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Decent Work in Global Supply Chains

Unit 1, Section 1: The Changing World of Global Production

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Pre-Globalization
Production and consumption together because poor tech / transport

Steam Revolution (1830s to 1870s)
Now have ability to spatially separate production / consumption
Scale economies/comparative advantage makes separation profitable

Post WWII (mid-1940s to 1960s) = “Fordist” production regime
o Standardized mass production
o Assembly-line techniques
o Increased productivity b/c of “economies of scale”
o Increased profits, increased wages
o Collective bargaining

End of 1960s = Productivity and profitability begins decreasing b/c of
o Increased bargaining power of workers
o Increased social expenditure (?)
• Leads to inflation and rigid mass production line
• Call to restructure production/economic policy

1970s = Oil Shock, Stagnation and Inflation
o Capitalism → neo-liberal phase ... Keynesian welfare state failed to address this change
• Diminished role of state regulation

• Trade liberalization through World Trade Organization

• Trade unions face attacks in heavily business influenced-states

• Production / labor becomes more flexible to exploit “economies of scale”
• i.e. offshoring

• Production ‘de-centered’: moves from Global North to Global South
• TNC exploit wage hierarchies between Global North and South

• Capital Mobility

• Technology

Globalization 1st Unbundling [1830s-1970s]

North industrialized / South de-industrialized

Steam revolution → lowers trade costs → now vast production profitable
Triggers modern growth cycle of production, innovation, income gains

“Big time” income divergence
Innovation/scale give the North cost advantage which decreases incentive for innovation in the South

International trade/labor explodes
Trade costs fall with steam revolution
WWI to 1950 trade costs increase b/c of trade barriers
1951 trade costs fall again because of protectionism / Great Depression
By 1974 trade costs return to pre WWI levels

Local production
Clustered around factories / industrial districts … building industrial base

Globalization 2nd Unbundling [Post-1970s]

ICT revolution – able to coordinate production complexity from separate spaces
Wage hierarchy made separation profitable
Facilitated combo of developed-economy technology and developing-nation labor

2nd Unbundling Impact

South Industrialization / North De-Industrialization
South driven mostly by Chinese manufacturing performance

Reversal of “big income” Divergence
G7 nations share of world income decreases. Growth in emerging economies

Trade Liberalization
Desire to attract off short manufacturing jobs/investment
Liberalized tariffs and embraced pro-business/pro-investor policies
Embraced trade agreements with key supply chain partners
Policy incentives provided by state governments: foreign direct investment, tax holidays, weak labor laws, etc.

Trade-Investment-Services-ID Nexus
International investment in services / facilities
Cross border flow of know-how

Join rather than build supply chains

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