transformed as the state firms collapsed or were broken into parts, firm numbers increased and firm size decreased. By the end of 2000, Haskovo oblast had 2,702 economically active manufacturing firms, of which 1,016 were apparel firms (NSI: Firms by Region and District, mimeo), accounting for 38% of all manufacturing firms in the oblast and 11% of all economically active Bulgarian apparel firms (ranking behind only Sofia (13%) and Plovdiv (12%)). Their increased importance in the industry was particu-larly marked between 1996 and 2004 (Figure 9.3) (NSI 2003). During this period, the proportion of employment in apparel in the region grew to over 40%, with the number of workers nearly doubling, albeit declining following the economic crisis of the late 2000s. Even as employment in total manufac-turing and apparel declined as a result of the financial crisis of 2008 and EU accession, the relative importance of the industry as a proportion of total employment declined only briefly. It increased again in 2011 and 2012.

Figure 9.2 The Mir apparel enterprise, 1994. Photo by John Pickles.


A similar pattern emerged across the South Central Planning Region (Haskovo, Kardzhali, Pazardzhik, Plovdiv and Smolyan). Even in Smolyan and Pazardzhik, where absolute declines in employment occurred between 2010 and 2012 (see Figure 8.2), the relative importance of apparel manu-facturing as a proportion of total manufacturing remained high (Figure 9.4). Each of these regions has its own underlying story associated with these relative patterns of decline and resilience. Plovdiv has a larger more diversified economic base and has expanded apparel employment, even in recent years. By contrast, smaller producing centres such as Smolyan and Pazardzhik lost employment in apparel. Smolyan is an interesting example of this structural transformation. It is a small, more remote administrative centre in the mountains with poor infrastructure and transport links, in

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0

5

10

15

20

25

30

35

40

45

Figure 9.3 Apparel employment as a percentage of total manufacturing, Haskovo oblast, 1996–2012.

0 10 20 30 40 50 60

Haskovo

Kardzhali

Pazardzhik

Plovdiv

Smolyan

Figure 9.4 Apparel employment as percentage of total manufacturing employment, 2012. Adapted from Bulgarian National Statistical Institute Data, 2013.


which employment in the apparel industry has declined in recent years. But because of the more serious collapse in its few other industries, the relative importance of apparel employment has increased, accounting for nearly 40% of total manufacturing employment in 2012. We have discussed the case of Kardzhali in Chapter Eight. Here we turn to the case of Haskovo, at the heart of whose transformations are quite distinct linked systems of produc-tion and end markets. The production system is organized around a wide array of garage firms and workshops, whose primary end markets are shaped by the Dimitrovgrad open air market, the largest in South‐eastern Europe.

The Garage Firms of Haskovo

In Chapter Eight, we showed how apparel industry dynamics articulated with local legacies of state socialist production and an ethnic economy of village workshops integrated into transnational and cross‐border contracting to create new regional production systems. This involved the downgrading of former state enterprises which were captured by export sewing contracts, and workshop economies organized autonomously by former managers and technicians. Export contracting led to one of two distinct outcomes: contract capture and labour squeezing, or strengthened buyer–supplier links with technical investment and organizational learning. In this chapter, we focus on a third form that emerged quickly out of the de‐industrialization of state enterprises. This is a geographically concentrated ‘industrial district’ in the ethnic garage firms of Haskovo and a particular domestic retail and whole-sale network that surrounds them.2

Historically, the Haskovo region had been a major centre for textiles and apparel production, particularly involving the production of knitwear products for both export and domestic markets. With their collapse and partial re‐emergence as sewing shops for export contracts, the resulting unemployment and disinvestment left residual skills capacities and available factory space and equipment. One outcome was the rapid rise of a large number of small workshop firms located in the ethnic Turkish and Bulgarian Muslim neighbourhoods of the town of Haskovo (Hisarya, Chervena Stena, Macedonski, Trakiyski and Voevodski). Each workshop cluster has created a distinctive physical landscape as ground‐floors and garages, and sometimes second floors of houses, have been systematically converted into workshops (Figures 9.5 and 9.6).

It is difficult to estimate the total number of garage firms in the district. Officially, in 2004, there were 620 registered firms with estimates of around 400 unregistered small firms.3 But, since many firms are opportunistic in responding to market demand and the availability and cost of inputs and family labour, their numbers fluctuate rapidly. At their peak before 2008, these neighbourhoods were vibrant clusters of day and night stitching,


Figure 9.5 Garage firms, Haskovo, 2013. Photo: John Pickles.

Figure 9.6 Ground‐floor and second‐floor garage firms, Haskovo, 2004. Photo: Robert Begg.


jobbers pushing bolts of cloth from one workshop to another, trucks unloading fabric, and vans dashing back and forth to input suppliers for needles, thread, and buttons (Figure 9.7). During this peak period, we car-ried out fieldwork in the districts of Haskovo interviewing 27 such firms, supplemented by more recent follow‐up interviews. The size of the firms interviewed ranged from 2 to 50 workers with an average of 16, a figure consistent with national data (Table 9.1).

Two‐thirds of garage firms sold their production mostly to small shops or in open‐air markets, with 55% selling only in the open‐air wholesale and retail market in Dimitrovgrad. Only one of the garage firms sold to a foreign buyer. Small firms of ten workers or less made up half the sample, and for purposes of analysis we have divided firms into those with fewer than 20 employees and those with 20 or more. The firms are housed in the garages or basement of what are usually five‐storey apartment buildings, some of which were still under construction (especially on the upper floors). Above the factory are two or three floors of apartments for several house-holds of the extended family that owns the factory. The principal machinery was sewing machines ranging from between four up to 40 in some of the larger garage firms. The firms interviewed had been in existence for as little as a few months and as long as 14 years. Hand operations were interspersed with mechanized ones. Much of the machinery was fully modern in technology and design; sometimes exactly the same as that found in local

Figure 9.7 Garage workshop delivery van, Haskovo, 2013. Photo: John Pickles.


factories. Almost every firm had at least some new sewing machines, though many began with old second‐hand machines that emerged from the hollowing out of the former state firm Mir. Some of the larger firms had CAD systems with hand cutting of fabric in one room and the later manu-facturing process continued linearly through the building to finish with labelling and packing. Most of the larger firms had embroidery machines, one had computerized cutting and two had stamping machines. Yet, in a great many, production was still centred on the garage and primarily involved only sewing operations. Firm owners interviewed reinvested heavily in transport equipment (small vans) for delivering fabrics and yarns, and for shipping product to market, and all were intent on investing in the latest technology in their downstairs garage facilities. New luxury apart-ments were being built amid the old command economy apartment blocks and the few remaining farm houses (Figures 9.8a and 9.8b).

In these garage firms, production volumes ranged from as low as 10 pieces per month to as high as 3,000 pieces. All firms undertook their own cutting and most had the capability to “borrow” patterns from shops or catalogues. Some firms had printing facilities. Products ranged from under-wear and t‐shirts to mid‐price range women’s blouses and suits. Like the Haskovo region more generally, the production profile norm was knitwear, often sportswear. Fabrics and yarns were usually bought locally, but they were seldom of Bulgarian origin, with Turkish, Chinese, and Dubai cloth predominating.

Table 9.1 Selected characteristics of Haskovo garage firms, 2008. Source: Author surveys, 2008.

Total (27 firms)

<20 employees (18 firms)

>= 20 employees (9 firms)

Average number of employees 16.3 9.2 30.3Female employees 90% (26) 93.6% (17) 88.2%Average number of machines 15.5 (17) 9.6 (9) 22 (8)Proportion of new machines 73.6% (20) 58.5% (12) 95.8% (8)Own design 86.3% (22) 84.6% (11) 88.6%Proportion of production sold at Dimitrovgrad Market

55.5% 66.6% 22.2%

Proportion of firms selling through their own stall or shop

66.6% 83.3% 33.3%

Proportion of firms selling product through a regional wholesaler

44.4% 27.8% 88.8%

Average monthly pieces produced

1388 (17) 762 (10) 2283 (7)


The garage clusters stimulated broader agglomeration economies. Machine repair, pattern making and stamping were often contracted out locally. The proliferation of small firms also under‐wrote the local suppliers of zips and buttons, which in turn had important consequences for other producers in the region, whose access to a broader range of low‐cost input suppliers was guaranteed. Machinery purchase and repair were also easily accessible in the local area. However, these agglomera-tion effects are indirect, and often fail to carry over into forms of strong inter‐firm cooperation among sewing firms. Larger garage firms and firms run by members of the same extended family do occasionally share work orders or workers, sub‐contracting orders to each other. But most garage firms operate as relatively independent producers with little intra‐district cooperation. When we asked one owner whose firm had particu-larly complex capacities and equipment if he could introduce us to neighbouring firms he declined, saying: “They are suspicious of me too, no one trusts anyone.”

Production went to two distinct markets. All but one of the firms with more than 20 employees was a sub‐contractor for two larger regional sportswear firms, Beni and Elmas Tex. Both are ethnically Bulgarian Muslim wholesalers who purchase Turkish cloth and sub‐contract CMT production to the medium‐sized firms of the ethnic neighbourhoods and villages sur-rounding Haskovo. They deliver cut pieces to the village workshops, but in the garage firms they simply give the owner a picture or a description and let the owner make a model. Benny and Elmas Tex both sell the assembled clothes in the low‐cost domestic market. One larger firm with 40 machines exported to the Italian market under the brand name “Steven”, and also produced for domestic consumption under its own brand name. Smaller

(a) (b)

Figure 9.8 Garage firms investing in housing, Haskovo 6, 2004 and 2013. Photo: John Pickles.


firms directed their production differently. Some 83% of small firm production was sold in Dimitrovgrad Market or Ilientzi Market (in Sofia) usually in their own shops, compared to only one‐third for the larger firms. The smaller firms purchased all their inputs locally, usually also from Beni or Elmas Tex. Some bought domestic materials locally, and one small firm also owned a small fabric store in Haskovo. The small firms developed low‐cost products they believed would be in demand and took them to the nearby market where they rented a stall. Work was dependent on the open‐air markets and was, as a result, seasonal.4

By 2013 the number of garage firm had declined significantly. Many of the operators had closed their workshops, some moving away after 2007 as employment opportunities increased in the EU, while others who had cap-italized in the boom years and had refurbished their houses invested in retail outlets and service industries in the town, or they were working for someone else. The remaining garage firms tended to be larger, more stable and better capitalized. Several had consolidated into own brand producers or small tailoring fashion houses, supplying local and regional markets, and many of these had begun working under their own brand name (Figure 9.9). Most continued to sell their product on the local Dimitrovgrad Market, which continued as a crucial anchor for these firms to the domestic market and to trading with neighbouring national markets. It is to the operation and role of the market in this localized system of apparel production in southern Bulgaria that we turn in the following section.

Figure 9.9 ‘Djenny’: garage firm branding, 2013. Photo: John Pickles.


Regional Markets and Transborder Traders: The Dimitrovgrad Market

There are two large municipal markets in Bulgaria for the sale of domestic and imported apparel; the Ilientzi Market in Sofia and Dimitrovgrad Market located a few kilometres from Haskovo. Dimitrovgrad Market is the largest open market in the Balkans and attracts traders from Bulgaria, Turkey, Greece, Romania, Serbia and Italy (Figure 9.10).5 Located on a main thor-oughfare between Istanbul and Sofia and only 60 kilometres from the Greek and Turkish borders, Dimitrovgrad Market has long been a wholesale and retail trading centre. Before 1995, there were about 700 people selling mainly clothing and shoes, with some food stalls on the margins of the market. In the mid‐1990s the municipality upgraded dirt streets and tem-porary stalls to paved and enclosed venues. In a December 2003 survey carried out by the market itself, about 3,000 of the 4,800 stalls at the market were firms selling their own products, the majority of which were ‘local’ – 1,700 of the 3,000 being from Haskovo alone.6 By 2004, there were 4,800 stalls as the market continued to expand its role as a regional centre for locally produced and increasingly imported clothing, supplying traders and small retailers from all over Bulgaria and from neighbouring countries (Figures 9.11 and 9.12). In 2004, 85% of the stalls sold clothing and 15% sold other kinds of goods, with Bulgarian clothing producers accounting

ROMANIAespecially the China Borse, Bucharest

TURKEY

Pazardjik

Plovdiv Dimitrovgradmarket

Ilientzimarket

StaraZagora

Yambol

Russe

Pleven

Blagoevgrad

Razgrad

Shumen

Dobrich

Varna

Burgas

1000 kilometres


BlackSea

VratsaSERBIA

GREECE

ITALY

HUNGARY

SOFIA

Kardzhali

Haskovo

Sliven

MACEDONIA

Figure 9.10 Dimitrovgrad Market as transnational petty producer retail and wholesale network hub.


Figure 9.11 Clothing stall at Dimitrovgrad Market, 2004. Photo: John Pickles.

Figure 9.12 Clothing and logistics integrated in the Dmitrovgrad Market, 2004. Photo: John Pickles.


for 60% of all clothing stalls. According to the manager of the market, in 2004, the market contributed approximately 2 million Leva to the municipal budget, accounting for 20% of its total budget.7 About 80% of the firms selling at the market in 2004 had been doing so for at least five to six years and it had become a necessary part of the business strategy of these firms. According to the manager, “If there was no market like this, there wouldn’t be any garage firms. The market has allowed Turkish‐speaking and Bulgarian Muslims the opportunity to dramatically increase their livelihoods as a result of garage activity. Previously they worked in tobacco and had very low incomes.”8

The market filled an important void in the retail and wholesale distribu-tion network that developed with the collapse of command economies. Whether such open air markets are a temporary or permanent fixture within ECE is a matter of debate, but they are an important transitional mechanism for emerging domestic producers and retailers; an under-standing which is critical – alongside export market dynamics which we have largely focused on until now – for interpreting the dynamics in the local apparel industry. In this case, the trucks and minivans lined up at the edges of the labyrinthine rows of stalls served deliver fabric and imports from Turkey and other international markets, carry clothing from the garage firms of Haskovo to a broad regional retail and wholesale centre and carry them away to urban shops. In this way, the market operates as a regional wholesaling centre for the small urban shops throughout Bulgaria, with about half of sales being to wholesale customers from small shops in other parts of Bulgaria (Varna, Rousse, Stara Zagora, Plovdiv and Kardzhali).

Between 2004 and 2013, the market was reorganized by product area, the infrastructure was upgraded, rents were adjusted and tighter requirements on safety and security were introduced (Figure 9.13 and Figure 9.14). At the same time, the broader financial crisis led to reduced demand from buyers and a decline in the demand for stalls in the market. By 2013, declines in garage firm production had resulted in a shift in the structure of the market. By then the market had 3,500 stalls, 380 of which were pro-ducers from Dimitrovgrad, 100 each were from Haskovo and Assenovgrad, and 70% of the vendors were from Turkey. Buyer expenditures had declined from an average of 5,000–6,000 Leva in 2004 to 2,000 Leva in 2013).9 Even so, the market remained active and a crucial part of the garage apparel cluster; despite declines, firms continued to sell in and depend on the market. In 2012, of the total of 2,100 stalls available, only 50 were not rented. On Saturdays and Sundays, 10,000–15,000 cars and 20,000 people attended the market selling and buying a wide range of clothing and other goods. The 2012 annual income of the market was 3,700,000 Leva, and contributed 27 million Leva to the municipal budget. Essentially the market

Figure 9.13 Dimitrovgrad Market, 2013. Photo: John Pickles.

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B

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eron Street

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Stefan S

tambolor B

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Figure 9.14 Dimitrovgrad Market, 2011, stall layout. Adapted from The Obstina Dimitrovgrad Market Catalogue 2011. Note: See Appendix 2 for an extended key to the market zones, their products, and the towns and regions of origin.


had become the wholesale distribution centre for small‐scale producers selling into shops countrywide and around the Black Sea and Southern Mediterranean.

The articulation of the Haskovo garage firms with the Dimitrovgrad Market is only part of the broader regional industrial apparel production network oriented towards the domestic market. The old state firm, Mir, and many of its subsidiary plants continue to operate as independent private firms with varied success. Some are engaged solely in ishleme production for the EU or the United States, others are attempting to develop their own product range. Large Turkish firms have invested both in small ishleme sub‐ contractors and in large modern plants with CAD‐CAM, embroidery, and printing facilities. More recently medium‐sized Bulgarian firms in Haskovo are developing OBM activity for German catalogue sales. Within this mix, the garage firms hold onto a small but profitable domestic niche.

The Dimitrovgrad Market provides an important conduit for supplying the small boutiques and clothing stores that in turn supplied the majority of Bulgarian domestic demand until the recent entry of large supermarket chains and global brand outlets. It was this demand primarily for knitwear plus that from neighbouring countries that sustained garage firm produc-tion. In 1989 there were 522 clothing (obleklo) and 811 knitwear (trikotazh) stores in Bulgaria (National Statistical Institute 1991: 277), or 1.5 per 10,000 people. By 2001, there were 9,403 clothing stores throughout the country (National Statistical Institute 2002: 360) or 12 per 10,000 people. The development of the market in Dimitrovgrad was thus a direct stimulus to the emergence of the garage firms in the 1990s and early 2000s and the burgeoning of the domestic retail market in apparel, particularly in conditions of fiscal crisis and economic uncertainty in the country. Similar patterns of economic precarity also fuelled the growth of the market as a supplier of other country markets in the wider South‐East European region. But, the dependence of the garage firms on the Dimitrovgrad Market as their primary outlet for product was also their weakness.

First, EU accession in 2007 meant that institutions and regulations gov-erning production and trade were improved. Particularly Labour Inspectorates and the Institutes of Health and Safety began to operate more standard EU‐wide regulations and practices both in workplaces and the market. The general consequences for labour of enhanced regulation in the Dimitrovgrad Market and workplace were good, but the diversity of firms and their wide range of behaviour during this period made regulation more complicated.10 Those garage firms able to adapt to the new requirements for transparency, regulation and payment of wages and benefits generally saw their products upgraded and were able to expand demand for their products beyond the Dimitrovgrad Market. EU accession also brought much tighter regulation in the market to deal with counterfeit apparel,


particularly from China and Turkey, often with Bulgarian labels added.11 Particularly since EU accession, monitoring and policing of false labelling and fake brands increased and controls have been tightened, which also benefitted the more regularized firms while disadvantaging those who had been capturing rents from re‐labelling.12

Second, the economic crisis of 2008 resulted in a decline in sales at the market and the collapse of the larger garage firm districts. Smaller garage firms with their own cutting technologies tended to be more resilient, while larger firms – particularly those with higher overhead and labour costs – found it difficult to maintain markets in the downturn. Some firms reduced their workforce and focused their product lines, while others expanded the role of branding for domestic markets with some, like Djenny and Juliet, prospering. Larger firms, such as Flair, capitalized on the regional speciali-zation in sportswear to produce higher quality product for those markets while continuing to sell into the Dimitrovgrad Market. Some garage firms closed, others continued with lower margins, and yet others turned to off‐book or double book accounting, paying below minimum wages and avoiding overtime and/or taxes.13

Julietta is a typical example of the changing fortunes of these garage firms. Julietta is a small tailoring garage firm owned by a woman who began work as a dressmaker in the 1980s.14 Focused on denim cloth, the firm makes women’s trousers, dresses, and skirts to order and for the Dmitrovgrad Market. The firm was founded in 2001 and benefited from the boom bet-ween 2001 and 2005, with 20 workers and two saleswomen, supplying shops in Sofia and Haskovo, and a stall in the Dimitrovgrad Market. Julietta has since suffered rapid declines in orders, particularly after 2007, and has now shrunk to two sewers and four delivery and machinist workers, supplying individual orders and between 50 and 150 pieces per week only to a stall in the Dimitrovgrad Market. Most of the work is now tailoring ODM women’s trousers, dresses and skirts for individual clients.

The overall result was a drastic shrinkage in the number of garage firms in the districts, many of which returned to being predominantly residential areas. Among the firms that survive in the garage firm cluster today, there is a wide range of firm types, ownership pattern and labour process. These shifting industrial dynamics operate separately from the formal export sec-tor, but they have been fundamental to its performance in several important ways. They maintained pools of industrial skills, often introducing younger workers to the industry through family networks. They supported regional input suppliers and service providers who were also important to the formal export sector as buyers increasingly off‐loaded more and more demands and expected higher levels of capability and service for their orders. And they have historically been regionally significant incubators for small firm creation and skills development, such as design and branding. The past five years have changed much of this dynamism.


The Perfect Storm and the Future of Local Production Systems

The years 2008 to 2014 were, in many ways, a perfect storm for the Bulgarian apparel industry, as they were also in somewhat different ways in Slovakia. If the years prior had been ones of rapid expansion of contract production for export with corresponding expansion of employment, sta-bilization of regulations and norms, slow upgrading of processes and prod-ucts as inter‐firm learning and new markets were each mobilized to allow firms to add competencies beyond simple sewing operations, the years after 2008 were the opposite. MFA quota removal at the end of 2004 and the removal of safeguards on Chinese imports in 2008 resulted in substan-tially increased competition in export and domestic markets, and declines in prices. Accession to the EU in 2007 led to labour market opening, the inflow of large amounts of euros to ‘pump’ the economy and the opening of market access to goods from other countries. The effects of each were highly uneven. The financial and economic crisis of 2007/08, delayed in its effects in Bulgaria until 2009/10, completely restructured the availability of business credit, increased interest rates on the loans that were available and – through its effects on demand—resulted in the devaluation of the sunk capital costs in machinery among the small and large firms with out-standing loans taken to purchase machinery during the boom years. Today, Bulgarian manufacturing is concentrated in the production and export of relatively simple, low‐value products (ITUC 2014: 18) and in 2012 had the fifth highest Gini coefficient of income inequality in the EU after the Latvia, Spain, Portugal and Greece, down from second highest with Romania in 2008 (ITUC 2014: 46).

Over this period, former state‐owned enterprises like Mir lost contracts and liquidity. Mir had employed 220 workers in 2003 but by 2013 it existed only on the books, with most of the previous workforce having been placed on extended year‐long unpaid “vacation”. Remaining orders were so small that workers could not make the minimum wage from the volume of work they were given on piece rates. For many firms that had gradually worked their way out of the constraints and challenges of OPT production for export, the loss of orders and the decline in domestic consumption led to a return to grey economy practices of off‐the‐books hiring, double‐book keeping, enforced overtime and the return of sub‐minimum wage work.

The clusters of neighbourhood garage firms in Haskovo were similarly affected. At the height of the garage firm boom in 2003–2005 there were 500 firms. In 2007, this number dropped to 250. In 2013, there were 20.15 At the same time, unemployment in Haskovo increased from 5–6% (2004) to 13% (2013), despite the out‐migration of large numbers of workers for whom the relaxing of entry and work visas in the EU offered employment


prospects. The impact of the financial crisis, EU accession and labour outflow, and changes in tax laws were devastating for many in the garage firm economy, and many had been liquidated and gone out of business. Wages remained the lowest in all sectors, with an official minimum wage of 310 Leva.16

Several of the remaining garage firms were able to upgrade and some of the remaining firms captured the markets of those that collapsed. But the dynamic nature of the district has changed and many garage firms have simply closed. During these years, this has not been a process of consolida-tion, expansion or new firm creation, in fact no new garage firms have been created in the past four years. Instead, as with the larger former state‐owned firms and workshops, while individual garage firms expanded their opera-tions, the employment relation in them changed; home‐work, part‐time contracts and enforced overtime became relatively more important and full‐time work among those employed diminished (Clean Clothes Campaign 2014).17 Regional ‘suitcase trading’ again increased, and this was reflected in the shift in activities, participants and products on the Dimitrovgrad Market, with Chinese and Turkish products replacing Bulgarian products in the lower‐cost niches, while Bulgarian producers shifted to more boutique and higher quality products.

The financial crisis, in particular, had a significant impact on garage firm production. Most operated with machinery purchased with bank loans, but in 2008 the banks called in all loans, further credit was difficult to obtain, and interest rates were among the highest in Europe. The outcome was a rapid decline in machine prices, devaluing equipment stocks for those who owned their own machinery, and resulting in firms going into bankruptcy and being unable to repay their bank loans for equipment purchase. A further consequence was the collapse of garage firm wages, from 800 Leva per month in 2001 (with a peak of 700–1200 Leva at their peak in 2004/05) to 400 Leva in 2013.

The effect of these changing underlying financial arrangements was par-ticularly negative on the input suppliers that had grown up in the 2000s to supply the hundreds of factories and garage firms in the region. Byaltex is one such fabric supplier that was crucial for garage firms and small factories in Haskovo.18 It was founded in 1997 and struggled in the first three years of its existence. After 2000, the firm grew rapidly as the demand for fabric expanded from knitwear, t‐shirts, and sportswear producers throughout the region. After 2010, the firm experienced a series of rolling crises as garage production declined, demand for fabric plummeted and firm debt grew. Byaltex was also hit by a decision it made to hedge cotton prices against continued increase in 2011, when subsequently prices actually declined. Saddled by this expanded debt, Byaltex then began to see sales drop as 70–80% of its customers in the region went out of business. Turkish cross‐border trade increased as these garage producers liquidated, went bankrupt


or turned to other business, as younger female workers left for Western Europe, and machinists and owners moved into construction and services either in Bulgaria or also in Western Europe.

As a result, in the past few years, the production clusters of garage firms have withered and, with them, ancillary support industries and services have struggled. Ishleme has again become relatively more impor-tant in the production mix of the region, further undermining local input suppliers like Byaltex and the options available to the remaining independent producers. The future of these mutual dependencies between input suppliers and independent producers is further threatened by legislative changes in the turnover bands of value added taxes. VAT is charged on every point of a transaction and must then be claimed back from the tax authorities. But the return of VAT to suppliers and producers is slow, typically up to three months, depriving each of the essential oper-ational funds on which they depend. In 2013, the VAT owed to businesses in Bulgaria was 770,000,000 Leva.

At the same time and to some degree, the regional apparel production system has been resilient during this period. Those firms that have sur-vived have been able to expand activity in niche product and market areas in recent years. Social networks and regional embeddedness and the role of regional and domestic markets have all been crucial, as has direct access to either bank or personal credit. Despite their focus on domestic markets, the garage firms of Haskovo are not isolated in an otherwise global circuit of capital. They are fully embedded in those circuits and underwrite some of the costs of formal export producers through their contribution to the reduction of input costs and their easy revolving door contributions to worker training and employment. The apparel workshop neighbourhoods of Haskovo further underwrite the Dimitrovgrad Market’s role as a national and international centre of trade and exchange, supplying low‐cost basic and semi‐fashion goods to Bulgarian and trans-national consumers, while consuming fabrics and other inputs from international traders.

Conclusion

It is by now a truism to say that global value chains are always embedded in wider networks of production, but the garage workshop economies of Haskovo illustrate the ways in which context and conjuncture in the global economy are articulated with the cultural economy of local and regional practices. The post‐socialist firm illustrates particularly well the complex-ities of value chain embeddedness and the multiplicities of capitalist relations that are currently transforming the mutual relations between ECE regional economies and global production networks.


We have emphasized how these forms of articulation are differentially embedded in specific cultural histories and regional economic formations, and how economic behaviour is shaped by cognitive, social, cultural and political practices in the process of transforming regional economies. These thoroughly relational economic geographies are, then, formed out of the transnational nature of the ethnic structure of south central Bulgaria and the networks and location of the region at a transport crossroads to and from Turkey, as well as the articulation of apparel production with home and garage firms, underwriting some of the skills and input costs of the OPT export industry. The extent to which this regional production system is able to survive the “perfect storm” of the global financial crisis and EU accession remains an open question. But it does highlight the ways in which regional production systems are formed out of the complex scalar and relational geographies of post‐socialist economies.

Notes

1 Interviews with manager, Haskovo, October 2003, May 2004, July 2013. 2 This section is based on interviews and surveys carried out at intervals over a

ten‐year period: Autumn 2002, Spring 2004, and Spring–Summer 2013. 3 Field survey, Haskovo, May 2004. 4 This bifurcation of firms based on their size, product mix, quality, and end

market is a broader characteristic of smaller‐scale household production in Europe. Lan (2014), for example, has argued that the Chinese workshops of Prato, far from being an insourced production system articulated with the wider pronto moda industries of Pratenese firms, tend to sell into a European‐wide, especially ECE, market of lower‐quality, lower‐cost goods. In his reading, the industrial district model of Prato has to be interrogated through these dynamics of distinct ownership patterns, labour processes, and end‐markets.

5 See Petrova (2009) and (2009/2010) for a particularly interesting engagement with the changing landscapes of the Dimitrovgrad Market.

6 Interview with Dimitrovgrad Market manager, May 2004. 7 Interview with Dimitrovgrad Market manager, May 2004. 8 Interviews with Dimitrovgrad Market manager, May 2004, and July 2013. 9 Interviews with Dimitrovgrad Market, manager, May 2004, July 2013.10 Interviews with KNCB staff, Haskovo, October 2003, May 2004, July 2013.11 Interview with Dimitrovgrad Market manager, July 2013.12 The unit responsible for enforcement of counterfeiting and false labelling laws

is the Police for Organized Crime under the Ministry of the Interior. In 2013, the unit was exacting heavy penalties. Fines of three times the face value of the product were levied, all products were confiscated, a fine of 10,000 Leva could be exacted, and sentences of six months’ probation and two years conditional probation were made.

13 Interview with Director, Haskovo KNCB, July 2013.14 Interview with firm manager, Julietta, Haskovo, July 2013.


15 Interview with KNCB Director, Haskovo, July 2013.16 In 2012, the minimum apparel wage was 310 Leva compared to average wages

for Bulgaria of 750 Leva and in Haskovo of 537 Leva. Interview Vacilka Ivanova, Director, KNCB Haskovo office, July 2013.

17 KNCB, the national trade union and most active of the trade union federations in apparel, currently runs an EU project on limiting and prevention of the grey economy, running training programmes in firms on workers’ rights, contracts, wages, and overtime. Part of the nationwide EU‐supported programme on ‘Be informed’, the programme in Kardzhali and Haskovo focuses particularly on apparel worker training on their rights. Interview, KNCB Director Kardzhali, July 2013.

18 Interview with firm manager, Byaltex, Haskovo, July 2013.

Part FourConclusion


ConclusionChapter Ten

Articulations of Capital has assessed the dynamic and complex political‐economic processes that drive the transformation of the ECE apparel industry. It has charted these transformations from the era of state socialism in the 1970s and 1980s to recent years when the industry and the regions in which it has been located have been affected by a series of crises from the collapse of ECE and CMEA markets, to the competitive pressures arising from trade liberalization, to the contemporary contraction of market demand due to the economic crisis in core EU markets. In understanding these multiple waves of crisis and transformation, our focus has been on the dialectics of continuity and disappearance, and the inter‐woven processes of scalar globalization and regionalization and differential inclusion into global production networks.

We have examined the actually existing geographies of contemporary economic change in the apparel industry in ECE as expressive of the underlying dynamics of contemporary global value chains and global production networks, always in articulation with historical legacies and regionally embedded contexts. In doing so we have shown how the changing economic geographies of post‐socialist Europe and the concrete experiences of state socialism and post‐socialism make a difference to the ways in which the contemporary global economy of capitalism is operating.


While a great deal of research on GVCs and GPNs, as well as broader analyses of manufacturing and regional economies, has focused on various logics of upgrading as central dynamics of transformation in global capitalism, we have examined the dynamics of differential inclusion and the multiplication of labour, work and state practices that emerged in post‐socialist Europe to shape its variegated regional economies. Throughout we have insisted that understanding such changes requires a conjunctural economic geography which focuses on five inter‐connected concepts. First, we understand the dynamics of capitalist development in terms of the specific and concrete contexts of their emergence and transformation. That is, regional economies are always, for us, geo‐historical social – as well as economic – formations. Second, in this sense, manufacturing systems and their resulting regional economic structures are both path dependent and institutionally produced. Third, and to avoid any essentializing of such contexts and regions, we understand post‐socialist regional transformations as deeply articulated with wider global dynamics through multi‐scalar and shifting networks of investment, information and governance. Fourth, such regional and global networks are precisely what we mean by the historically and geographically embedded character of economic change. And, fifth, such dynamics, contexts, histories and networks are not reducible in any straightforward manner to logics of capital, however important they may be. The transformation of state socialist economic relations and their partial and distorted integration into global production networks was certainly driven by such logics and by the institutional imperatives of structural adjustment, export‐led development, foreign direct investment and the financialization of manufacturing systems. But it was also – crucially – driven by the way in which firms, workers and communities articulated their own economic needs with such global, regional and domestic capital logics, as well as with non‐capitalist social relations, in this process of transformation.

Structural imperatives of markets, competition, cost and profit have driven processes of industrial change and corresponding labour market dynamics. Indeed, the particular configuration of the economic geographies of macro‐regional production in ECE was one part of a ‘global’ reconfiguration of economic relations driven in large part by the pressures from established fractions of capital in Northern and, later, Southern Europe to restructure its own costs of production and to revitalize profitability as a series of competitive pressures increased. Outsourcing and sub‐contracting were but one set of mechanisms implemented to resolve a broader crisis of profitability. In this sense, the crisis of state socialism and the end of command economy controls offered an ‘open’ arena – a resource – for the geographical re‐configuration of late‐Fordist manufacturing and retail capital. But in this process, ‘global’ production was articulated with

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particular contexts of late‐state socialism, post‐socialism and the legacies of the command economy as it was embedded in the regions and economies of apparel production, and articulated with regionally specific scalar networks, social formations, conjunctures and relational geographies.

Such an approach to economic geography is, then, one in which context is crucial. As Doreen Massey has so succinctly stated: “Geography matters.” But in this relational geography, context is not a fixed space or place, although it is always spatialized in several ways. Rather it is the conjuncture of social forces within which all economic action occurs, including – in our case – the (re‐)organization of apparel production systems. It is what Louis Althusser called the over‐determination of economic relations, and what Doreen Massey called a relational geography. The challenge for this understanding of context is to balance the analytical and policy value of more parsimonious abstract models that focus on a discrete set of particular relations with the conceptual and theoretical demands of rigour in clarifying the actually existing structures and relations that produce the economy and its many forms. We prefer a language of context, conjuncture and relationality to understand the ways in which apparel production in ECE was restructured in a wide variety of ways as firms, labour and regional economies came to be embedded differentially in global value chains and production networks. The resulting circuits of capital are mechanisms for generating (and capturing and appropriating) value but only become possible because of constituent, conjunctural relations with state institutions, spatial divisions of labour, ethnic and cultural economies and gender relations. The consequence is an embedded, more socially situated approach to analysis of global value chains and global production networks.

Working Beyond “Common Sense” in the Industrial Politics of Apparel

In reading against some of what have come to be seen as the prevailing “common‐sense” discourses about labour‐intensive industries and post‐socialism, we have argued for a more institutional and embedded reading of regional industrial dynamics. The first common sense we have questioned is that the apparel industry is footloose, prone to only brief histories in particular regional economies, and a kind of ‘stepping‐stone’ industry which gives way to more ‘sophisticated’ forms of industrial economic development. One consequence of this particular view is that it leads to a reading of apparel as always low‐skilled, low‐value and low‐tech in nature. As a consequence it is often assumed to be particularly prone to poor working conditions and labour abuses. While this is an accurate characterization of important elements of the apparel supply chain, it is a


partial reading of the relations of labour and capital in export‐processing economies, with important consequences for policy thinking about the industry.

Such common‐sense models of industrial mobility are common sense for a reason; they produce important insights into the ways in which global sourcing and fast fashion produce serious breaches of national labour laws and international labour codes and agreements. Particularly in second‐tier and third‐tier sub‐contracting firms, the pressures of cost, delivery time, quality demands and other buyer requirements have produced serious workplace compliance failures and some of the largest manufacturing disasters in history. But while there are certainly examples of such poor working conditions in factories across ECE, the landscapes of work and the ability of workers to shape more complex terrains of production politics in post‐socialist countries are more nuanced, even under the conditions of intense economic involution in the decades after 1989. We have highlighted some of the ways in which these state socialist labour practices and forms of industrial governance have shaped the industry’s engagement with global value chains and the working conditions which resulted. While there have been clear pressures for cost reduction, tight contracting and increased flexibility based on the demands of buyers in Western Europe, such pressures have been mediated by state socialist‐era commitments to a social wage, systems of labour regulation and diverse livelihood strategies that were important alternative sources of income and social reproduction. These kinds of socially embedded relations played an important role in the ways in which the industry in ECE responded to the changing requirements of Western retailers for time‐responsive manufacture. The increasing importance of time and space in maintaining flexibility and managing risk in sourcing for increasingly uncertain markets has led to intense regionalization processes that have solidified the position of parts of the ECE apparel industry in global value chains.

The deep effects of various rounds of liberalization, financial crisis and industrial restructuring have devastated particular firms and regions, but our approach has sought to balance the analysis of regional economic involution with an attention to the elements of the industry which remain active and significant parts of the regional economies of ECE. Indeed, only this kind of path‐dependent analysis provides the historical and conceptual tools able to explain the continued significance since the 2008 economic crisis and the ways in which specific conditions and contexts ensured the stickiness of the industry in the region, albeit under intense competitive pressure and declining access to investment capital. In this sense, economic downgrading into stitch‐up work for export contracts mediated the broader weakness in the investment climate of post‐socialist manufacturing throughout ECE. As apparel firms collapsed and downsized, they nonetheless continued to provide jobs. It is important, however, to stress that this

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is by no means the replication of the arguments that American economists like Krugman (1997) and Sachs (in Meyerson 1997) and pundits like Kristof and WuDunn (2000) made in the late 1990s and early 2000s to defend sweatshops, arguing as they did that bad jobs are better than no jobs and that, as a consequence, we need more, not fewer, sweatshops (see Miller 2003 and Hickel 2011, for direct rebuttals of these arguments). We do not see job creation on its own as a value, and certainly not independent of a wider analysis of the historical and social conditions in which firms come and go. As we have shown, many of the apparel jobs in export processing firms were highly gendered, physically demanding and uncertain, and wages were typically among the lowest in the region, rarely providing a living wage (Clean Clothes Campaign 2014). Indeed, the loss of state and enterprise social wages after 1989 compounded the employment consequences of tight contract pricing in OPT export production. Together these had particularly negative effects on worker livelihoods, even as employment expanded. But, post‐socialist transformation and regional economic integration produced a paradox and a tension; export apparel sustained and in some cases expanded jobs in marginal regional economies, without which mass unemployment would have been even more severe. It generated from within the resulting weak contract supplier firms new forms of innovation, inter‐firm learning and strategic partnerships which, when articulated with legacies of socialist networks and practices, expanded opportunities for those firms and, at least to a certain extent, sustained employment in some of the regions suffering significant job losses in other manufacturing branches. While wages and benefits have been constrained and working conditions for some have worsened, legacies of the social wage, health and recreational norms, maternity considerations and the demands of household agrarian labour have shaped the labour process and contract norms in – at times – important ways. In turn, these conditions have produced opportunities for workforce stabilization and development, as well as individual firm upgrading. Clearly, what is needed is an industrial policy that recognizes these paradoxes and tensions. However, the writing‐off of the industry by many policy‐makers in ECE has not helped sustain this more complex kind of thinking about the anchoring and social upgrading of the industry. In making this argument, we acknowledge the need to reverse the perspective of capital as the innovative and dynamic motor of change, to one in which the productive role of workers and communities in shaping both firm‐level practices and broader economic contexts is accounted for.

The second common‐sense discourse which we have sought to question concerns linear conceptions of post‐socialism and associated transitions to capitalism. In Theorising Transition (Pickles and Smith 1998), we sought to problematize the logics of such prevailing linear transition models from state socialism to capitalism and the attendant discursive construction of a


model of neo‐liberal capitalism. We elaborated the beginnings of what we referred to as an economic geography of actually existing post‐socialism attendant to the reworkings of industrial, political and social legacies from the past in the engagement with, and the creation of, new forms of economic organization. In Articulations of Capital, we have developed a more explicit theorization of the conjunctural economic geographies of post‐socialist apparel restructuring. This approach avoids teleological claims surrounding linear transitions and provides an opening to more contingent readings of post‐socialist economic trajectories. We have emphasized how the legacies and socio‐spatial structures of the command economy, industrial networks, pre‐existing trade relationships, labour organization and regional patterns and histories of ethnicity differentiate the emergence of globally‐oriented industries in state socialist and post‐socialist Europe from forms of globalized industry found elsewhere. In other words, we have elaborated the difference that ‘post‐socialism’ makes to the operation and dynamics of a globalizing industry like apparel. But we have also emphasized how these processes of industrial change are differentiated regionally: how forms of integration into different apparel contracting networks and different national markets mattered for the kind of industrial development that could take place in each country; how ethnic resources were deployed differently dependent on the cultural histories of regional contexts; how the state responded in distinctive ways to the opportunities initially brought by OPT and its restructuring; how the timing of EU membership affected trajectories of change and opportunities for further out‐sourcing and delocalization; and how the embedded regional legacies of industrial and institutional structures shaped the transformation of the industry.

The third common sense relates to global value chains themselves. As global trade is increasingly managed within value chains rather than via market transactions, and when international agencies such as the World Bank, WTO, UNCTAD, OECD, and the ILO are investing heavily in GVC approaches for policy development (Neilson 2013; Werner et al. 2014), it is particularly important to assess the extent to which GVC analyses themselves embed certain assumptions about the economy. In our own arguments we work with global value chain and production network concepts of industrial organization because they provide effective and analytically sophisticated and politically productive approaches to understanding the globalization/regionalization dialectic. In particular, they enable us to understand the role played by lead firms and other network organizers in structuring production and trade across borders while keeping open the necessity of simultaneously assessing labour market dynamics and the nature of politics in production; they allow for an appreciation of the inter‐relationships among in situ firm restructuring, broader production network dynamics and community and industry policy actors; they help us understand how state institutions act at different scales to

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shape production patterns and accumulation strategies, and how the distributional consequences of these strategies are determined; and they map out the emerging forms of the global economy as ever more intermediate and finished goods are traded through global value chains.

But we have also stressed some of the limits of these frameworks. These include a focus on forms of linear transition, particularly around upgrading, and a ready acceptance of low wages as a direct driver of sourcing decisions or, more accurately, a conflation of this wage logic with notions of value. In such readings, high‐tech, high‐value added industries are too easily contrasted with low‐tech, low‐value added industries whose internal complexities, technologies and forms of work are ignored. The extensive use of international trade data to address industrial transformation has compounded these tendencies. Such data both privilege export production over domestic production, and lead to misleading characterizations of the total value and unit value derived from industrial activity. Thus, for example, as we showed in Chapter Nine, being able to use quantity produced and sold value data at the national level allows a very different picture to emerge of industry dynamics in particular countries and regions. These limits also include a failure to derive theories of value adequate to the claims of value chain geographies, which certainly include theories of value generation, circulation and appropriation within systems of economic governance, but which also necessitate a questioning of the focus on rent capture as a form of value mapping, as well as the failure to locate value in the broader and diverse economies with which all value chains are articulated. In contrast, by embedding the analysis of trade statistics in ethnographies of industrial process and regional economy, we have been attentive to the ways in which apparel manufacture can operate as a site for innovation, inter‐firm learning and skills development, even under conditions of regional economic involution.

In attempting to go beyond these limits we have focused on three primary dynamics. The first concerns the ways in which value chains and production networks operate as circuits of capital in contemporary capitalism to coordinate capital, labour and technologies under specific and changing regimes of accumulation and value creation. The second concerns the ways in which the restructuring of ECE apparel production networks have been shaped by attempts to reduce the turnover time of capital and manage capital at risk by adopting various spatial practices, including trans‐border networks. And the third has highlighted how these logics of circuits of capital are also always mediated through and by labour (the Copernican turn), the state (frontiers of capital and state borders) and the wider social relations with which industrial formations are articulated (conjunctural economic geography). Through these concepts we have attempted to more effectively explain regional economic change in terms of concrete forms of contingency and complexity. The resulting relational and articulated forms of the economy map out the diversity of actors, contexts and trajectories that are


constitutive of over‐determined regional economies. But what does this mean for the possibility of economic upgrading of the industry in broader global contexts?

Diverse Trajectories and Industrial Upgrading

Much of the existing literature on upgrading and value chains argues that the action and motivations of lead firms and global buyers are the main drivers of global contracting systems and upgrading possibilities. In this sense, lead firms are seen as the organizational motors in value chains (Gereffi 1999; Schmitz and Knorringa 2000). Such lead firms do have considerable power in the organization of global contracting, and in the European apparel sector there is a clear squeezing of contract prices and conditions by such firms. Indeed, the manner in which such firms organize their supply chains in order to reduce the turnover time of capital leads to a wide range of possibilities for the geographical organization of their production networks. However, focusing explanations one‐sidedly on global buyers does not help us understand how such ‘global’ strategies articulate with embedded and localized institutional arrangements in producing regions, or what the capacities of supplier firms are to restructure those relations. Research on industrial districts and clusters has focused on these forms of local and institutional embeddedness, but there are few analyses in this tradition with its focus on localized production systems of the wider relational structures of value chains into which firms and districts are increasingly integrated (see, for example, Humphrey and Schmitz 2002; Dunford 2006).

In ECE the upgrading possibilities for apparel producers must also be understood within the institutional contexts in which, for example, tightening local labour markets, national legal requirements and the legacies of a social economy of state socialism created a dynamic field of opportunities and constraints. The embeddedness of production systems suggests that understanding the trajectories of firms in ECE requires a broader understanding of the over‐determined nature of firm‐level action – not only driven by conditions set by lead firms and buyers from core export markets – but by a much wider range of forces in complex production networks (see Henderson et al. 2002; Smith et al. 2002; Coe et al. 2004). Indeed, a wider body of work on the political economies of post‐socialism has established that any explanation of transformation – as opposed to a linear transition to capitalism – requires an understanding of the complex, multiple and embedded geographies of post‐socialism (see Creed 1998; Pickles and Smith 1998; Grabher and Stark 1997; Smith 1998; Pavlínek and Pickles 2000; Stenning et al. 2010). Across a range of studies of political economic and regional change, this work has highlighted the importance of situating

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any account of post‐socialism within a context of locally embedded networks of actually existing social and economic power.

Thus, for example, an important condition for the emergence of post‐socialist export processing across ECE was the legacy of prior contracting arrangements with state socialist enterprises. Many OPT assembly contracts were initially established with pre‐existing firms and their managers, often those who had formerly orchestrated contracting with ‘the West’ under state socialism. With increasing consolidation in supply chains, contracts requiring larger production runs began to favour manufacturers with larger capacities and more diverse services (input sourcing, pressing, packaging, labelling and ability to meet international standards and codes), and many of these larger firms are those which had their origins in the restructuring and fragmentation of former SOEs. Managerial networks and inter‐firm cooperation that developed under state socialist industrialization have, in some cases, remained crucial in shaping the trajectories of firms and regions after 1989. In the Prešov region of Slovakia, for example, relationships between some of the most successful new private firms in the region and leading Italian and German investors in the Slovak apparel industry resulted directly from the prior experience of former managers of the state‐owned enterprise OZKN and investments in internationally competitive equipment made prior to 1989. In Bulgaria, while many firms operate as islands of export production and others see little value in cooperation with other local firms, many smaller firms and some larger ones continue to mobilize socialist practices of co‐operation and labour‐sharing, originally to meet the constraints of planned quota deadlines, but now to meet the strictures of legal contracts, deadlines and potential penalties. Particularly when firms need to compete with other suppliers by meeting the increasingly larger order demands and stricter deadline penalties of buyers, firms share production capacities, but also knowledge, particularly in relation to questions of different buyer strategies; who is ‘good’ to work for, who pays on time, and which buyers have habits of over‐contracting, resulting in higher rejection and return rates at delivery.

In these conditions, regional service providers and input suppliers – many with long traditions in socialist industrial supply networks – have also begun to (re‐)emerge across the region to supply the more diverse needs of assembly producers. Thus, for example, with expanded Italian investments in Bulgarian textile factories, fabric and trim suppliers, dyers and other apparel service providers have re‐emerged. The stitch‐up economies that replaced the fully‐integrated state systems have, in turn, been restructured to incorporate a wide range of firm types and labour processes. Moreover, as trade liberalization and economic crisis have weakened the potential for export processing across ECE, the residual firms with expanded capacities, differential markets or strategic partnerships with their buyers have – in turn – stimulated the return of old, and the emergence of new, input supply and industrial service firms.


A related element is the role played by domestic and non‐EU markets. Scholars and policy analysts of global apparel and those working on post‐socialist restructuring have tended to pay only passing attention to the resurgence of domestic and regional markets. In the wake of economic involution after 1989, domestic markets have generally been assumed to be relatively unimportant in shaping industrial futures. EU markets remain the key ones for ECE manufacturers, but a significant number of producers are turning to domestic or macro‐regional markets either in standard low quality goods or, in some cases, in technical textiles or goods for the new emerging elite. Many of these build on networks established as a result of prior experiences in the former Soviet Union and Middle Eastern countries that also derive from socialist commercial networks.

Where the focus has been on export production, analyses of regional competitiveness based on wage rates and labour costs reproduce very specific models of industrial locational flexibility, in the process often failing to attend to the reasons for regional ‘stickiness’. One form of this ‘stickiness’ derives from product mix for EU markets. Higher‐value men’s and women’s suits, trousers, dresses and shirts are important in the product profile of several ECE exporting countries. In these product lines, the competitive pressures faced by retailers and manufacturers in Western Europe require flexibility and speed in replenishment. Consequently, a significant part of sourcing has been concentrated regionally, in turn, allowing ECE manufacturers to upgrade their production and logistical functions to enhance their capabilities in delivery and response to changing quality, design and demand needs.

We have emphasized the need for a contextual understanding of the contingent conditions by which capitalist industrial development occurs. Our focus has been to understand how capital deployed through apparel contracting networks is organized via networks of inter‐firm production systems and attempts to manage risk and enhance the turnover time of capital. We have highlighted how involvement in proximate sourcing became a basis on which several key firms have been able to undertake a partial upgrading of their position in increasingly global production networks. Geographically proximate sourcing has also allowed Western buyers and partners in joint ventures with Slovak firms to minimize capital at risk in their supply chains. We have also highlighted how the tightening landscapes of competitive pressure resulting from trade liberalization, the economic crisis and shifting landscapes of relative production costs in the region have underpinned a level of precariousness for many firms in the industry, many of which have been unable to move away from a dependency on OPT‐like production arrangements which locked them into a model of competitiveness based primarily on labour costs. Each of these requires a relational understanding of the inter‐dependencies in production networks, particularly the inter‐dependencies of fractions of capitals, labour and state policy in the constant struggle to stabilize dynamic systems of globalizing production.

conclusion 249

The Role of the State in Global Production Networks

The roles played by three primary state actors have been important in producing the architecture of policies and regulatory practices that structure the operation of global production networks, sourcing and contracting decisions across Europe and beyond. As early as the 1970s, national governments in North America and Western Europe began to pave the way for their own textile and clothing industries to adapt to the pressures of economic globalization by creating customs agreements with neighbouring countries. These agreements provided incentives for apparel manufacturers and retailers to expand their sourcing networks into proximate lower‐cost labour markets in ECE while guaranteeing markets for homemade textiles.

Later, the European Union established its own policies on trade expansion, regional economic integration and economic competitiveness. These similarly fostered outsourcing, plant closure and delocalization in member states, while encouraging the integration of ECE and Euro‐Mediterranean firms into regionalized production networks driven by buyers in the major markets. In particular, EU outward processing arrangements, national tax and customs policies and the direct intervention of state and industry associations encouraged this expansion of processes of outsourcing production to regional centres in ECE and Turkey, while older established centres of clothing production declined and jobs were lost.

The legacies of industrial organization and state regulation from former state socialist governments are also important in shaping these industrial geographies. While trade unions and the state inspectorates for labour, health and environment were often ignored in socialist times, they now provide opportunities and official structures for worker representation and mobilization that are lacking in many other export processing platforms around the world. State socialist investments in industrial fairs, technical training and design schools, along with the legacies of a fully integrated textile and clothing industrial system (albeit now much degraded) provided basic infrastructures, skills and available input and industrial service suppliers for firms seeking to add capacities and service to their original stitching contracts. Finally, state inspectorates and labour codes may provide marginal competitive advantages for managers seeking to secure export contracts from buyers who are increasingly concerned about the heightened concern for code compliance among their customers.

Recognizing the role of these state actors in global production networks and global value chains is important in any attempt to assess firm trajectories and regional economic futures. It is the diversity of interactions among firm and non‐firm actors which shape the specific geographies of production and work. Rather than seeing globalization and the production systems to which it gives rise as a result of the hollowing‐out or reduction of the capacity of the state to constitute economic spaces, we see the state as


remaining a fundamental constitutive force in the generation of landscapes of opportunity, constraint and accumulation (see Smith 2015). The ‘withdrawal’ of the state from direct economic ownership through privatization and the re‐scaling of the state at the EU level have reconfigured the ways the state acts to coordinate particular forms of economic governance, trade policy and the economic opportunities to which they gives rise, but the state remains fundamental to any analysis of changing forms of economic governance.

The Apparel Industry and Regional Economic Futures

With the end of quotas it was widely expected that workers would suffer the consequences of a more liberalized apparel industry. Continued liberalization has resulted in deregulation of labour markets, with corresponding challenges for workers: production jobs have continued to decline especially (but not only) in high cost locations and in countries of the global South reliant on quota‐based trade;1 labour standards have declined in many firms struggling to compete with low‐cost producers in Asia; and informalization and flexibilization of production are further demobilizing worker organizations, notably through the increased use of home‐workers. At the same time, the deregulation of trade has also changed the structures of governance in the industry. Industry and trade associations, multilateral institutions and citizen interest groups are actively engaged in major markets to ensure that imported clothing meets basic labour and environmental standards. New coalitions and associations of interest have emerged and new legislation is emerging to regulate production practices across the supply chain. These range from state investment programmes for technical upgrading and training to private sector initiatives to create strategic partnerships aimed at quality, efficiency and risk management in the supply chain, to national and multilateral deployment of non‐tariff barriers such as anti‐dumping clauses to protect local industries.

It is now widely accepted that the phase‐out of MFA quota‐based trade resulted in a ‘race to the bottom’ as traditional firms, workers and regions experienced intense downgrading as new producers, workers and regions emerged in Latin America and Asia. Many smaller quota‐dependent producers have been unable to sustain their former location in global value chains, particularly in Africa. Other former quota‐constrained producers, such as China and Bangladesh, have expanded their role in the global economy. In a period in which wage and input costs have begun to rise in low‐wage assembly industries throughout ECE, as well as in China, it will be important for researchers to pay more, not less, attention to the specific circumstances of workers, managers and firms in their respective regions, if we are to make any significant in‐roads into explaining and regulating the ‘race to the bottom’.

conclusion 251

But equally, for policy communities, the limits of a one‐size‐fits‐all policy approach to the apparel sector needs to be recognized. In ECE, this policy approach initially took the form of benign neglect and the rejection of any consideration that the industry had a role to play in national economic development strategy. Even national apparel industry associations found themselves largely unheard amidst the clamour for automotive, informational and financial industry investments. We have stressed how the diversity of regional industrial formations requires us to think differently about the apparel industry and its relationships with other forms of economic life. This means not simply writing off apparel as a ‘sunset’, ‘footloose’ industry responsible for worker immiseration. Such logics remain overly constraining and myopic, and they fail to pay attention to the actually occurring complexities and much more open dynamics of regional economies and global production networks. This diversity means that more contingent analyses and policy approaches are required; approaches which can enable socially inclusive growth and export competitiveness at the very least without undermining the economic security of workers and other actors engaged in globalized systems of production. Of course, the claim that alternatives are always possible may require a much more radical approach to re‐thinking the politics of global production networks; opening up a space which allows us to open up questions of power and control, as well as ways of thinking about democratizing the economy. Whether the apparel – or any industry – offers the potential for regional economic development and sustaining of livelihoods in particular places is never pre‐determined, but must be analyzed, not least because the complex geographies within which global production networks are embedded always matter.

Just as the creators of Orllegro – the imaginary textile material from the 1950s with which we opened Articulations of Capital – were attempting to construct imaginary futures for textile products, our argument has been that we need new imaginative discourses through which we envisage the futures of textile and apparel industries in ECE. The ability to upgrade, innovate and modernize is central to such imaginary futures. But, given the ubiquity of apparel and the ever‐present struggles of workers both to keep their jobs in a spatially mobile industry while simultaneously articulating demands for better work and wages, the industry is crying out for more socially progressive, socially inclusive and more democratic economic logics beyond the narrow forms of exploitive low‐skill, low‐wage narratives. These need to pay much more attention to the concrete realities of firms and workers in the ways they weave complex webs of embedded relations, while simultaneously recombining this industry with others.

This project requires at least three fundamental transformations in the way we understand the regional political economy of development and the role of apparel in that project. First, we need a much better understanding of the geographies of responsibility that link consumers and producers in an


increasingly global industry. In this regard, GVC and GPN researchers have much to offer, but also much work to do to demonstrate how global networks of consumption, production and disposal are increasingly organized in ways that make a fundamental difference to this responsibility. Second, to the extent that the apparel industry has been understood through narratives of spatial flexibility, low‐skill activity and hence low‐wages, we need to interrogate the ways in which this process of inscription has been a self‐ fulfilling process fuelled by our own desires to understand and challenge the ‘race to the bottom’. One consequence is the need for a great deal more work on the underlying theories of value that motivate both GVC and GPN scholars, but also that shape the ways in which low‐ and high‐value added conceptions of the economy emerge and are held to be true. Third, the post‐socialist experience is a particularly important one in the sense that it so clearly shows the ways in which industrial systems are always so thoroughly embedded in social relations and broader economies to which such systems respond. It forces us to always take seriously how economy and society are mutually constitutive in an increasingly globalized world.

Note

1 For historical and geo‐political reasons, Bangladesh has retained special EU market access preferences even as quotas have been removed for other countries.


Firm‐level Restructuring in the Slovak Textiles and Clothing Sector, 2004–2013

Appendix 1

Date Company Activity Location Reason

Job gain (loss)

February 2013 Nexis Fibers Textiles and yarn for automotive industry

Humenné, eastern Slovakia

Acquisition of Twista

95

January 2013 Twista Textile fibers and yarn


Closure of production

–120

September 2012 Slotex Fashion Clothing Vranov nad Topľou, eastern Slovakia

Firm closure –180

May 2011 Mayser Hats Rožňava, eastern Slovakia

Delocalisation of production from Germany

150

April 2011 ICA (former Svik)

Clothing Svidník, eastern Slovakia

Decline in orders –100

March 2010 Feldsam Underwear Lučenec, central Slovakia

Bankruptcy –116

December 2009 Svik Clothing Svidník, eastern Slovakia

Decline in orders –70

(Continued)

254 appendix 1


Job gain (loss)

November 2009 Mapier Production

Knitted and crocheted clothing

Vranov nad Topľou, eastern Slovakia

Loss of orders due to economic crisis

–364

November 2009 Makyta Clothing and car upholstery

Púchov, western Slovakia

Delocalisation of production to Serbia

–654

October 2009 Chemlon Man‐made fibres


Bankruptcy –308

September 2009 Ross KC Clothing Královský Chlmec, eastern Slovakia

Bankruptcy due to reduced competitiveness and high labour costs

–127

June 2009 Chemlon Man‐made fibres


Restructuring –311

May 2009 Ozeta Neo Men’s clothing Topoľčany, western Slovakia

Loss of orders leading to 180 job losses out of 654 employees

–180

April 2009 Merina Textiles Trenčín, western Slovakia

Bankruptcy due to global competition following previous downsizing

–150

April 2009 Kodex plus Work clothing, ready‐made women’s and children’s clothing

Košice, eastern Slovakia

Loss of orders –190

February 2009 Luko‐K Ready‐made clothing

Stará Ľubovňa, eastern Slovakia

Due to the global economic crisis, the company is closing

–127

January 2009 Svik Men’s clothing Svidník, eastern Slovakia


November 2008 Zekon Clothing Humenné, eastern Slovakia

Closure of branch plant

–318

appendix 1 255


Job gain (loss)

July 2008 Gestora de Inversiones Siglo

Clothing Košice, eastern Slovakia

Establishment of factory by Spanish investor

150

May 2008 Avent Slovakia Medical clothing Piešťany, western Slovakia

Relocation of production of main owner (Kimberly‐Clark Corporation) to China due to increasing local labour costs and strengthening of the SKK/US Dollar exchange rate, which worsened the competitiveness of the production

–857

December 2007 OZKN Men’s clothing Prešov, eastern Slovakia

Loss of orders from main Spanish customer (Induyco) to Chinese firms

–440

August 2007 Ozeta Neo Men’s clothing Tornaľa, central Slovakia

Bankruptcy –628

March 2007 Ozeta Neo Men’s clothing Trenčín and Skalica, central Slovakia

Loss of orders from main customers due to increasing competition and exchange rate

–870

October 2006 Mayser Textiles (for automobile industry)

Tornala, central Slovakia

Establishment of new factory

130

August 2006 Twista Textiles (man‐made fibres)


Planned expansion of existing facilities by Italian parent firm

250

(Continued)

256 appendix 1


Job gain (loss)

October 2005 Gemtex Textiles and underwear

Revúca, central Slovakia

Relocation and restructuring of existing facility

220

September 2004 Makyta Textile products for automobile industry (car seats)

Púchov, western Slovakia

Expansion of existing facility

320

June 2004 Slovenka Knitted products Banská Bystrica, central Slovakia


April 2004 Maytex Textiles Liptovský Mikuláš, central Slovakia

Bankruptcy –162

April 2004 Ozeta Neo Men’s clothing Hlohovec, western Slovakia

Closure of branch plant producing men’s suits

–570

Total jobs lost since 2005

–7,532

Total new jobs since 2005

1,315

Net job change since 2005

–6,217

Source: Elaborated from European Monitoring Centre on Change Fact Sheets, available at www.eurofound.europa.eu/emcc, and other press reports.

http://www.eurofound.europa.eu/emcc


Key to Figure 9.14 Dimitrovgrad Market, 2011Appendix 2

• Sectors A, B and С are located in the south part of the market, along the railway lines. The firms offered a wide range of goods and they are from all over the country (Bulgaria).

• In sector A there are 175 shops used by 100 firms. The majority of firms are from Haskovo, with others from Rousse, Omurtag, Asenovgrad, Dimitrovgrad, Kazanlak, Plovdiv, Yambol, Tryavna, Kardzhali, Dzhebel, Blagoevgrad and seven villages. Their main products are wom-en’s garments, children’s garments and men’s garments. They also sell underwear, sports wear, blankets, bags, toys, watches, slippers and shoes.

• In sector B there are 100 firms in 145 pavilions. The firms are from Sofia, Haskovo, Dimitrovgrad, Plovdiv, Stara Zagora, Kardzhali, Asenovgrad, Stambolovo and 5 villages in South Bulgaria. They are traders of imported or own produced apparel. In this sector there are also shops selling shoes, sports wear, bags, hats/caps, and apparel for elderly people.

• In sector С there are 130 firms using 182 pavilions. They focus mainly on children’s wear, hats/caps, men’s suits, men’s shirts and ties, socks. In the south‐east part of the sector there are jeans’ shops which continues in sector I. The firms are from Haskovo, Plovdiv, Dimitrovgrad, Stara Zagora, Asenovgrad, Sliven, Karlovo, Yambol and Kardzhali.

• In sector D‐1 there are 50 firms renting 67 shops. About 40% of the firms are registered in Haskovo (i.e., they are local firms). The rest are from Plovdiv, Dimitrovgrad and Stara Zagora, with a further 22% of firms coming from other parts of the country. They sell jeans, jackets, men’s, women’s and children’s knitwear and wearing apparel, underwear, sports wear, and home textiles. One street in the sector sells bedding and bathroom towels, etc.

258 appendix 2

• In sector D‐2 the shops represent the cheapest sector of the market. The western part together with a new sector H‐3 is named “Kerbala”. Here the prices are extremely low and the diversity of goods is large. There are 80 firms renting 118 pavilions. 90% of the firms are from Haskovo, Plovdiv, Nova Zagora, Dimitrovgrad, and 10% are from villages. They offer sports wear, bedding textiles, blankets as well as jeans, slippers, shoes, underwear and knitwear. The northern part of this sector is reserved for carpets merchants.

• Sector E is the main concentration of firms from Dimitrovgrad, known in the market as the Nedelen Pazar (Sunday market). There are almost 100 firms firms renting 132 pavilions. 70% are from Dimitrovgrad, 13% are from Haskovo, and the rest are from Harmanli, Yambol, Stara Zagora and Nova Zagora, and from a few villages. Most of the goods on sale in this sector are from their own production, including jeans, handbags, travel bags, trousers, and men’s shirts. In this sector high‐quality imported Turkish knitwear is also sold, mainly in children’s wear, home textiles, underwear, socks, sport shoes, bedding and bathroom textiles.

• In sector E‐1 there are 50 firms and 68 shops. 51% of the firms are from Dimitrovgrad, 25% are from Haskovo and the rest are from Stara Zagora, Nova Zagora, Sliven, Kazanlak, Plovdiv, Harmanli and two firms are from villages. They sell leather clothing, fishing accessories, underwear, jewels and accessories, towels, curtains, electric and electronic goods and other home devices.

• In sectors E‐2 and E‐3 there are over 90 and 70 firms respectively. The firms in both sectors are mainly from Dimitrovgrad, Haskovo and Stara Zagora.

• In sector F‐1 there are 90 firms and 108 shops. 60% of the firms are from Haskovo, 15% are from Dimitrovgrad, and the others are from Pazardzhik, Asenovgrad, Gabrovo, Yambol and some villages. These firms mainly sell imported men’s, women’s and children’s clothing.

• In sector F‐2 there are 40 firms and 60 pavilions which sell similar goods to those in F‐1. Most of the firms come from Nova Zagora, Haskovo, Sliven, Stara Zagora, Kardzhali, Yambol, Parvomai, Bourgas and Harmanli, and they sell Bulgarian made men’s shirts, bedding, hats/caps, shoes, and socks.

• In sector F‐3 more than 60% of the firms are clothing producers and the sector is known as ‘the sector of Haskovo sewers’. There are 60 firms and 99 shops. There are also traders from the villages of Boyan Botevo and Sarnitza, and the towns of Nova Zagora, Plovdiv, Harmanli, Bourgas and Sliven.

• In sectors G‐1 and G‐2 there are 100 firms registered in Dimitrovgrad, Haskovo, Sliven, Asenovgrad, Stara Zagora, Nova Zagora, Kardzhali, Sofia and Chirpan. In sector G‐2 there are over 100 firms and 131 shops, one third of which sell their own production. There are firms from

appendix 2 259

Dimitrovgrad, Haskovo, Plovdiv, Pazardzhik, Gabrovo, Parvomai, Asenovgrad, Harmanli, Stara Zagora, and from 10 villages. These firms sell hard goods, including auto accessories, bicycles, household goods, baby and kid’s carriages, working and protective clothing, underwear, handbags, belts, and sport and formal shoes.

• Sector H is the smallest sector with 11 firms, six of which are rented by the municipality enterprise “Pazari”. The rest are registered in Dimitrovgrad. They sell both imported and their own production clothing, mainly jeans, underwear, and hats and caps. The firms Diamond and Elmas Tex (Haskovo) have shops here.

• In sector H‐1 there are over 60 firms in 72 pavilions, mainly firms from Dimitrovgrad and Haskovo, with smaller numbers from Bourgas, Plovdiv, Stara Zagora and Nova Zagora, and 2 villages. The firms sell men’s, women’s and children’s clothing, with several producing and selling their own women’s and youth fashion brands.

• In sector H‐2 there are 80 firms renting 133 shops, mainly from Dimitrovgrad, Haskovo, Nova Zagora, Plovdiv, and Bourgas.

• Sector I‐3 is known as the “Vietnamese sector” and is located on the most narrow street in the market. Clothing vendors sell jeans, men’s, women’s and children’s knitwear, camouflage clothing, shoes, slippers, socks, while others sell bedding, paintings, pictures, leather goods, hats/caps, artificial flowers, fishing goods, and shells with household goods.

• In sector J‐4 there are over 30 clothing producers and traders mainly from Haskovo, Dimitrovgrad, Kardzhali, Stara Zagora, Plovdiv, Dobritch, Harmanli, Yambol and Pazardzhik.

(Source: Adapted from The Obstina Dimitrovgrad Market Catalogue 2011). Translation and redaction: Poli Roukova and John Pickles.


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Index

Note: page numbers followed by f, t, and n refer to figures, tables, and endnotes, respectively.

Adhikari, Ratnakar, 92Agnew, John, 139Agreement on Textiles and Clothing

(ATC), 65, 89, 90t, 91–92, 91t, 97, 102n7

Althusser, Louis, 42, 51n13, 241apparel industry see specific topics and

placesArena, 207–210Artex, 206–207, 206farticulations of capital

articulation as metaphor, 42differential inclusion and, 40disarticulation and, 39meaning of, 10

Asian outsourcing, 68f, 69, 85n6, 92, 175

back-loading, 102n7Bair, Jennifer, 31, 32, 38, 140Balkantex, 208Bangladesh, 85n6, 92, 93f, 250, 252n1

banking system stabilization, Bulgaria, 158

bargaining in trade policy, forms of, 88Beni, 223–224Benková, I., 180n10–11Bhaskaran, Resmi, 80blizki (close networks), 194border practices and cross-border

production (Slovakia–Ukraine)cross-border outsourcing and trade

integration, 166–170, 168f, 169fdirect ownership, emerging, 172–173frontiers of capital and, 162–163, 170geo-economic and geo-political

articulation of economic and political-juridical space, 163, 169, 178–179

limits of, 175–178map, 171fnetwork organizers and logistics

hubs, 174–175proximity and, 149, 163

282 index

border practices and cross-border production (cont’d)

regional and global context of, 164–166

sub-contracting production, 170–172triangular production and, 166,

179n2 see also Turkey, cross-border contact with

Border Regions Policy (Bulgaria), 133n1branch plant space, 113branding

domestic, 121, 122f–124f, 150–152garage-firm, 224fPierre, 150–152, 151f see also

own-brand manufacturing (OBM)Bulgaria

banking system stabilization, 158clothing employment trends, 67fcombinat space in, 113economic crisis (1997), 188employment by selected branch

(1992–98), 187t, 200, 201femployment in apparel industry,

115f, 128, 186, 218fEU apparel imports, comparative, 93fexport production trends, 66, 68,

69f, 71firm transformation trajectories in, 144global economic crisis (2008) and,

131–132, 231–233labour codes in, 79–80, 81labour market, 73–74map of, 114fminimum insurable earnings by

occupation, 75tOPT and, 96OPT precariousness in, 145perfect economic storm, 231post-socialist transition of apparel

industry in, 123–124regional industrial location policy,

133n1residual privatized firms in, 106Roska cooperative, 78socialist industry and enterprise

in, 106Turkish-owned firms in, 133n8,

183, 212n8

unemployment, 188, 195, 231workshop networks and economy,

113–115, 124, 188 see also Haskovo oblast, Bulgaria; Plovdiv, Bulgaria

Bulgarian post-socialist cultural economies

border economy and, 199–200complexity of, 214Dimitrovgrad Market and, 221,

225–230, 225f, 226f, 228feconomic crisis impacts, 231–233firm diversity, local embeddedness

and end markets, 215–219Haskovo garage firms and

surrounding networks, 219–224, 220f, 221f, 222t, 223f, 231–233

relational economic geographies and, 215, 234

social networks and peripheral cultural economy, 193–195

value chain embeddedness and, 233–234

Bulgarian post-socialist enterprisesArena, 209–210Artex, 206–207, 206fchanges in statistical units, 211tdeepening social networks and

cultural economy of peripheral apparel, 193–195

defensive and offensive restructuring, 183, 211–212

diversification of economic practices, 193

diversification of firm type and strategy, 205

economic crises, 185ethnic and trans-national networks,

198–200, 198tFlair, 205–206, 230former state enterprises as

incubators for new kinds of firms, 184–185

industrial collapse and mass unemployment in peripheral regions, 185–187, 186t

industrial resurgence and emergent firm types, 187–192, 190t

index 283

low-value production expansion and high-value decline, 200–203

mass unemployment, 187–188, 187t, 189f

Moduk, 207–209palimpsest landscapes, 183relational assets and, 183–184re-peasantization, factory and farm,

195–198Slovakia contrasted with, 183social co-ordination in, 193sold quantities of goods and value

of goods sold, 200, 202f–204ftightening labour markets, 191

Burawoy, Michael, 72, 116, 193–194buyer-driven value chains, 11–12,

12f, 25Byaltex, 232, 233

CAD-CAM technologies, 158, 209, 222California Supply Chain Transparency

Act, 94Campling, Liam, 39capital

articulations of, 10, 39, 40, 42circuits of, 27–31, 29f, 36–38frontiers of, 162–163, 170at risk, 14–15

capitalism and creative destruction, 6Cattaneo, Olivier, 19Cellarius, Barbara, 214Center and East European Business

Center, US Dept. of Commerce, 61Center for New Assortments of

Products and Fashion (CNAPF), 134n10

Center for New Products and Fashion (CNPF), 134n10

Central American Free Trade Agreement–Dominican Republic (CAFTA-DR), 90t

chain upgrading, 32, 34f, 36–37Chakrabarty, Dipesh, 45–46China

competitive pressures from, 130, 149, 165

counterfeits from, 229–230Induyco and, 146

Lifeline and, 154–156North–South dualism and, 139opening-up and reform policies in, 8own-brand development, 22n2quotas and, 250share of EU15 apparel imports, 68ftrade liberalization and, 92unit value of EU apparel imports, 93f

‘China prices’, 175Clarke, Simon, 195Clean Clothes Campaign, 63–64, 78, 80Codes of Conduct, 77–81Coe, Neil, M., 26, 31coercive bargaining, 88, 107f, 116collectivism, 133n2combinats

breakup of, 61core industrial regions as combinat

space, 113social wages and, 108fvertical integration and, 105

commanding heights industriesin Bulgaria, 113–114, 185–186collapse of, 183gender and, 106loss of CMEA and, 60retrenchment of, 66–67social networks and, 193–195

common-sense discourses, prevailing, 4, 6, 9, 60, 241–246 see also global value chain (GVC) approach

community investments by socialist enterprises, 107–108, 108f

competitive bargaining, 88conjunctural economic geography

of production networksarticulation and, 43conjuncture, concept of, 43,

51n11, 51n13context and, 44–45dimensions and concepts of, 24, 240embeddedness in GPNs and, 47–48post-socialism and, 49prevailing linear transition models

and, 243–244primary commitment of, 41–42transition theories vs. transformation/

translation theories and, 45–47

284 index

context, 8–9, 44–45, 240–241continental-scale trade networks under

socialism, 106Core Labour Standards (ILO), 78, 80corporate social responsibility (CSR)

agendas, 77–79cost pressures and precariousness of

OPT, 144–146Council for Mutual Economic

Assistance (CMEA), 60creative destruction narrative, 6credit access, 29–30, 156, 158Creed, Gerald, 193crisis, disembedding effects of, 9 see also

global economic crisis (2008)cross-border networks see border

practices and cross-border production; Turkey, cross-border contact with

cultural economy. see Bulgarian post-socialist cultural economies

Currency Board Arrangement (CBA), 212n4

cut-make (CM) and cut-make-trim (CMT), 32, 33f, 97

Czech Republicclothing employment trends, 67fexport production trends, 65, 69fOPT and, 97

“daughters-of-the-mothers” plants, 215, 217

De Costa, J., 173Deep and Comprehensive Free Trade

Agreement (DCFTA), 163, 169defensive bargaining, 88defensive restructuring, 183, 211Deleuze, Gilles, xiiidelocalization

from 1980s to post-1989, 121–129circuits of capital and, 29–30consequences for employment and

regional development, 18cross-border economies and,

164–166, 174–176de-industrialization and, 57disaggregation of value chains and, 25downgrading and, 35

forms of, in ECE apparel industry, 8NAFTA and, 102n8post-socialist divisions of labour,

64–71strategies of, 37trade unionization and, 117–118

see also Bulgarian post-socialist enterprises

dependent and constrained upgrading, 149

Dicken, Peter, xii, 215differential inclusion, 40, 140, 141,

162, 214Dimitrovgrad Market, 157, 221, 224,

225–230, 225f, 226f, 228fdirect ownership, cross-border,

172–173disarticulation, 38–39diversity and diversification

Bulgarian post-socialist firm diversity, 205, 215–219

own-product development and, 150–156

upgrading trajectories and, 137–138Djenny, 224f, 230Dolan, Michael, 103n19downgrading, 35, 74, 140, 158–159Dunford, Michael, 31

Eastern and Central Europe (ECE), map of, 5 see also entries at Bulgaria and Slovakia; other specific topics

Eastern Partnership (EU), 169East Germany, 109economic crisis (2008) see global

economic crisiseconomic OPT, 95–96Electronic Point of Sales (EPOS)

systems, 38Elmas Tex, 223–224embeddedness

conjuncturalism and, 42, 47–48crisis, disembedding effects of, 9cross-border production and,

175–176cultural economy and value chain

embeddedness, 233–234

index 285

relationality of embedded economic practices, 215

territorial, 48employment

in Bulgarian apparel industry, 115f, 128f, 186, 199, 218f

by Bulgarian oblast, obstina and planning region, 189f, 201f

Haskovo oblast (1996–2012), 218fin Kardzhali region, Bulgaria, 187by obstina, Kardzhali oblast (Bulgaria,

1998), 197tin Rhodopes villages, Bulgaria, 212n5in Slovak apparel industry, 110,

112f, 128funemployment, 188, 195, 231–232

energy cost differentials, 171, 180n11Ethical Trading Initiative (ETI), 78ethnic communities

blizki networks and, 194Bulgarian Turkish women migrating

to Turkey, 212n7garage firms and, 223–224Turkish and Muslim minorities in

post-socialist Bulgaria, 198–200, 198t, 227

Euro-Mediterranean Barcelona Process, 94

Europe Agreements, 94European Commission Directorate

General for Trade (DGTrade), 93Europeanization of supply chains,

98–100European Neighbourhood Policy

(ENP), 169European Union (EU)

“deep integration without EU accession”, 169

Dimitrovgrad Market and EU accession, 229–230

Eastern Partnership, 169EU enlargement and wage

pressure, 130labour out-migration following EU

membership and sectoral restructuring, 131

preferential trade arrangements with EU applicant states, 94

regional division of labor and exports to, 65–71, 68f–71f, 71t

trade liberalization, 57, 168–169 see also Outward Processing Trade (OPT); trade policy

Euro-Zone accession, 130EU-Ukraine Association Agreement,

163, 169E Walters UK, 174–175, 180n20Ewert, Joachim, 140exchange rate differentials, 180n9export production trends

Bulgarian, 66, 68, 71Slovak, 65–66, 71Slovak apparel exports by type,

165, 165tUkraine-Slovakia balance of trade,

167–169, 168f, 169f

Fair Labor Association (FLA), 78fashion design industry

domestic branding, 121, 122f–124f

schools of fashion and design, socialist legacy of, 119–121

socialist Fashion, 121state socialist production and, 109student design work, International

Fair Plovdiv, 120ffast fashion, 14–15, 38, 100, 154Fernandez-Stark, Karina, 11–12fiscal OPT, 95, 103n13Flair, 205–206, 230foreign investment

ECE labour market opening and, 61–62

quota phaseout and, 92relational proximity and,

147–148stabilization Bulgarian banking

system and, 158Turkish, 199–200, 212n8types of, 188

Freeman, Richard B., 20Fröbel, F., 103n13Fukuyama, Francis, 45full-bundle production, 59–60, 59t

see also production sharing

286 index

full-package production, 157–158functional upgrading, 32, 33f, 36,

147–150

garage firms of Haskovo, Bulgaria, 157, 157f, 219–224, 220f, 222t, 231–233

garage production, 85n14gender division of industrial labour, 110Gereffi, Gary, 25–26, 31, 48, 50n3, 61,

102n5German-Slovak joint ventures, 126–127,

160n9, 175Germany

Artex and, 206, 207OPT and, 96–97, 98, 100 see also

East GermanyGFT, 160n7Gibbon, Peter, 99, 102n3, 140Global Association of the Exhibition

Industry (UFI), 118global commodity chain (GCC)

approach, 25–26global economic crisis (2008)

Bulgaria, delayed impact in, 231credit access and, 156garage firms and, 230, 231–233GVCs and, 19impact on regional production

systems, 131OPT precariousness and, 146

global production networks (GPNs)as already always embedded in

particular contexts and social relations, 8–9 articulation/disarticulation and differential inclusion in, 38–41

circuits of capital and, 28–31, 29fdevelopment and foci of approach,

26–27upgrading/downgrading and,

140–141global value chain (GVC) approach

buyer-driven vs. producer-driven, 11–12, 12f

consequences of, 17–19cultural economy, embeddedness

and, 233–234

disarticulation in, 38fast fashion, lean retailing and, 14–15Gereffi’s formulations of, 25 governance of value chains, 26historical conditions, neglect of, 142inclusionary bias in, 34industrial upgrading and, 138–140origin of term, 50n3segments of apparel value chain,

11, 11fshift from GCC to, 26upgrading and, 31–32value, upgrading and the logics

of outsourcing, 15–16“value chain”, meaning of, 25

golden bands approach, 68–69, 178 see also trade policy

Gospodinova, Z., 73Grabher, Gernot, 72, 105Gramsci, Antonio, 51n13Graziani, Giovanni, 100Greece, 78, 96, 188, 225fGreek-owned firms, 183, 212n9Grossberg, Larry, 43, 44, 47, 48, 51n11Gruppo HIB, 160n7Guattari, Félix, xiii

Hale, Angela, 71–72Hall, Stuart, 42, 44, 50n9, 51n11Hanro, 209Harmanli Haskovo, 151–152Haskovo oblast, Bulgaria

apparel employment in, 218ffirm diversification in, 217garage firms, 157, 157f, 219–224,

220f, 222t, 231–233history of textile production in, 219

Havice, Elizabeth, 39Henderson, Jeffrey, 27, 48Heron, Tony, 93, 103n13Hess, Martin, 49, 215“History 1” and “History 2”, 45–46hosiery export trends from

Slovakia, 165hubbing strategies, 174Huber, 209Hudson, Ray, 28, 31Hughes, Alex, 79

index 287

Humphrey, John, 32, 50n3Hungary

Artex Bulgaria and, 206fclothing employment trends, 67fDimitrovgrad Market and, 225fexport production trends, 65, 68, 69fOPT and, 96, 97

Hurley, Jennifer, 80hyper-markets, Western-owned,

161n19

ideal-typical model of firm transformation, 142–144, 143f see also upgrading and trajectories of transformation

Ilientzi Market, Sofia, 224, 225inclusion, differential, 40, 140, 141,

162, 214IncSanti, 206industrialization, forced, 109, 133n3industrial trade fairs, 118–119,

118f–120findustrial upgrading see upgrading and

trajectories of transformationInduyco, 146in situ strategies, 36–37, 138, 147Inspectorates, 116–117, 229, 249Institutes of Health and Safety,

116–117, 229Institutes of Technology, 116–117inter-firm networking strategies, 37International Fair Plovdiv, 118–119,

118f–120fInternational Labour Organization

(ILO), 77–78, 80intra-firm in situ strategies, 36–37,

138, 147ishleme production

“2.0”, 208defined, 59tdomestication of, 192–200Flair, 205as form, 188, 190tgarage firms and, 233in Haskovo, 229Moduk, 207–209OPT expansion and, 187Pierre and, 151–152

Italian-Slovak joint ventures, 160n7, 160n9, 160n11

Italy, 100, 153, 158, 165, 225fI-Tran, 153–54, 153f

Japan, 89joint ventures

Austrian, 148–149German-Slovak, 126–127, 160n9, 175Italian, 148–149, 160n7, 160n11Turkish cross-border, 207Ukraine cross-border, 173, 175

Julietta, 230

Kaldor, Mary, 129Kalida, 206Kardzhali oblast, post-socialist

enterprises in see Bulgarian post-socialist enterprises

Kardzhali oblast, town and village population, 216t

Kazalarska, Svetla, 121, 134n10Klondike capitalism, 188KNCB (Confederation of Independent

Trade Unions of Bulgaria), 235n17Kornai, Janos, 72koruna, Slovak, appreciation of, 130,

134n13

labourapparel manufacture as employment

opportunity for women, 18apparel workers’ role in labour

movement, 18blizki networks and positional power

of workers, 194–195Bulgarian post-socialist labour

shedding, 185Bulgarian post-socialist tightening

labour market, 191Codes of Conduct and, 77–81collapse of state socialism and, 55–57conjuncturalism and, 41Flair and, 205–206flexible, for women, 197gender division of, 110“great doubling” of world labour

market, 62

288 index

labour (cont’d)industrial upgrading and opportunities

for direct action, 81–82joint ventures and cancellation of

benefits, 160n11multiplication of, 40–41, 58out-migration following EU

membership and sectoral restructuring, 131

post-socialist Bulgaria and pressure on working time and wages, 197

post-socialist regional divisions of labour and apparel exports to EU, 64–71, 67f–70f, 71t

race to the bottom, limits to, 15shift from state socialist full-package

production to export processing, 59–64

social democratic parties and, 83socialist hoarding of, 107“sweatshop” trope and low-wage

production, 18, 22n3, 63–64, 71–74, 75t

trade unions, 76–77, 235n17wage levels, 61, 62f, 64, 74, 84n3work councils and trade unions in

Bulgaria, 117–118 see also employment; wages

Labour Code, Slovakia, 80–81, 85n13Labour Inspectorates, 116–117, 229labour migration, 212n7Lan, Tu, 234n4Lane, Christel, 50n2lean retailing, 14–15Lee, Ching Kwan, 74Lexa, Ivan, 134n11Lifeline Slovakia, 154–156, 154f, 155fLipietz, Alain, 8Lohn system, 59t, 85n4Long-Term Arrangement Regarding

International Trade in Cotton Textiles and Substitutes, 89, 90t

Lopez-Acevedo, Gladys, 18Lukács, János, 116

Makyta, 110, 143, 150, 152, 254Mandelson, Peter, 169maquiladora production, 61–64

marginal profits, squeezing of, 30Marks and Spencer, 99, 102n3, 174Marx, Karl, 45Massey, Doreen, 43, 44, 48, 50n7,

51n10, 241Mayer, Frederick, 102n5Mediconf, 160n7Metro Bulgaria, 209Meurs, Mieke, 196, 212n5Mezzadra, Sandro, 39, 58, 162–163Migaš, Dušan, 134n11Mir, 215–216, 217f, 222, 229, 231Mountain Regions Policy (Bulgaria),

133n1Multi-Fibre Arrangement (MFA), 8,

88, 89, 90t, 129–132, 231, 250Multi-Fibre Arrangement (MFA) III,

95–96Murray, Warwick, 10Muslim communities in Bulgaria, 199,

223–224, 227

Nathan, Dev, 16nationalization of private factories,

Slovakia, 109–110Neilson, Jeff, 10, 50n8, 58, 162–163neoliberalism and post-socialism, 7–8network organizers in cross-border

economies, 174–175Nickell, Jon Karl, 63North American Free Trade Agreement

(NAFTA), 90t, 102n8North-South dualism, 139

offensive restructuring, 211–212offshoring as strategy, 37Orfei, 207–208Orllegro, 3–4, 251outsourcing

from 1980s to post-1989, 121–129circuits of capital and, 28, 29cross-border (Slovak-Ukraine),

164, 166–170de-industrialization and, 57flexibility and, 17forms of, in ECE apparel industry,

8, 59tItaly and, 100

index 289

“opening-up” and reform policies and, 8

policy environment and, 101post-socialist transition and, 121–129as strategy, 37trade liberalization and, 86–87, 88UK and, 99, 174upgrading and, 35value, upgrading and logics of, 16–17value chains and, 11–12workshop economies and, 145, 176

see also Outward Processing TradeOutward Processing Relief, 103n18Outward Processing Trade (OPT)

in Bulgaria, 115circuits of capital and, 29continuing role of, 103n18cost pressure and precariousness of,

144–146customs policy, 59tdefined, 59teconomic, 95–96expansion stimulated by, 62–63export growth and, 66fiscal, 95, 103n13full-bundle production and, 59–60impetus for, 84n2ishleme and, 187ODM and, 152–156post-socialist transition and, 121–125power and, 13as production process and trade

regime, 95–98Overton, John, 10own-brand manufacturing (OBM), 33f,

150–152own-design manufacturing (ODM),

33f, 150, 152–156own/original equipment manufacturing

(OEM), 33fOZKN (Odevné závody kpt. Nálepku),

110, 112–113, 112f, 125–127, 132, 133n7, 134n11, 145–146, 173

palimpsests, 51n10, 183Passiven Veredelungsverkehrs (PV), 97Pazardzhik, Bulgaria, 218Peck, Jamie, 44, 104–105

Pickles, John, 73, 102n5, 149Pierre of Plovdiv, 150–152, 151fPlank, Leonhard, 13, 100, 140, 149Plovdiv, Bulgaria

apparel employment in, 217, 218Codes of Conduct in, 80International Fair Plovdiv, 118–119,

118f–120fPierre, 150–152, 151f

Polandclothing employment trends, 67fexport production trends, 65, 68,

69f, 71OPT and, 96Solidarity, 84n1

Police for Organized Crime, Ministry of the Interior, Bulgaria, 234n12

Ponte, Stefano, 140Porter, Michael, 50n3Portugal, 96post-socialism

conjunctural economic geographies and, 49, 244

multi-coloured economies of, 52n15neoliberalism and, 7–8political economy and geographies

of, 7transition theory and, 45transitology and, 6 see also Bulgarian

post-socialist cultural economies; Bulgarian post-socialist enterprises

Práca vo mzde (“working for wages”), 59tPrato, Chinese workshops of, 234n4preferential trade arrangements,

94, 111fPrešov regional cluster, eastern

Slovakiacross-border sub-contracting,

170–172, 173firm transformation trajectories in,

143–144industrial restructuring and, 125–126joint ventures, 126–127OZKN (Odevné závody kpt.

Nálepku), 110, 112–113, 112f, 125–127, 132, 133n7, 134n11, 145–146, 173

290 index

Prešov regional cluster, eastern Slovakia (cont’d)

wages, average, 177t see also border practices and cross-border production

Pritchard, Bill, 10, 50n8Probert, Jecelyn, 50n2process upgrading, 32, 34f, 36,

147–150, 205producer-driven value chains, 11–12,

12f, 25production sharing (807 production),

103n11 see also full-bundle production

product upgrading, 32, 33f, 36, 147–150, 205

proximate sourcing, upgrading and, 141–142, 147–150 see also border practices and cross-border production

Púchov, western Slovakia, 110, 133n4, 152

Puma, 80, 207

qualityArena and, 209 , 210Asian competition and, 149, 175cross-border production and, 164,

172–173, 176–177, 178fast fashion and, 14–15firm responsibility and, 128–129Flair and, 205–206 Labour Inspectorates and, 80Moduk and, 207–209product switches and, 126product upgrading and, 36quality control, 65, 74, 99–100,

157–158skilled workers and, 81social wage and, 195

quick-response supply chains, 38, 149, 158

quota removal, 89–94, 90t, 91t, 130, 250quotas in the socialist enterprise, 107, 116

‘race to the bottom’common sense of, 9, 63, 72, 252labour conditions and, 94

limits to, 15quota removal and, 130, 250–251stickiness and, 164

regional production networks, 8, 61, 139, 157–158, 183, 215 see also border practices and cross-border production

relational assets, 183–184relational economic geographies, 215,

234 see also Bulgarian post-socialist cultural economies

relational geography, 7, 10, 241relational proximity, 147–148rents, 27re-peasantization, 195–198retail consolidation, 88, 102n3Robertson, Raymond, 18Romania

Artex and, 206–207clothing employment trends, 67fDimitrovgrad Market and, 225fexport production trends, 66, 68,

69f, 71, 93fLohn system, 85n4OPT and, 96

Roska cooperative, southern Bulgaria, 78rules of origin requirements, 12–13, 65,

87–88, 95

Schmitz, Hubert, 32, 50n3Schumpeter, Joseph, 6Short-Term Arrangement Regarding

International Trade in Cotton Textiles, 89

Slovakiaaverage wages, 84n3clothing employment trends, 67fcompetitive pressures in 2000s, 125employment in apparel industry, 110,

112f, 128, 128fEU apparel imports, comparative, 93fexport production trends, 65–66,

69f, 71exports by type of apparel, 165, 165tfirm transformation trajectories in,

143–144global economic crisis (2008)

and, 131

index 291

joint ventures, 126–127, 148–149, 160n7, 160n9, 160n11

Labour Code, 80–81, 85n13labour market, 74map of, 111fOPT precariousness in, 145–146post-socialist transition of apparel

industry in, 123regional associations and

inter-regional networks in, 106socialist industry and enterprise

in, 106state socialism and apparel industry,

109–113trade union membership, 76–77upgrading and, 148value added in apparel industry

(1995–2011), 125fVranov and Topl’ou strikes (2010),

81–82wage levels by region, 177t, 178–179

see also border practices and cross-border production Prešov regional cluster, eastern Slovakia

Slovenska SOE, 153Smith, Adrian, 51n15, 195Smolyan, Bulgaria, 218–219social democratic parties, 83Social Industries Policy (Bulgaria),

133n1socialism see state socialismsocialist enterprises

coercive bargaining in, 107fcontinental-scale trade networks and

de-industrialization, 106establishment of SOEs in Slovakia,

109–110fashion and, 109quotas and storm production,

107, 116socialist enterprises, 108fsocial wages and community

investments, 107–108vertical integration and, 108–109

see also Bulgarian post-socialist enterprises

social networks in post-socialist Bulgaria, deepening of, 193–195

social wages, 77, 107–108, 108f, 133n8

sold quantities by product category, 200, 202f

Solidarity, Poland, 84n1Spain, 100Standing, Guy, 56Staritz, Cornelia, 140Stark, David, 72, 105state-owned enterprises (SOEs) see

socialist enterprisesstate socialism and planned economy

apparel industry in Bulgaria, 113–115

apparel industry in Slovakia, 109–113

characteristics of the social enterprise, 106–109

fashion schools, branding and modelling, legacy of, 119–121

industrial policy and trade fairs, legacy of, 118–119

institutionalizing regulation, legacy of, 116–118

labour under, 82national differences in, 106outsourcing and delocalization in

transition from, 121–129relational assets created by, 104vertical integration in, 105–106war economy of, 129 see also socialist

enterprisesStenning, Alison, 49, 51n15stickiness, 9, 164, 175–176, 242, 248Stitziel, Judd, 109storm production, 107, 116“strategic coupling”, 43, 141Sturgeon, Tim, 26subcontracting

cross-border, 167, 170–172precarious position of, 127in value chains, 12f see also border

practices and cross-border production

subsistence production, 195–196subtraction, xiiisuitcase trading, 232‘sunset’ industries, 60, 251

292 index

“sweatshop” productiondefense of, 243delocalization and, 18meaning of, 22n3trope of, 63–64, 71–74

Sympatex Technologies, 152

tailored apparel export trends in Slovakia, 165–166

tariff OPT, 95territorial embeddedness, 48Tewari, Meenu, 16Thrift, Nigel, 215Tokatli, Nebahat, 100, 140trade liberalization, 57, 60–65,

168–169trade policy

in apparel GPNs, 87–89bargaining, forms of, 88Europeanization of supply chains

and, 98–100OPT and origins and reconfiguration

of pan-European production, 95–98

preferential trade arrangements, 94quota removal regimes, 89–94,

90t, 91tas state actor, 249

trade unions, 76–77, 235n17trajectories of transformation see

upgrading and trajectories of transformation

transformation and translation theories, 46–47

transition theories, 45–46transitology, 6Trenčin region, Slovakia, 111f, 143,

174, 177ttriangular production, 166, 179n2Turkey, cross-border contact with,

199–200, 225f, 232–233Turkey, imports from, 68f, 93fTurkish-owned firms, 133n8, 183,

212n8Turkish-speaking population in

Bulgaria, 198–200, 227turnover time of capital, 14–15,

37–38, 149

Ukraine, EU imports from, 93fUkraine cross-border out-sourcing see

border practices and cross-border production

unemployment, 188, 195, 231–232 see also employment

unionization, 76–77, 117–118United Kingdom

“hollowing out” of apparel production and Europeanization of supply chains, 98–100 outsourcing and, 99, 174

outward processing and, 96unit value measures, 92, 93f, 102n9,

200, 204fupgrading and trajectories of

transformationcost pressures and precariousness

of OPT contracts, 144–146defined, 31–32dependent and constrained

upgrading, 149direct labour action and, 81–82diversity of trajectories, 137–138existing GVC and GPN analyses of,

138–142Flair and, 205–206full-package export production and

emergence of regional production networks, 157–158 historical conditions and, 137, 142

ideal-typical model of firm transformation, 142–144, 143f

labour and, 74low-value full-package domestic

market producers, 156–157market proximity and, 141–142,

147–150own-product development and

diversification, 150–156problematic of, 35, 36process, product, functional, and

chain upgrading, 32, 33f–34f, 36–37, 147–150

refiguring of the concept, 32–35value, logics of outsourcing and,

16–17 see also downgradingUS-Cambodia Textile Agreement, 90t

index 293

value added taxes (VAT), 233“value chain”, as term, 50n3value creation, 27, 125fvalue of goods sold, 200, 203fvertical integration, 105–106, 165voluntary export restraints (VER),

Japan, 89

wagescross-border production and wage

differentials, 171, 180n10EU enlargement and wage

pressure, 130increasing minimum wage in

Slovakia, 130–131levels of, 61, 62f, 64, 74, 84n3minimum wage in Bulgaria, 232,

235n16

quota-driven export production and, 91

Slovak regional wage levels, 177–178, 177t

social wage, 77, 108f, 133n8Walters SK, 174–175, 180Werner, Marion, 34, 38work councils, 117Workers’ Rights Consortium

(WRC), 78workshop networks and economy,

Bulgaria, 113–115, 124, 188 see also garage firms of Haskovo, Bulgaria; ishleme production

workshop space, 113

Yamamoto, Yumiko, 92

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articulations of capital: global production networks and regional transformations

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