In the 1980's, one solution for developed capitalist economies was to shift production to a range of newly industrialising economies, particularly in Asia. This production was largely of those mature commodities, based on high levels of output, using significant amounts of fixed capital, with very high rates of turnover of the circulating capital, and consequently small profit margins, but a much higher annual rate of profit. In other words, mostly routine assembly. Low wages in these economies helped to boost profit margins. It was not that the total volume of industrial production, in developed economies fell, either, but that, as productivity rose, it required much less labour than it had previously, and accounted for a much smaller proportion of total output value. It was the same thing that happened with agricultural production in the 19th century.
Production moved up the value chain, away from these mature, low profit margin, high volume products, to new, higher profit margin, lower volume products and services. This is the process Marx describes in The Civilising Mission of Capital, but also, in Capital III, Chapter 14.
“new lines of production are opened up, especially for the production of luxuries, and it is these that take as their basis this relative over-population, often set free in other lines of production through the increase of their constant capital. These new lines start out predominantly with living labour, and by degrees pass through the same evolution as the other lines of production. In either case the variable capital makes up a considerable portion of the total capital and wages are below the average, so that both the rate and mass of surplus-value in these lines of production are unusually high.”
By shifting the unskilled production to China, and other parts of Asia, as well as sourcing things like coal from Poland, and so on, capital, in the developed economies, expelled large amounts of labour in these industries, in a process of deindustrialisation. It, thereby, ended the labour shortages that had arisen during the period of long wave boom and crisis (1962-1985) that had caused relative wages to rise, relative profits to fall, interest rates to rise, and inflation adjusted asset prices to fall.
But, it also expelled large amounts of labour, even without moving production, by simply replacing labour with technology. The microchip revolution was the means by which that was made possible. As I have written, elsewhere, it wasn't Thatcher that defeated the British working-class, but the microchip, without which, the mass expulsion of labour would not have been possible.
The example of the Apple iPhone illustrates the point. The task of assembly of the phone takes place in China, with around 1 million workers employed at Foxconn. Which illustrates the point that although this is capital intensive, assembly work, requiring only unskilled labour, the huge volume of production, still requires large numbers of workers. But, of the total value of the iPhone, only 10% of it is accounted for by this assembly, with 90% of the value comprising the high value, skilled labour involved in designing the microchips and architecture of the phone, the development of the software and so on, all of which takes place in the US. This is all, low volume and high value, labour-intensive production. It does not employ vast numbers of workers, as with the assembly labour, but the labour employed is all high-value, complex labour, low organic composition of capital, and so with a higher than average rate of surplus value, and rate of profit.
This process had other consequences, creating further contradictions. Firstly, this shift of production to a range of newly industrialising economies in Asia, speeded up their own development. This aspect of combined and uneven development was understood by Marx, and also described by Trotsky. Contrary to the petty-bourgeois notions of moral socialists, Stalinists and Third Worldists, and their theories of super-exploitation and underdevelopment, as the basis of their reactionary “anti-imperialism”, the process of equalisation occurs faster under imperialism than was previously the case.
“In contrast to the economic systems which preceded it, capitalism inherently and constantly aims at economic expansion, at the penetration of new territories, the surmounting of economic differences, the conversion of self-sufficient provincial and national economies into a system of financial interrelationships. Thereby it brings about their rapprochement and equalizes the economic and cultural levels of the most progressive and the most backward countries. Without this main process, it would be impossible to conceive of the relative levelling out, first, of Europe with Great Britain, and then, of America with Europe; the industrialization of the colonies, the diminishing gap between India and Great Britain, and all the consequences arising from the enumerated processes upon which is based not only the program of the Communist International but also its very existence.”
(Trotsky - The Third International After Lenin)
As these economies industrialised, just as had happened elsewhere, in the past, it developed the domestic market alongside it. Large numbers of peasants moved to the towns and cities to become industrial workers, their living standards, low compared to those of workers in the West, but much higher than those of the peasant production they left behind, itself being a source of further demand, and expansion of the domestic market. The main thrust of the dynamic of real industrial capital moved to these areas, where real industrial capital accumulated at a faster pace, to satisfy a growing global market, whilst in the developed economies, real industrial capital was undermined, as surplus value was siphoned off into financial and property speculation, and consumption expanded on the basis of a delusion of growing wealth produced by inflated asset prices, and increased debt.
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