Global South 2007-8

Lecture 8: November 16, 2007Corporate Power and Globalization

Recap

Last week we tried to explore the link between corporate wealth and national development

We saw that the link is not automatic, but may come about through particular forms state interventions

Contrasting models We looked at two models – India and South

Korea

In India, high profits, low economic growth, low wages, some gains in political rights of workers

In South Korea, low profits, high economic growth and expansion of productive capacity, falling income inequality, limited or no political rights during the period of growth

Large corporations Complementarity between ‘physical’ and

‘human’ capital Between ‘tangible’ and ‘intangible’ capital

This is what brings about increasing returns to scale

Google’s growth http://blog.searchenginewatch.com/blog/061026-091240

http://investor.google.com/fin_data.html

South Korea The connection between corporate growth

and national development was established by the developmental state

But what happens when the state does not intervene or withdraws from intervention? Is there still a link between corporate growth and national development?

Globalization The advocates of globalization argue

that and even stronger link can be established between corporate growth and national economic growth when states do not regulate or discipline business or do so minimally.

Is this the case? Are corporations in this ‘global’ era

creating national growth?

Caution

We are only talking about national economic development, with some rise in wages and reduction in income inequality

Many may not think of this as development (but we leave that debate until later)

Globalization and corporate wealth

What is globalization? David Held et al:“Globalization can usefully be conceived as a

process (or set of processes) which embodies a transformation in the spatial organization of social relations and transactions, generating transcontinental or interregional flows and networks of activity, interaction and power”.

Noam Chomsky

How are corporations doing?

In the list of the top 55 economic entities, 14 are corporations

Volkswagen is about the size of Venezuela, and Wal-Mart is about 2.5 times

World’s largest list

What is the source of this wealth? Schumpeter: Innovation Adam Smith: Division of Labour Marx: appropriating surplus value from the

labour of others Dependendistas: colonial ‘unequal exchange’ Feminists: ? Harvey: Accumulation by dispossession Any others views?

So what happens during globalization? Profits come from which of these sources?

Compare

Compare with an earlier era:

Henry Ford and Fordism

The Fordist formula

Fordism had several characteristics: Product Innovation Division of labour : the assembly line

(process innovation) Political control

Ford’s Policies in 1914 Ford announced that he was going to

pay $5 as daily wage (double the national standard)

reduced the working day from nine hours to eight

‘bought’ worker loyalty to his cars

Fordism “Fordism” thus came to refer to the

strategy of profiting from a high-wage economy, by producing commodities for the ‘masses’ as cheaply as possible by the application of assembly line techniques, and buying worker loyalty for its products .

Fordism is believed to have been behind the rise of the US as the dominant capitalist power by the end of WWII. History (1) History (2)

To ponder:

Who best explains the source of Ford’s profitability

Schumpeter, Smith or Marx?

What changed during Globalization?

Gereffi: Commodity Chains

What is a Commodity Chain?

What is the source of profit in a commodity chain?

Note: now we speak more of “value chains” than “commodity chains”

How does this affect:

(1) National economic development? Q. Under the commodity chain regime,

do national governments in the developing world act like developmental states? (Recall Kicking away the ladder)

(2) How does it affect development understood more broadly?

How do these organizations create wealth?

Blackwater Haliburton Wal-mart Google Microsoft MondragonWho is most relevant – Smith? Schumpeter?

Marx? Harvey? all of them in combination?

UN Global Compact

“Business, trade and investment are essential pillars for prosperity and peace. But in many areas, business is too often linked with serious dilemmas - for example, exploitative practices, corruption, income equality, and barriers that discourage innovation and entrepreneurship. Responsible business practices can in many ways build trust and social capital, contributing to broad-based development and sustainable markets”.

UN’s ten principles

Link

What do these principles seek to affect? How would they affect:Development?national economic growth?jobs? Social relations?World orders?

Historical structures (Cox)

Social forcesLand relations?

Industrial capitalism?

Forms of state Democracy/dictatorship

“developmentalism”

World OrdersHegemonic/non-hegemonic