Category Archives: political economy

Book Review: “Corbynism, A Critical Approach” Part Two

Jeremy Corbyn has become the symbol for everything the British establishment loves to hate. The media mounts sustained attacks on him, the army uses his image for target practice, and Labour centrists smear his record with accusations of antisemitism. On the ideological front, academics Matt Bolton and Frederick Harry Pitts have recently produced a highly critical account of Corbyn and the Corbyn movement, in which their interpretation is sustained by an apparently “Marxist” logic.

Part Two: Socialists must “hold the centre”

The authors accuse Corbyn of ignoring the “messiness” of real politics, “the calculated compromises necessary to achieve something concrete in a contradictory world,” in favour of an abstract morality manifested in a history of protests. However, as party leader, Corbyn has had to engage in many calculated compromises, such as holding a free vote on military intervention in Syria to appease shadow cabinet ministers, for example, and has had to navigate a difficult political terrain when aiming to unify Brexit-supporting and remaining constituencies. He has succeeded in holding together different wings of the party with moderate but practical policies that aim to reverse some of the most egregious aspects of privatization and welfare austerity. When he advocates more radical political alternatives aimed at encouraging popular democracy and involvement, he prefers practical examples like Preston and the “people’s Uber” pioneered in Barcelona over ideological purity.

Corbyn’s strength lies in his ability to communicate his ethical socialist beliefs to the public in a way that connects them with the political fight against austerity. The inclusivity of his message enables him to make a human connection with crowds at rallies and events. He does not perform well in parliament, on the other hand, since its procedures rely on making facile debating points rather than engaging with substance, a form of discourse modelled on institutions of ruling class privilege like Oxford, Cambridge, and the independent public schools. His political room for manoeuvre in parliament is limited by the hostility of many centrist Labour MPs, and even if a Labour government were to be elected in the near future, many of them would probably keep their seats. But this does not make him a prisoner of the parliamentary party. For him, the cabinet’s collective responsibility means fighting for policies decided by party conference, although his opponents had no compunction about resigning from the shadow cabinet.

As party leader, he can leverage his support from the membership in a way that previous left leaders like Bevan and Benn could not. At the same time, Labour MPs all believe in a certain amount of redistribution of wealth to alleviate social problems, and that creates a political space for Corbyn to keep the PLP together, since British capitalism now subsists on extraction of rents (in the broad sense) from the population through privatised industries and the financial sector. So, while the reforms proposed in Labour’s 2017 manifesto may be modest, the threat of halting or even reversing this flow of wealth to the rich alarms the establishment, even more than Corbyn’s foreign policy which would end the enrichment of the arms industry from dictatorships throughout the world, especially Saudi Arabia.

Bolton and Pitts’ pessimistic prognosis is that socialists must “hold the centre” to resist the advance of fascism and national populism. Only through the “structures of formal democracy” can the labour movement carry out its traditional activities. What is missing from their entire analysis is any sense of labour as a combative force in struggle with capital and its representatives, a movement that fought and fights for democratic rights even when outlawed by the state. In the 2017 election campaign Corbyn was able to shift the centre ground of politics to the left, something the authors perversely attribute to the Brexit vote, and his radical democratic instincts impel him to turn the party away from the arcane procedures of parliament towards local communities from which, he says, all progress originates. The authors concede none of this: for them, the “abstract, intangible forms of capital” remove all agency from socialists, since fighting to make the super-rich pay their taxes would illegitimately persecute those who are only the personalizations of money, capital and commodities. Demands for accountability for those who made the decision to cut costs on the Grenfell Tower refurbishment so drastically that they made it a death trap would not be acceptable to them. Socialists can only be spectators of “the fateful objectification of human activity in a reality that increasingly enslaves us.” This is their “Marxist” justification for accepting the neoliberal argument that there is no alternative to accepting the domination of the financial markets.

Labour’s immediate challenge is to establish itself as a clear alternative to both a Tory Brexit and the disenfranchising of neglected communities, navigating divisive political pressures exerted on the leadership by the media and sections of the parliamentary party. This depends on the politically empowered and knowledgeable party membership being able to develop policy through their connections to social movements. As Corbyn told a rallyin 2019, “What’s different now about Labour is that the members are much more involved in their communities, and it’s those members that will write the manifesto for the future.” This prospect is deeply disturbing to most of the PLP, who want to preserve the division between the political arena and extra-parliamentary struggle that facilitates their domination of the party. It also frightens the ruling establishment, for whom any tactic is justified to prevent the election of a government that might reverse the transfer of wealth and power to the rich.

How could Corbyn achieve his platform in the face of such opposition from the establishment? The plain fact is that the dominant class has little inherent strength and depends on its control of the state and the grip of ideology to sustain its rule. Corbyn challenges this ideology by asserting the imperative of community solidarity, of inclusion rather than the division of Brexit and racism. Above all, he is able to channel popular dissent in a way that enables it to express itself in a creative struggle for policies of social change. This undermines the ruling elite’s historical strategy of using the elective legitimacy of parliament to contain and manage pressure from below, while strictly limiting popular influence on the actual conduct of government. Whatever limitations Corbyn may have as a politician, what is important is the fact that he has broken through the exclusion of the party membership from decision-making and released their energies in order to transform the relation of the party to the public and to the state.

Under a Tory government British society faces deepening austerity and a sharp growth in absolute poverty with its imposition of Universal Credit on benefit recipients, which can only be made worse by Brexit. The crisis it has induced threatens to break up the imperial British state, which has always depended on external advantage for its internal stability. However, social radicalisation has found an outlet and focus in a social democratic party that, for historical reasons, has provided the only practical conduit of organised political opposition to an austerity state. Rather than Bolton and Pitts’ faith in the institutions of “internationalist liberalism” to resolve the contradictions of a globalized economy, a Corbyn-led Labour government would be an inspiration for anti-austerity movements across Europe and the US, acting as an antidote to the rise of rightwing populist parties. Corbyn’s outreach to socialist tendencies battling the existing conservative leaderships of left parties and conservative Democrats in the US lays the foundation for democratizing international institutions like the IMF, the World Bank, and the EU itself.

The strengthening of a mass social movement in close connection with a Labour party transformed by its roots in the localities offers the possibility of undoing the effects of years of neoliberal governments. The party at the constituency level is becoming increasingly open to the concept of empowering ordinary citizens so they can restore the social values of equality, public service, and cooperative effort for the common good. This is the socialism Corbyn aspires towards.

Matt Bolton and Frederick Harry Pitts, Corbynism: A Critical Approach, Emerald Publishing, Bingley, 2018

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Labour defectors and Watson challenge Corbyn’s leadership

On the BBC’s Andrew Marr show this Sunday, Tom Watson, the deputy leader of the Labour party, threw down a challenge to Jeremy Corbyn’s leadership. He described the defection of nine Labour MPs as a “crisis for the soul of the party” that requires the shadow cabinet to adopt social democratic policies as “the only way to keep the Labour party united.” He himself was prepared to convene a group of MPs that believe in the “social democratic tradition” so that their ideas could be given greater weight in the parliamentary party. Watson repeated the defectors’ rhetoric of “bullying” and “intolerance” to describe attempts by party members to hold MPs accountable for their votes in parliament and statements to the press.

In reality, Watson is advocating a resuscitation of the failed politics of New Labour, not a return to the social democratic tradition of the membership. New Labour broke from this tradition in many ways, including its pro-business and anti-union stance, making benefits conditional on US-style “workfare”, and introducing market relations into social welfare provision. Its limited increases in spending on welfare were perfectly compatible with its “light touch” avoidance of regulation of financial markets that ended in the banking crash of 2008.

Watson and the defectors’ blanket accusations of “antisemitism” are intended to shut down rank and file criticism of the MPs’ differences with Corbyn: their reluctance to raise taxes on the rich, their support for neoliberal austerity policies and opposition to re-nationalisation of public utilities. The “independent” group’s policy platform, such as it is, hankers for the days of the Blairite ascendancy, reviving the “third way” argument of encouraging business so as to fund social welfare. They know there is no political future for this platform, so will continue to occupy the seats in parliament won for them by the efforts of Labour members campaigning on the manifesto produced by the party leadership.

The not entirely unexpected defection of Ian Austin MP makes it clear that the earlier resignations were not primarily about Labour’s Brexit policy. Austin is aggressively pro-Brexit and voted with the Tory government for Theresa May’s deal, while the other eight MPs demand a second referendum to overturn the result of the first one. Austin’s professed reasons for leaving mirror those of the other quitters with his denunciation of a “culture of extremism, antisemitism and intolerance.” But why should party members tolerate behaviour like Austin’s attack on Jeremy Corbyn when the Chilcot report on the run-up to the Iraq war was being discussed in parliament? In very unparliamentary language he told the leader of his own party to “sit down and shut up” and shouted “you’re a disgrace” as Corbyn criticised the Iraq war.

The defecting MPs are especially hostile to Corbyn because his election as party leader has enhanced the influence and assertiveness of the party rank and file, which has brought them into conflict with the privileges of the parliamentary party. This is why the defectors describe the party as “broken.” What truly unites them is their belief in their right to debate how the country should be run while ignoring the opinions and needs of their own members and constituents.

Even the organizational methods of the group reflect corporate financial techniques – incorporating themselves as a company rather than as a political party, which means they do not have to disclose their funders. The “shared values” that the group claims to possess appear to be those of a sense of entitlement to ignore the views of the electorate. They all claim to be working in the “national interest” – that is, the interests of the bankers, landlords, and offshore industrialists who make up the establishment – and cynically demand “leadership” from Jeremy Corbyn. HIs strategy of respecting the referendum result while exposing Theresa May’s dependence on the Tory ultra-right is not regarded by the splinter group as leadership, even though his demand that May should take a no-deal Brexit off the table would have circumscribed her manoeuvring. They want a demagogue who would denounce the referendum and align the Labour party with Tory remainers who represent the affluent beneficiaries of a global economy. Doing so, however, would only strengthen the appeal of the extreme Tommy Robinson right. Labour needs to speak for leavers as well as remainers, making itself a party of all the dispossessed.

Corbyn fired back at the quitters at a rally in former Tory Anna Soubry’s constituency of Broxtowe. He restated the party’s policies such as raising corporation tax to fund free education, and to use the power of government purchasing to end the gender pay gap. “I’m disappointed that a small number of Labour MPs have decided to leave our party and join forces with disaffected Tories, who say they have no problem with austerity that has plunged thousands into desperate poverty and insecurity,” he said. The party’s 2017 manifesto promised an end to austerity, it offered “hope, instead of the same old establishment demand for cuts, privatisation and austerity. That’s why we now back public ownership of the utilities and railways, why we now oppose tuition fees and corporate giveaways, and why we’re no longer afraid to ask the rich to pay their fair share of tax.”

“What’s different now about Labour is that the members are much more involved in their communities, and it’s those members that will write the manifesto for the future,” he told the rally. He had reached out to fellow socialist parties in Europe at their conference in Madrid to outline plans for cooperation after Brexit, and explained to them how anger in left-behind communities was behind the referendum result. “What’s happened in deindustrialized parts of Britain is exactly the same as what’s happened in deindustrialized parts of Germany, France, Spain, and many other countries across Europe,” he said. “The real problem is an economic system that discards industrial workers and allows whole communities to collapse and die and good jobs to be replaced by employers like Sports Direct.”

He warned about the growth of the far right across Europe when populist politicians would blame the nearest group of migrant workers for factory closures instead of the multinational companies who moved industries to the next low-wage economy, and called for closer relations with people in Europe. Climate change is a class issue, he said, and he backed the schoolchildren who had organized to protest climate change, adding that green energy would create jobs and protect the environment.

Unlike Watson, who was only concerned with the opinions of other MPs, Corbyn addressed the issues of homelessness, poverty and growing hospital waiting lists in his speech. His calm and successful leadership of the Labour party must be supported against the frantic efforts of the right wing and the corporate media to railroad through a desperate capitulation to Theresa May’s dogmatic plans.

UPDATE: The left-wing blog Counterfire responded to Watson’s challenge by calling for the party leadership to ditch Labour’s “broad church” model and recast the Corbyn project as a “left reformist socialist party. … A clear declaration that Labour wants to build a new socialist party would enthuse hundreds of thousands of activists, recapture the dynamism of the early Corbyn leadership campaigns, re-engage the party with the most disaffected sections of the working class, and open up the path to election victory.”

What a left reformist socialist party would mean in practice is unclear, but ditching the party’s centrists and making a declaration of socialism from above, so to speak, is not going to solve Labour’s problems and will not necessarily re-engage the party with the most disaffected sections of the working class. What is needed most of all is for Labour to strengthen its connections with the resistance to austerity in the communities and give it political expression. Moreover, the author’s contention that Corbynism is in danger of being killed off if the present regime continues assumes the right has much more power than it does. Counterfire is arguing from the particular standpoint of left activists rather than examining the actual movements of public opinion.

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Political Economy of Flexible Accumulation: Part Three – Finance Capital

The flexible accumulation strategies of companies like Amazon and Apple don’t solve the overall problem of capital accumulation – a superabundance of capital chasing opportunities for valorization. They are only a temporary fix to the reduction of the rate of profit in manufacturing, as technology reduces the socially-necessary labor time involved in the production of commodities.

The specific nature of these strategies is not an inevitable result of fundamental laws of capitalism, which could have taken many other forms of development, but depends on contingent historical and geopolitical factors that created the conditions for distributed production and accelerated consumption, together with the opening up of low wage areas of the world to capital. The end result, however, has been the consolidation of the centrality of finance capital in the circulation process.

From the end of the 1970s, writes Canadian Marxist Gary Teeple, the post-Fordist, computer based “new economy” “created the basis for a massive increase in productivity and consequently a relative decline in demand for labour. Increased productivity, in turn, lowered the cost or cheapened the world’s supply of goods and services and created an ever-greater impetus for global chains of production and distribution.” [Teeple and McBride, eds, Relations of Global Power: Neoliberal Order and Disorder, Toronto 2011:233]

The preconditions for corporations in the developed nations to outsource production to developing countries included technological and logistical advances like shipping containerization, control of inventory with barcoding, deskilling of labor processes, the proliferation of electronics component production in Japan, Korea and Taiwan, and the availability of a large disciplined semiskilled labor force in China. However the decisive factor was the ability of financial capital to freely cross borders, achieved by a sustained campaign by US capitalism to deregulate capital flows dating back to 1945, which consolidated its strategic role in world capitalism and restructured foreign companies to do business in dollars and along American lines.

“By the 1980s and 1990s the greater mobility of financial capital across sectors, space, and time … greatly intensified domestic and international competition at the same time as it brought a much greater degree of financial volatility. … The networks of transnational production as well as finance that characterized [globalization] more than ever linked other capitalist states and economies to American capitalism’s central place in global capitalism. This was seen in the extent to which other countries’ exports depended on access to the US consumer market, and in the increasingly integrated production networks that emanated from US [multinational corporations’] foreign direct investment, on the one hand, and the flow of global investment into the US itself on the other.” [Leo Panitch and Sam Gindin, The Making of Global Empire: The Political Economy of American Empire, Verso 2012:20, 311]

Financial capital and the development of new financial instruments such as complex derivatives functioned in this scenario to smooth out and accelerate capital flows between the developing countries and metropolitan markets, eventually driving the integration of global economies. At the same time it made them vulnerable to possible interruptions of the flow of capital in the form of a crisis.

Panitch and Gindin comment: “The development of derivative markets provided risk insurance in a complex global economy without which the internationalization of capital via trade and FDI would otherwise have been significantly restricted. … By the 1980s and 1990s the greater mobility of financial capital across sectors, space, and time (especially via derivatives—that is, financial capital’s quality as general or ‘abstract’ capital) —greatly intensified domestic and international competition at the same time as it brought a much greater degree of financial volatility. … [This] was accepted because financial markets had become so crucial to the domestic and global expansion of capitalism in general.” [2012:14, 20]

Because of the centrality of finance to capitalist production and accumulation, financial capitalists are able to cream off and concentrate the surplus value generated by the system, shifting power away from production. Derivatives and bond funds soon became the target of hedge funds and venture capitalists seeking higher profits through the exponential expansion of debt. Their insistence on austerity to repay bond loans has collapsed the economies of Puerto Rico and Greece, and looks likely to soon bankrupt Europe.

These structural changes in capitalism are permanent: this is what the left has to grasp and confront. But the extension of global capitalism has also globalized resistance: in China, for example, strikes and worker protests have increased noticeably over the 1,400 strikes recorded in 2014. In the US, although unions face declining membership and hostile laws, strikes and battles over factory recognition continue.

Significantly, workers involved in the supply chain in shipping, transport and warehousing have begun to challenge the employment agencies that supply labor to large corporations like Walmart. Their essentiality to the process of realization of surplus value gives them more leverage than they realize. Moreover, struggles of the lowpaid are merging with the Black Lives Matter fight: the Fight for 15 campaign called for boycotts and protests against shopping on the day after Thanksgiving, but the largest demonstration targeting Black Friday shopping was in Chicago protesting the police shooting of Laquan McDonald. Many elite stores in the high-end North Michigan Avenue were shut down, including Nieman Marcus and the Apple Store.

The anti-Wall Street message of the Occupy movement continues to resonate in the 2016 US presidential elections, with the leading Democratic candidates calling for strengthening of regulations on the financial industry. While none of their measures will reverse the structural changes in capitalism that have led to the dominance of big finance, they anticipate the mobilization of the public against the monopolization and commodification of all human needs.

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Political Economy of Flexible Accumulation: Part Two – The Case of


Fight for 15 protesters at Amazon’s fulfilment center in Baltimore. Photo: People’s World

The ideology of flexible accumulation is neoliberalism, which, David Harvey writes, “seeks to bring all human action into the domain of the market. This requires technologies of information creation and capacities to accumulate, store, transfer, analyse, and use massive databases to guide decisions in the global marketplace. … These technologies have compressed the rising density of market transactions in both space and time.” [Harvey, Brief History of Neoliberalism, Oxford 2007:3] Companies like Uber, Airbnb, and Amazon are in the forefront of accelerating the density of market transactions as well as the “creative destruction” of obstacles like state regulations and taxation.

Amazon aims to dominate consumer access to internet retail through its massive investment in servers and fulfilment centers around the world. Even though it makes a minimal profit on each transaction, the sheer volume of exchanges it hosts generates a surplus. It has been able to accelerate the density of market transactions precisely by using massive databases to store information about consumers. Analysts have noted that “Amazon’s enormous investments in infrastructure and logistics have begun to pay off. The company keeps capturing a larger slice of American and even international purchases. It keeps attracting more users to its Prime fast-shipping subscription program, and, albeit slowly, it is beginning to scratch out higher profits from shoppers. Now that Amazon has hit this point, it’s difficult to see how any other retailer could catch up anytime soon.”

Harvey’s prescient analysis did not extend to how a workforce that is capable of dealing with accelerated rates of commercial, technological, and organizational innovation would be created. But, since he wrote, neoliberal management doctrines, intended to make workers more agile and “self-regulating” through the breaking down of traditional divisions of labor, have resulted in the combination of low-waged labor employed part-time through subcontractors with the promise of fulltime jobs for a few, forcing them all to work ever harder. The flexible workforce marks a new pattern of labor usage, most visible in retail and leading to downsizing and retrenchment; flexible workers have no rights of seniority or fulltime permanence.

Amazon has succeeded in creating a highly flexible workforce; the work conditions in its warehouses are well-known, but it has also pioneered ways to accelerate technical and marketing innovation through internal competition among its white-collar professionals, monitoring their activities in the same way as its consumers. By coercing his employees to voluntarily extend their working day to 80 or 100 hours per week, Amazon chief Jeff Bezos has been able to extract the maximum effort from his marketers and software engineers.

Recently, the New York Times published an article detailing how “Amazon uses a self-reinforcing set of management, data and psychological tools to spur its tens of thousands of white-collar employees to do more and more. … Every aspect of the Amazon system amplifies the others to motivate and discipline the company’s marketers, engineers and finance specialists: the leadership principles; rigorous, continuing feedback on performance; and the competition among peers who fear missing a potential problem or improvement and race to answer an email before anyone else. … To prod employees, Amazon has a powerful lever: more data than any retail operation in history. Its perpetual flow of real-time, ultradetailed metrics allows the company to measure nearly everything its customers do … It can also tell when engineers are not building pages that load quickly enough, or when a vendor manager does not have enough gardening gloves in stock.”

Many who are deemed “inflexible” are fired in annual cullings of the staff. According to the Times, “ ‘Amazon is O.K. with moving through a lot of people to identify and retain superstars,’ said Vijay Ravindran, who worked at the retailer for seven years, the last two as the manager overseeing the checkout technology. ‘They keep the stars by offering a combination of incredible opportunities and incredible compensation. It’s like panning for gold’.”

Harvey notes that accelerated turnover time in production as a result of advances in technology requires a corresponding reduction of turnover time in consumption. To achieve this reduction in turnover time, Amazon directed its technical efforts into streamlining internet ordering and payment processing with features such as 1-click checkout, investing heavily in servers to handle heavy traffic. In addition to automated ordering, shorter delivery times help to increase the volume of commodities exchanged and create new needs for instant gratification.

The Times reported: “Last August, Stephenie Landry, an operations executive, joined in discussions about how to shorten delivery times and developed an idea for rushing goods to urban customers in an hour or less. … ‘A customer was able to get an Elsa doll that they could not find in all of New York City, and they had it delivered to their house in 23 minutes,’ said Ms. Landry … ‘We’re trying to create those moments for customers where we’re solving a really practical need,’ Ms. Landry said, ‘in this way that feels really futuristic and magical’.”

Shortening delivery times is key to Amazon’s strategy: in some metropolitan centers it offers same-day service. Locating and packing products is achieved through a grueling 24-hour operation in its vast warehouses: “Through the engineering of its fulfillment centers, Amazon has built the world’s most nimble infrastructure for the transfer of things … The packing stations are a whirl of activity where algorithms test human endurance. … Workers whip through the folding, packing, and sealing of boxes at a speed that could only come through days, months, and years of practice. The pace cannot slow if Amazon wants to meet the demand the company itself has stoked through the speed and reliability of its fulfillment operation.”

Amazon aims to both step up the pace of consumption and, like Apple, lock in a captive customer base. After the launch of 2-day shipping through Amazon Prime, the company’s sales growth took off. Time magazine notes: “Early on, Amazon discovered that Prime subscribers overwhelmingly made their online purchases via Amazon, and therefore they stopped shopping elsewhere. Naturally, a customer’s Amazon purchases skyrocket once he or she is signed up for Prime.”

The New York Times reported: “Because Amazon is still expanding madly, its expenses remain enormous and its retail profits tiny. In its last quarter, its operating margin on the North American retail business was 3.5 percent, while Amazon Web Services’s margin was 25 percent.” But the growth in Prime subscriptions is the key to how Amazon intends to generate profits. “Analysts at Morgan Stanley reported recently that ‘retail gross profit dollars per customer’ — a fancy way of measuring how much Amazon makes from each shopper — has accelerated in each of the last four quarters, in part because of Prime. Amazon keeps winning ‘a larger share of customers’ wallets’.”

An ex-employee explains: “Amazon has boundless ambition. It wants to eat global retail. … Amazon has decided to continue to invest to arm itself for a much larger scale of business. … lowering its shipping costs and increasing the speed of shipping items to customers is like a shot of adrenaline to customer’s propensity to buy from them, and so it has doubled down on building more and more fulfillment centers around the world. … That is a gargantuan investment, billions of dollars worth, and it takes a significant bite out of Amazon’s free cash flow.”

Increasing the velocity of commodity capital turnover offsets Amazon’s lower margins, resulting in a relative advantage over competitors: as Bezos is reputed to have said, “your margin is my opportunity.” But faster delivery times depend on an increase of fixed capital tied up in warehouse facilities across the world, which soaks up the surplus. This makes the company more dependent on finance capital for expansion into new markets; according to analysts, the company is searching for “one or two winning bets to make it all worthwhile” – or rather, it is speculating on future gains in the unpredictable world of consumer tastes.

Amazon makes its profit from the redistribution of the surplus value realized from the exchange of large quantities of commodities, which means the labor involved in shipping and warehousing is essential for the process to be completed. This is the company’s weakness: it was able to beat back an attempt to unionize maintenance engineers in its Delaware warehouse, but as noted: “… however sophisticated its ordering and distribution systems, Amazon still relies on a host of human hands to pull items off the shelves … And as demonstrated by several exposés on working conditions at Amazon’s warehouses, its algorithms can only be as efficient as the hands and feet executing their instructions. … Amazon can’t outsource its main business — online retail — to workers overseas. Getting more orders to more people more quickly depends on getting as geographically close to customers as possible. As a result, any conflicts and complaints involving the workers filling those orders will be more visible to American consumers, Amazon’s main customer base.”

Amazon’s eventual goal is to establish an absolute monopoly in internet-based exchange and distribution, so that value can be siphoned off by the retailer and enrich Jeff Bezos. However, its plans are built on the backs of a low-waged workforce, while workers have been moving to establish unions and push back against the intensity of algorithm-directed labor. In last Tuesday’s Fight for 15 day of action, hundreds of protesters picketed the Amazon Fulfillment Center in Baltimore, where most of the jobs are part time with no guarantee of full time employment.  Amazon cannot escape the movement of the low-paid for a living wage and decent benefits.

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The Political Economy of Flexible Accumulation: Part One

Writing in 1989, David Harvey proposed a concept of “flexible accumulation” to express the changes in the capitalist world since the 1970s, given the increasing circulation of capital across national boundaries while at the same time corporations were consolidating production of commodities in low-waged economies abroad (especially south-east Asia). [The Condition of Postmodernity: An Enquiry into the Origins of Cultural Change, Blackwell, 1989]

He connects this with the shift from Fordism – manufacturing centered in large, vertically-integrated factories – to a decentralized process involving assembly of components sourced from geographically dispersed suppliers, integrated by new financial instruments and markets. In the field of labor relations, this has been accompanied by a shift to short-term contracts and a low-wage economy, with a special role for a small cadre of elite workers.

The geographical dispersion of manufacturing is only possible with the extended reach of financial capital. Harvey points out that much of the geographical and temporal flexibility of capital accumulation has been achieved through “the rise of highly sophisticated systems of financial coordination on a global scale.” [1989:194]

Flexible accumulation “rests on flexibility with respect to labour processes, labour markets, products, and patterns of consumption,” writes Harvey. “It is characterized by the emergence of entirely new sectors of production, new ways of providing financial services, new markets, and, above all, greatly intensified rates of commercial, technological, and organizational innovation.” [1989:147]

The advantage of Harvey’s concept is that it focuses on the overall process of capital circulation, rather than manufacturing or the financial aspects of global exchange, making it more comprehensive than the concept of globalization. Attention can then be given to the enhanced importance of marketing and distribution that is necessary to complete the circuit of commodity exchange.

The changing structure of manufacturing, made possible by technological and logistical advances, has empowered retail capital to dominate markets and hence control the process of realizing surplus value, accumulating capital at a relatively higher rate. This is different from the classical pattern of capital accumulation, where the manufacturer is able to take the surplus value realized from the sale of commodities and reinvest in new means of production, even higher wages. Through a series of binding contracts, retailers are able to minimize the surplus value retained by the manufacturer.

A paper published by The Research Institute of the Finnish Economy in 2011 found that “value capture is increasingly detached from cross-border flows of physical goods. It is rather in-house and market services as well as various forms of intangible assets that com­mand the lion’s share of value added (and thus income and profits earned). Even if final as­sembly has largely moved offshore, the developed countries continue to capture most of the value added generated globally.”

A retailer, for example, will order large quantities of a commodity and attach stringent supply conditions. The low profit margin for the supplier necessitates volume production, which creates a dependency on its high-volume customers. In addition, the lead company can threaten to switch to a competitor if its price points are not met. Since the supplier has already heavily invested in fixed-capital machinery etc., such a threat has power because it would cut the manufacturer off from access to the circulation of capital and make it impossible to realize the value locked up in depreciating equipment.

“Capturing sizable shares of the actual consumer markets for products, large retailers gain commanding positions to structure and organize suppliers for the products they sell. Conventional thinking describes retailers as middlemen, the passive conduit between manufacturers and consumers. The retail revolution, however, has made retailers proactive agents in designing products, organizing suppliers, and even shaping consumers’ behavior. As brand-name merchandiser Apple Computers did for the iPod, retailers often create whole new markets – on both the consumer and the supplier side.” [The Market Makers: How Retailers are Reshaping the Global Economy, eds. Hamilton G.G., Petrovic M., Senauer B., Oxford 2011:10]

Apple uses its strong branding and loyal consumer base to sell commodities above their value, increasing its profit rate substantially. Even though it only produces 15 percent of all smartphones, it takes 94 percent of the entire industry’s profits. By selling iPhones at a premium price it achieves high margins on each unit: Samsung’s average selling price was $180 per phone using similar components (thus reflecting the socially necessary cost to produce), while Apple’s was $670. In addition, an annual update cycle accelerates turnover time in consumption through disposability.

At its US facilities the company develops a closely-connected strategy of product and software design, branding, and marketing, differentiating itself from competitors by an emphasis on elegant aesthetics combined with user-friendliness and seamless connectivity. However, its goal is to generate the greatest possible profit per commodity. It deals with stagnating sales of a product line by moving it upmarket into higher price brackets, rather than cutting prices in the hope of achieving a greater volume of sales.

After initiating a production cycle through expending capital on design, Apple is able to set in motion a workforce of up to 700,000 in SE Asia and China to manufacture components and carry out assembly. The component manufacturers bring together tooling and labor for large-scale production runs before final assembly at another location; shipping direct to the customer or store is coordinated through the internet-based Apple Store and international shipping by companies like FedEx. In this way fixed capital expenditure is outsourced to the supplier companies, while Apple disperses production of components so that foreign rivals cannot duplicate its design, and uses nonstandard components to make their commodities harder to imitate. The system of supply chain management is set up to minimize capital tied up in inventory and reduce production turnover time.

Apple didn’t invent this system, but took what others had pioneered and perfected it. However, despite its close control over production, Apple’s high level of capital accumulation (revenues in 2011 greater than the combined state budgets of Michigan, New Jersey and Massachusetts) is achieved through its appeal to consumers, giving it a commanding role in the conversion of its commodities into money – through the exclusivity and “coolness” of its brand, the physical and virtual Apple Stores, and through deals to distribute iPhones through wireless carriers. While competitors like Dell or Samsung are struggling with low profit margins, it has succeeded by achieving a monopoly in a particular market sector.

Harvey points out that “New technologies have empowered certain privileged layers, at the same time as alternative production and labour control systems open up the way to high remuneration of technical, managerial, and entrepreneurial skills. The trend, further exaggerated by the shift to services and the enlargement of ‘the cultural mass’, has been to increasing inequalities of income.” [1989:192] Despite its carefully cultivated image of a “humanistic” company, Apple’s contribution to increasing inequalities of income is shown in the fact that the average wage of an Apple Store employee in the US is around $15 per hour ($20 for an Apple genius), workers assembling iPhones in China earn less than $2 per hour, while CEO Tim Cook made $1.4 million in 2012.

In part two we will discuss the way the drive of retailers for monopoly control of markets is exemplified by the rise of

UPDATE: The latest iPhone X, has an increased contribution from Chinese companies to its overall value. However, Apple still retains 60% of the sale price. “The bill of materials of the iPhone X is estimated at $409.25, of which the Chinese firms jointly contribute $104, about 25.4%. Chinese value-added in the iPhone X is dramatically higher than the $6.5 captured in the iPhone 3G. The retail price of the iPhone X is $1,000; the Chinese firms together gain 10.4% of the total value added of every iPhone X sold on the global market.”

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