Book Review: Imperialism in the Twenty-First Century

This is a review of Imperialism in the twenty-first century: Globalisation, Super-Exploitation and Capitalism’s Final Crisis by John Smith

John Smith’s work is an important contribution to understating modern capitalism and also updates Lenin’s analysis of imperialism for this era.

Smith explains how capitalism’s “good health rests on the extreme rates of exploitation of workers in low-wage countries where production of consumer goods and intermediate inputs has been relocated. It is the fundamental driving force of the race to the bottom and its attendant ills – starvation wages, rickety buildings, atrocious living conditions – is price-gouging by leading firms.”

Marx himself predicted this process in his 1867 Address to the Second International: “In order to oppose their workers, the employers either bring in workers from abroad or else transfer manufacture to countries where there is a cheap labour force. Given this state of affairs, if the working class wishes to continue it struggle with some chance of success, the national organisations must become international. Let every worker give serious consideration to this new aspect of the problem.”

Today, instead, most trade unions in the advanced capitalist countries (ACC) lobby alongside sections of manufacturing capitalists for protectionist measures against imports from ex-colonial or Third World countries (the latter term is a misnomer as its denies the integration of these countries in world production). Often they hide this push behind fake concerns for workers’ rights.

The level of tariffs on Bangladeshi imports into the US, for example, “exceeds the total wages received by the workers who made these goods.” Unions in the “South” (as Smith describes the ex-colonial countries) oppose these tariffs which merely punishes workers and hides from the real problem: the global chain of companies in the ACCs who have moved production to supplier companies in the South with dirt-cheap labour.

Few unions in ACC question the World Bank or their own transnational companies – it’s a lot easier for them to merely call for tariffs and protection than unite with workers in the South and build a common resistance to the race to the bottom.

Smith explains a new feature of modern capitalism – “a shift in power toward commercial capital (which) increased pressure on the producer monopolies to axe agreements with their trade unions and to de-unionise and “flexibilize” their domestic labour force – and follow the trail blazed by the retail giants and outsource their labour-intensive production processes to low-wage countries. This involved both a redistribution of profits from industrial to commercial capitalists and the distribution of some of the outsourcing’s bounty to increasingly wider sections of the working class through falling prices of consumer goods.”

Capitalists in the ACC have either taken flight to the South or, if that’s not possible, “enormously increased their reliance on imported migrant labour to cheapen the labour process”, in the words of an academic quoted by Smith.

He uses the example of Bangladesh, which has experienced the twin, interconnected features of modern imperialism: outsourcing of production from the ACCs and mass migration out of the country of surplus labour. Such is the low cost of local labour, by the way, the World Bank reported that in 2013 “each of Britain’s 210,000 Bangladeshi migrant workers remitted an average of US$4,058, three times the annual wages of his (most Bangladeshi migrant workers are male) wife, sister, or daughter working in a garment factory back home.”

The IMF stated “although labour share of GDP went down, globalisation of labour as manifested in cheaper imports in advanced economies has increased the ‘size of the pie’ to be shared among all citizens, resulting in a net gain in total workers’ compensation in real terms.” As Smith explains “in other words, cost savings resulting from outsourcing are shared with workers in imperialist countries…its crucial in maintaining domestic class peace.”

Smith quotes figures that show that transnational companies headquartered in the US now employ more workers in low-wage countries than they do domestically. However he explains a new process – the replacement of direct foreign investment by transnational companies with a more arms-length outsourcing to locally based suppliers.

This is because these companies pay less in wages than do foreign-owned companies in the South. One economist claimed it was on average 80% less. Arms-length also means “hands clean” for the likes of Nike. Smith argues, “It externalizes direct responsibility for pollution, poverty wages, and suppression of trade unions.”

In some cases such companies “regularly under their European and North American rivals in tenders for railway, port, and power station construction; companies such as HTC, Samsung and Xiaomi are challenging Apple’s supremacy in smartphone production.”

However a sense of balance is necessary: “this is an important trend, a real exception to the dominant pattern of trade established during the era of neoliberal globalisation, and is part of the evidence that, in some sectors at least, the grip of imperialist capital is being loosened by Southern competitors. Nevertheless…the dominant form of interaction between firms in imperialist and low-wage economies is synergetic and complementary.”

In the past the countries of the South exported food and minerals almost exclusively. Now they increasingly export manufactured goods but based on the same biased rules faced by primary products.

Smith quotes a UN report: “terms of trade losses are no longer confined to commodity exporters. Many manufacturers exported by developing countries are now beginning to behave more like primary commodities as a growing number of countries simultaneously attempt to raise their exports in the relatively stagnant and protected markets of industrial countries. Of the economies examined here, none of these which pursued rapid liberalization of trade and investment over the past two decades achieved a significant increase in its share of world manufacturing income, although some of them experienced a rapid growth in manufacturing exports.”

The historic fall in manufacturing in the advanced capitalist countries has been a massive blow to workers there, yet this outsourcing has not benefitted the economies it has been relocated to. It’s a race to the bottom, where the winners are the transnational companies as they successfully chase ever-cheaper wage rates to boost profit share.

This shift has moved the scales of where the industrial working class are. Smith explains “In 2010, 79% (or 541 million) of the world’s industrial workers lived in “less developed regions”, up from 34% in 1950 and 53% in 1980, compared to the 145 million industrial workers (or 21%) of the total, who in 2010 lived in the imperialist countries.”

Yet despite this growth, no 3rd World economy “has grown fast enough to provide jobs to the legions of young people entering the labour market and the rural exodus to swollen cities in search of work.”

When this happened in Europe in the early years of capitalism, excess pressure was released through mass migration – 70 million people in total to North America, Argentina, Brazil, Australasia and other such places.

This was in an era of next to no immigration control and they essential moved to stolen land. Today the ‘excess’ masses from the under-developed world face suppression of labour mobility.

Smith analyses work by a UN economist: “if the same proportion had emigrated from the Global South since the Second World War as left Europe between 1850 and 1920, 800 million people would have moved north, expanding the total population of the more developed countries by 70%. Instead a negligible 0.8% of the workforce of the developing countries has migrated to work in the industrial countries, one-twentieth of the fraction of Europe’s population that emigrated in the earlier period.”

These facts, says Smith, “flatly contradict widespread perceptions in imperialist countries, fanned by xenophobic politicians and mass media, of an explosive growth in their numbers.”

The “reserve army of labour” that Marx wrote about is now global, “shaped by the violent suppression of the right of working people in oppressed nations to cross the same borders as the wealth they produce.”

Those workers that do manage to get to the imperialist countries remitted back home US$440 billion in 2010 – “around ten times larger than total N-S development aid, much of which was anything but; and it is three times larger than the total annual income of the world’s poorest one billion people.”

Smith lambastes those who “talk about development while clamping down on immigration.” He quotes a former World Bank economist: “Reform that would bring the maximum benefit to poor countries…the biggest bang by far…would be relaxing restrictions on the international movement of workers…nothing else comes close to the magnitude of economic benefits that this would generate.”

He also criticises unions with a nationalist, head-in-the-sand outlook. Both in rich and poor countries, union membership leads to higher wages – but from an ever diminishing share of the pie. Large union membership in a sector “may constitute investment disincentives” for capitalists as the ILO argued. Smith explains “neo-liberalism is not a result of evil people or a particularly bad type of capitalism, but the result of systemic contradictions and the efforts of capitalists and their captive governments to resolve them by increasing their exploitation of living labour and nature. This trend cannot be resisted without challenging capitalism itself”.

Marx explained that the are three ways the capitalists exploit the labour of the working class: Initially via absolute surplus value (a longer working day), then more through relative surplus value – through mechanisation to reduce the value of labour-power in the working day. Today, capitalism, in its constant search for profits is trying to crudely drive down the wages below the value of labour-power – super exploitation. Capitalist economists call this global wage arbitrage.

One such economist, Stephen Roach, explains: “wage rates in China and India range from 10% to 25% of those for comparable-quality workers in the US and the rest of the developed world. Consequently, offshore outsourcing that extracts product from relatively low-wage workers in the developing world has become an increasingly urgent survival tactic for companies in the developed economies.” Side-by-side with these super exploited workers lie an ever-growing army of the working class “rendered superfluous by the inability of modern production methods to soak up enough labour to prevent rising unemployment.”

As Smith says “Roach’s argument cracks the very foundations of modern (capitalist) economic theory, which has no room for any notion of exploitation, and opens the door for Marx’s critique, which is founded on recognition of a systematic divergence between the value generated by a worker and the value s/he receives in the form of a wage; the difference between the two being surplus-value, the source and substance of profit in all its forms.”

This important book has interesting section on how GDP figures hide the real importance of the super exploited workers in the factories of the South to the profit rates of the imperialist companies, a share of which is taken by the state.

Elsewhere it explains the GFC as occurring less due to the “symptoms – excessive debt, reckless risk-taking, and lax regulation” and more to the global shift of production to the low-wage economies as the prime contributor to global imbalances.” He also documents the “investment strike” by capitalism despite historically low interest rates – “investing in means of production is the last thing on their minds”.

Capitalism has passed its use-by date. The investment strike, its inability to make use of massive numbers of the world’s people and its super exploitation of those it does need – all point to the need for a socialist system.

John Smith’s work is an important update to Marxist economic theory. It helps us both better understand capitalism and be motivated to challenge it.


– Reviewed by Stephen Jolly

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