1. Zaher Charara B200 AOU1 CHAPTER 14 A New International Division of Labour? Peter Braham

2. Zaher Charara B200 AOU 2 Introduction There is international migration of labour, and also international movements of capital. Multinational Corporations (MNCs) are geocentric: they go to the best possible country for their investment. They have offices and factories in several countries (40% of international trade occurs within firms). Production is located in the country that offers advantage in differential wage rates (cheaper labour).

3. Zaher Charara B200 AOU 3 NIDL: “New International Division of Labour” NIDL idea was developed and examined by Frobel et al in 1980. It discusses the impact of multinational companies (MNC), and its main purpose is to talk about the development of a world market in which manufacturing production can be divided into fragments and located in any country depending on where the most profitable combination of labour and capital can be obtained.

4. Zaher Charara B200 AOU 4 Under NIDL: manufacturing operations in industrially advanced countries (IACs) are being shut down, to open up such operations in other (less developed) countries. For example: German textile industry is manufacturing clothing items in Tunisia. Companies used to employ cheap migrant labour in IAC countries, but such labour is now more expensive. So now, multinational companies are moving production to the countries from which imported workers came (example: it’s cheaper to have production in Pakistan than to employ Pakistanis who live in Britain). Frobel considers that labour in developing (poor) countries is plentiful and easily exploitable.

5. Zaher Charara B200 AOU 5 The best examples of industries where production typically moves to less developed countries are: textiles and electronics. Textiles and electronics industries have the following characteristics: 1) No automation or machinery. 2) Fragmented, repetitive and labour-intensive procedures. 3) Mostly employ females, because they earn low pay and can sit for long hours at sewing machines or electronics assembly lines. Female workers have longer attention span, and have more agile hands (which is important in electronics). Some countries (like Mauritius) have 85% of factory workers as females.

6. Zaher Charara B200 AOU 6 Frobel calls the factories in lesser developed countries (LDCs): “world market factories”, where workers don’t acquire any significant skills and there is no transfer of technology to these countries. The underdevelopment of LDCs is getting deeper and the factories in these countries are not contributing to improving the local economies (according to Frobel). Only a fraction of the population is employed (at very low wages) while the rest are a permanent reserve army.

7. Zaher Charara B200 AOU 7 Criticisms to NIDL 1. Britain did not follow the same pattern of moving production to less developed countries (LDC) like Germany did. Britain had inner-city sweatshops where black minorities live. 2. NIDL theorists exaggerated the scale of relocating production. Third world output remains small when compared to international industrial output. 3. Multinationals don’t go only after cheap labor (like NIDL theorists suggest), MNCs also seek new world markets.

8. Zaher Charara B200 AOU 8 CONCLUSION NIDL theorists argue that textile and electronics industries will cause other industries to seek cheaper labour abroad. To seek competitive advantage, an alternative to seeking low cost labour is to increase labour productivity by technical innovation. Porter argues that developing skills and technologies is important, because “globalization makes nations more, not less, important”.