Monday, January 1, 2018

Collins, Jane. Threads: Gender, Labor, and Power in the Global Apparel Industry

Collins, Jane. 2003. Threads: Gender, Labor, and Power in the Global Apparel Industry. Chicago: University of Chicago Press.

Collins uses a case study ethnography method to perform a commodity chain analysis in the global apparel industry. In it, she examines four firms: Tultex, Confitek, Burlmex, and Liz Claiborne.

Tultex and Liz Claiborne are two very different companies. Tultex mass produced sweatshirts and you've probably never heard of them. It actually produced the sweatshirts in its factories in Virginia, for decades, until it went out of business shortly after Collins performed her research there. Liz Claiborne designs and markets branded fashion apparel but it makes nothing; subcontractors produce the garments. Unlike the nearly identical sweatshirts Tultex workers made every day, Liz Claiborne sells many different styles with great variation.

Some theorists believed that jobs performing simpler work like producing Tultex sweatshirts would leave the U.S. for the Global South but the more complex work of producing apparel for Liz Claiborne would stay in the U.S. due to the level of skill required for the job. In fact, that is not the case. Liz Claiborne was a pioneer of offshoring production in the industry.

The other two firms are both in Aguascalientes, Mexico. One produced apparel for Tultex; the other for Liz Claiborne. The production processes in the two were remarkably similar. Both used a 'progressive bundle' system and paid piece-rate for the number of bundles a worker produced. The major difference is that Burlmex, which produced for Liz Claiborne, used a statistical quality control method. Using statistical quality control, a number of measurements and assessments are made of each worker's work. The measurements are graphed and tracked, and workers must stay within a certain range. This might be a quantitative measurement, like the depth of a seam, or a qualitative one. Instead of hiring more experienced or higher skilled workers, this company hires low skilled workers and controls them more tightly.

Both firms take a low road strategy of hiring unskilled workers, paying them little, offering them few benefits, and working them hard. The workers under statistical quality control are particularly stressed. Turnover is frequent and expected, if not built in. They recruit from a large geographic area, up to two hours from the factories. This gives them a larger pool to hire from to deal with turnover, but also means that some workers have an extra four hours of travel time added to each workday and that increases the stress. Additionally, the companies seek a docile labor force to put up with the stressful conditions and low pay, and they hire mostly women. The jobs given to men (operating machines) have higher pay.

Another theme in the book is that although globalization seems placeless, nowhere and everywhere, we can see examples of it in real places, affecting real people and communities. Terms like "offshoring" and "outsourcing" sound like nameless, faceless concepts, but Collins describes real factories that hired real workers in two cities. When a company selects a location for a factory, it must work with local laws, politics, norms, language, and other facets of that particular place. Collins examines how these companies adapt to each place in their workplace, their relationship with the community, and in terms of social reproduction. In terms of the community, she mentions how they work with the legal and political systems, whether they pollute, whether they invest in the communities, whether they offer daycare, whether they house workers or provide them transportation to work, etc. They are also interfacing with the local labor market. In this case, she mentions Tultex's paternalism in Virginia (until the workers unionized), comparing it to the subcontracted workers in Mexico who had no immediate relations with the U.S. firms employing them. The two parties (the workers and the U.S. companies) were connected by a general manager who ran the Mexican firm and dealt with both the U.S. company and the Mexican workers. The general manager was socially distant from the workers despite living in the same country. It was only relatively minor supervisors who had family and friends and other outside relationships with those they supervised. (This was not so for Tultex in its town in Virginia.) Collins says that by outsourcing to Mexico, the U.S. companies deterritorialize the social relations of work.

The nature of subcontracting makes the bargaining position of workers' worse. Contractors bid for jobs, trying to give the lowest price in order to win the contract. This drives down wages. But the low wages workers can get when the contractor wins a contract are better than the no wages they would get at all if their employer increased their wages and but got no contracts because it could not offer the best price.

The third area is social reproduction. Do employers pay a living wage so that workers can raise families and educate their children? In the case of the two Mexican firms in this book, they do not. Employers use their workers' gender against them, claiming that because they are women, their income is supplemental, so they do not need to earn enough to raise a family on. Of course this is ridiculous, as many women do not have a husband who earns more than they do, or any husband at all. Collins then speculates that the high turnover rate is desirable to firms because workers do not stick around long enough to organize and demand higher wages or better conditions.

Friday, December 29, 2017

Burawoy, Michael. 1984. “The Hidden Abode of Underdevelopment: Labor Process and the State in Zambia.”

Burawoy, Michael. 1984. “The Hidden Abode of Underdevelopment: Labor Process and the State in Zambia.” In Politics and Society and The Politics of Production.

Burawoy begins by explaining his premise: He is writing about what he calls the political apparatuses of industry. By this, he is referring to the ways in which the state regulates the relations between labor and capital (generally intervening on the side of capital). For example, they "enforce compulsory arbitration, outlaw strikes, detain leaders, monitor union organization, [and] impose wage freezes" (p. 124). He states that theories of underdevelopment neglect to consider this. So, that's what he's going to do.

He begins with a lit review, noting that early theories of underdevelopment blamed nations in the Global South for their own poverty due to "inappropriate values, the force of tradition, or the scarcity of capital" (p. 124). Dependency theorists like Andre Gunder Frank reacted against this, blaming colonizing nations for "plundering" their colonies (p. 124).

I must admit that I skipped the rest of the lit review because Burawoy writes about articles I have not read and it was simply too much effort to figure out what he meant by it. But he comes to the point on p. 127-128 that since the labor process is left out of these theories, then so are the struggles over the labor process, what he calls the "politics of production."

After reviewing all of the things that are not the point, Burawoy gets to the point: "I am developing here a notion of the state that focuses on the relationship between production politics and global politics.... We examine closely the functions of the colonial and postcolonial states as they are reflected in the relations between the apparatuses of the state and those of the economy, of industry, or of agriculture..." (p. 129). He names two forms of primitive accumulation the colonial state was after. First, get "direct producers" into the labor force so they work for wages for someone else (industrial capital). Second, merchant capital extracts the surplus from precapitalist production (farming, crafts, etc) and exports it. "Thus, the colonial state was not concerned with production per se but rather with orchestrating relations among modes of production leading to the capitalist mode" (p. 129-130).

Once everything is in place for capitalism, the purpose of the colonial state "disappears" (p. 130). At this point, a new form of the state takes over, marked by the granting of "formal political independence" which he calls a "symbol" of the transition (p. 130).

Burawoy then goes into a long explanation of Marxist theory. The question seems to be - what happens to precapitalist modes of production when capitalism comes along? Burawoy says that they don't go away, they are just "recreated and restructured in accordance with the needs of the dominant capitalist mode of production" (p. 132). The postcolonial state is concerned with the regulation of expanded reproduction, not primitive accumulation.

When primitive accumulation gives way to expanded reproduction, "alternative institutions," and not the colonial state, "take over its regulation" (p. 136). Even if the state has not declared independence yet, the colonial state drops out of the equation, at this point.

Writing of the operation of a Zambian mine under colonialism, Burawoy says, "I call this form of production politics colonial despotism. It is despotic because force prevails over consent. It is colonial because one racial group dominates through political, legal, and economic rights denied to the other" (p. 142).

Burawoy describes various phases in the Zambian mines. Initially, labor is recruited and workers are controlled in a "company state" using a compound system. All of the workers live in a company compound and their lives are controlled by the company both inside and outside of work. Mostly, the colonial state and the company state leave each other alone. In fact, they are working at cross purposes. The colonial state depends on migrant labor, whereas the mine is attempting to proletarianize a stable labor force. Burawoy explains that by proletarianization, he means cutting all ties to rural life. The company state uses force and coercion to control labor.

I find his description of what happened over time in the mine easy to understand, but the point he is making from it more difficult to draw out. He describes how, with independence, the mines go through a process of Zambianization, in which (in theory) senior positions formerly held by whites are given to Zambians. In reality, when this occurred, it occurred quickly and somewhat badly. Whites in senior positions were told to select and train Zambian replacements quickly. They often did not pick very qualified people, and they also did not teach them how to do the entire job. Instead, as the Zambians were given the whites' old jobs, new, even more senior jobs were given to the whites. Many of the responsibilities of the old jobs now held by Zambians were given to the whites in new positions, and the senior jobs Zambians now held were given smaller responsibilities. One mechanism by which whites kept power was by not sufficiently training Zambians nor selecting Zambians with proper qualifications to do the jobs, making it impossible for those Zambians to truly gain power. Burawoy says, "The devaluation of supervisory authority lay in the very process of Zambianization" (p. 150).

The use of force and coercion of colonial despotism went away, and the new Zambianized structure was weaker than the previous company state. Africans were now in unions, but the bureaucratic structure was rearranged so that centers of power were now higher up in the mine's organization, making it harder for unions to find leverage to have their demands met, and requiring them to use more drastic measures, like strikes. Buroway concludes that colonial despotism gave way to a weaker and more bureaucratic administrative apparatus for the mine. Workers gained more control (p. 152).

When faced with a strike, the postcolonial state tried to reassert the bygone colonial mode of production (by claiming that the workers were better disciplined before under the colonial production relations instead of recognizing that workers past were working under a more coercive regime - p. 157). He further concludes that the postcolonial state responded by aligning with the interests of capital more than the colonial state did (p. 158).

That all makes sense, but I don't see how it proves his point that by definition, a colonial state is engaged in primitive accumulation whereas a postcolonial state focuses on expanded reproduction. Nor do I see how he is proving his point that this is a universal phenomenon in all colonies and not just Zambia. Or even not just in British colonies in Africa, or in British colonies in general, since Great Britain tended to use similar methods of governing their colonies, and the colonial state in Zambia was therefore not entirely unique.

He states that "The distinctive function of the colonial state is to organize primitive accumulation so as to maximize the transfer of surplus to the metropolis" (p. 160-161). He continues, saying, "Merchant capital requires the colonized populations to produce for the market (for example, cocoa farmers in Ghana), whereas industrial capital requires proletarianization (for example, Southern Africa). The revenues of the colonial state emerge from and thereby reproduce the forms of primitive accumulation. The economic base of the colonial state is as weak as the surpluses it helps to generate - are inaccessible to it. It is a limited state that cannot afford the costs of extensive infrastructure and urbanization. And so there is a separation of powers between the company state and the colonial state" (p. 161).

Perhaps this is where his argument lies, that by definition, the colonial state is engaged in primitive accumulation, but expanded reproductive is inaccessible to it because it's busy transferring all of its surplus back to the metropolis (the colonizing power) and not keeping any at home with which to urbanize or build the infrastructure needed for expanded reproduction. He adds that the colonial state basically works itself out of a job when "capitalist relations of production become self-reproducing" (p. 161). It is at that moment that a new state, the postcolonial state, arises to serve the new needs of expanded reproduction.

Under the new form of organization, surpluses now transfer back to the metropolis via economic mechanisms instead of political ones (p. 162). With the company state now weaker - and I suppose this is where his analysis from above becomes relevant - the postcolonial state must insert itself into the equation or else the workers themselves will gain more control.

In Burawoy's words, "Under the colonial order the development of primitive accumulation led to the insulation of production apparatuses from state apparatuses and, as a consequence, the separation of industrial struggles from political struggles. Under the constraints of late development, expanded accumulation of capital led to the interpenetration of production apparatuses and state apparatuses and the rapid transformation of industrial struggles into political struggles against the state" (p. 163).

Toward the end, Burawoy points to the one obvious scholar who did connect the production process to colonization: Wallerstein. He finds that Wallerstein's analysis does not explain "how the various structures (labor process, production apparatuses, and state apparatuses) come into being and change over time" (p. 164). Then he gets in a good insult: "Synchronic functionalist teleology is no substitute for diachronic causal analysis" (p. 164). The causal mechanism, says Burawoy, is class struggle.

All in all, while I think I can regurgitate Burawoy's ideas in a simple form on my prelim exam, I don't fully understand what he's saying here, nor am I convinced he's right.

Thursday, December 28, 2017

Babb, Sarah: “The IMF in Sociological Perspective: A Tale of Organizational Slippage”

Babb, Sarah. 2003. “The IMF in Sociological Perspective: A Tale of Organizational Slippage.” Studies in Comparative International Development. 38(2):3-27.

Babb disagrees with Stiglitz's analysis of "what went wrong" with the IMF. He traces the problem to the early 1980s. She says it started long before that.

Babb uses organizational sociology to analyze the IMF as an organization. She begins with the IMF's founding and its vague mission. It's common for a multilateral, international organization such as this to have a vague mission because it's difficult to get so many different parties to agree to something more specific. She also mentions that it's difficult to enforce international law, so countries might be hesitate to commit to something specific that cannot be enforced.

In this case, Keynes was on the British side arguing for something vastly different (Keynesian, in fact) from what the Americans wanted. While one might imagine that Keynes was arguing for his own brand of economics (as he was) simply because that's what he believed in, Babb points out that the U.S. and Great Britain had different interests, and each side was arguing for their own interests. The U.S. wanted "conditionality" and Great Britain did not. Conditionality refers to imposing conditions on nations receiving IMF loans. The resulting agreement did not mention conditionality.

Yet, conditionality became a part of the IMF's loans early on in its history. Babb looks to three possible sources of what shaped the organization given its weak and vague mission: coercive powerful outside forces, mimicking similar organizations ("mimetic isomorphism"), and the norms of the staff.

The powerful outside force she considers is the U.S. Treasury. This is an example of "asymmetric dependence." The original Bretton Woods agreement stated that all nations would peg their currencies to the dollar, and the dollar could be exchanged for gold. This eventually fell apart decades later, but the dollar continued to be important. Plus the U.S. had the most votes in the Executive Board and the only effective veto. Given that the U.S. and specifically its Treasury held more power over the IMF than the other way around, the U.S. and specifically the U.S. Treasury were an influential force in guiding IMF policy.

As for mimetic isomorphism, it was difficult for the IMF to pattern itself after similar organizations when no similar organizations existed. The IMF was simply the only IMF in the world, in all of history. However, there was a precedent of banking institutions dating back to the 19th century under the gold standard. Back then, when a nation ran into a balance of payments crisis, it was common for other nations to lend them money to resolve the crisis. Those loans came with conditions, setting a precedent for conditionality.

The last point is patterning the organization after the norms of the staff. Indeed, the leadership often deferred to the views of the staff, both because the staff would hand them already finished agreements that they had to vote yes or no on, and sending an agreement back to the drawing board would slow things down. Given that loans were often given in a crisis situation and timeliness was important, this was not ideal. Also, the staff often had expertise that the Executive Board often did not. So the Executive Board gave the staff quite a bit of freedom.

The staff were mostly economists, and they followed the norms of their profession. But that's not all. The reason why the IMF's policy resembles gold standard-era pre-Keynesian economics is because it was gold standard-era pre-Keynesian economists who staffed the IMF. At the time, the Keynesian model was new and unfamiliar. The old way had decades, if not centuries of precedent. What's more, when Keynesian economic won the day in the Great Depression, economists who still bought into pre-Keynesian economics more or less hid out in central banks. When the IMF was created, they gravitated there.

During the IMF's formative years, it was run by these economists. They basically hid out in the IMF until the rest of the world came around to their way of thinking via the Washington Consensus. Babb writes, "Indeed, we might even say that the IMF became a think tank within which the old-fashioned, deflationary thinking of the gold standard was preserved, until it was resuscitated in the 1980s as a tenet of the Washington Consensus" (p. 22).

This wouldn't be quite so problematic if pre-Keynesian Gold Standard economics and the neoliberal economics that came after it were correct and Keynes was wrong but, alas, it is the other way around.

Wednesday, December 27, 2017

Stiglitz, Joseph: Globalization and its Discontents.

Stiglitz introduces his book as an analysis of "what went wrong" with the Bretton Woods institutions, the IMF and World Bank. Quite frankly, it should be titled "All the reasons I hate the IMF." Stiglitz describes the World Bank and IMF's founding and then tells of a few key changes between then and now. Whereas they were founded with the understanding that the nations of the world must work together for global economic stability, today the U.S. has the only effective veto, giving it the power to call the shots by itself. Whereas the IMF was founded on Keynesian principles with the goal of stimulating demand when the market failed to do so on its own, today it enforces structural adjustment policies that are contractionary. Stiglitz says Keynes would be rolling over in his grave.

He traces the biggest shift to the Reagan and Thatcher era of the 1980s. During this time, the IMF was used as the vehicle to force Washington Consensus policies on poor nations who needed loans and grants. The IMF gave them an offer they could not refuse. It was in this time, the early 1980s, the two institutions, previously distinct, became more intertwined. Stiglitz blames the mistakes of the World Bank and IMF on making decisions based on ideology and politics (often using bad economics that are thinly veiled give aways to special interests) instead of based on good economics.

Stiglitz identifies one problem as the domination of both institutions by the wealthiest nations on earth, and generally by the business and finance sectors within those nations. While the institutions are making decisions that affect the entire world, and greatly affect the poorest nations, and the poorest people within those nations, they are dominated by interests of the world's wealthiest people who may have no understanding at all of poor people or poor nations. One example of how this plays out is that the poorest nations are forced to get rid of trade barriers and subsidies, but the wealthiest nations retain agricultural subsidies. He calls it "taxation without representation" and "global governance without global government" - meaning that a few powerful institutions run by elites make the rules that affect the entire world, but the rest of the world has little to no control over those institutions.

He opposes broad, general protectionist policies but supports developing nations protecting certain fledgling industries until they are globally competitive. When markets are opened to competition from abroad, these industries cannot compete - and at the same time, the nation lacks a social safety net to support those who lose their jobs as a result.

Stiglitz distinguishes between the missions and the characters of the World Bank and the IMF. The former is to eliminate poverty; the latter to promote global economic stability. He dumps on the IMF a lot, basically framing it as the real problem compared to the comparatively innocent World Bank. (Stiglitz worked at the World Bank so I am suspicious about his biases.) One good point he makes is that the World Bank has staff living in the nations around the world where the World Bank works, whereas the IMF generally has a single person in each nation living a comfortable existence in the capital, never coming face to face with the suffering the IMF's policies inflict.

A major critique he makes of the IMF is their confusion of ends with means. That is, when it believes that certain policies (such as a liberalized financial market) are crucial to economic success, it sees those policies as goals in and of themselves. Even when a country is doing OK as it is - Stiglitz gives the example of Ethiopia - and does not need the IMF's "fix" (and the IMF's "fix" will actually hurt it) - the IMF still pushes for its preferred policies as if they are an end in themselves.

To me, it's like if someone is already thin but you believe that the Atkins diet helps you lose weight, this would be like telling the already thin person they must go on the Atkins diet, as if the diet itself is the goal and not the health, fitness, and weight loss goals a person may have.

Works Cited:
Stiglitz, Joseph. 2002. Globalization and its Discontents. New York: W. W. Norton and Co.

Tuesday, December 26, 2017

Eckstein: "Dollarization and Its Discontents: Remittances and the Remaking of Cuba in the Post-Soviet Era."

Eckstein, Susan. 2004. "Dollarization and Its Discontents: Remittances and the Remaking of Cuba in the Post-Soviet Era." Comparative Politics 36(3):313-30.

Eckstein begins by pointing to remittances as a source of foreign exchange for receiving nations. She distinguishes between the effect of remittances on individuals and their effect on receiving states. It's possible for remittances to benefit individuals but not states, or to help further the goals of the individuals but not the states. Second, remittances are not a substitute for other kinds of income to individuals who receive them. Third, remittances may have unintended consequences for receiving individuals. "Effects hinge on the social con- text in which remittances become embedded" (p. 314). It's interesting that she refers to "individuals" whereas Taylor refers to households.

Unlike Taylor, Eckstein focuses on the role of the state (and the impacts of remittances on the state). For example, she notes that refugees send back less in remittances than economic migrants perhaps because refugees oppose the government they fled. She then introduces the specific case she is considering: Cuba. "Cuba should, in principle, represent a most likely case of a state able to regulate remittance inflows and the uses to which they are put" (p. 314).

Eckstein says, "After the cold war Cuba, along with other remaining Communist regimes, had no option but to reintegrate into the global market economy for trade and financing, irrespective of any efforts to regulate market features domestically" (p. 314-315).

Eckstein seems to be most concerned with how states accomplish their goals. She points out that even a strong state may not be able to control black market activity. So she's looking at how a state like Cuba might be able to control what its citizens do in order to accomplish the state's own goals. She adds that the state might not even have clear goals, or even if the top of the government does have clear goals, different agencies and institutions may have competing goals and they might undermine each other.

She writes: "Regimes often face trade-offs in setting priorities between consumption and investment, the long and short terms, and political administrative and technical economic concerns. or such reasons, official remittance-linked policies may be grounded in institutional political and not merely economic rationality, with these two types of rationality possibly colliding. Policies designed to bring remittance dollars to the government, to address fiscal and other economic exigencies, for example, may have the unintended effect of eroding state capacity to maintain law and order, if they induce the populace to seek dollars illicitly or for purposes not legally permitted" (p. 315).

Following the paper's introduction, Eckstein provides background information about the Special Period in a more detailed way than before. She brings up the impact of the U.S. embargo and adds that world sugar prices declined and that hurt Cuba as well since sugar is an important export for the island. Sugar production also declined. Cuba received little in foreign aid, investment, or bank loans. However, tourism grew (this was a specific strategy of the government's to gain income and presumably foreign exchange too). But given everything else, remittances were an extremely important part of the economy. Eckstein writes, "The state and ordinary Cubans each had reasons for courting remittances. Analytically separable, their efforts became concretely inter- meshed, sometimes mutually reinforcing, at other times not" (p. 316).

Then she gets into the meat of her analysis. During the Special Period, Cubans could obtain some of what they needed with their ration books, but it was not enough. The black market flourished, but black market prices were unaffordable compared to income (she provides examples of chicken or cheese costing a third or a fourth of someone's monthly salary). Cubans had free education and health care and inexpensive shelter, and the food one got in rations was inexpensive, so low salaries in pesos were manageable until one needed to turn to the black market for food and other necessities.

Officially, pesos and dollars were worth equal value. On the streets, dollars were worth 130 times more than pesos. Even a small amount of dollars could go a long way in purchasing black market goods. Remittances were the way to go. Cubans received remittances from family members in the U.S. in ways that defied both U.S. and Cuban law. U.S. laws were cumbersome and limited the amount one could send, so many avoided these limitations by sending money through informal channels. For example, some relied on mulas, middlemen who carried goods and money to Cuba. (Incidentally, when I arrived in Cuba, an entire set of tires were on the baggage carousel. They were somebody's checked baggage.)

"Desperate for hard currency, the Cuban government introduced measures to induce remittance-sending in ways designed to channel money to its treasury" (p. 319-320). However, the state worried that dollars would lead to individualism and materialism. Realizing that the remittances were happening anyway, the state responded to, essentially, make the best of it. The first change the state made, in 1993, was legalizing possession of dollars. Then they allowed Cubans to shop at dollar stores that were previously reserved for foreigners. Dollar stores sold goods at inflated prices, bringing more needed hard currency to the state. Third, they set up official exchange booths that exchanged dollars at the street exchange rate to "soak up dollars not spent at dollar stores" (p. 320).

With these measures in place, the unofficial exchange rate dropped down to 21 pesos to the dollar (down from 130). This was nowhere near the official rate of 1:1. This gave a better exchange rate to those with dollars than the state would have liked, but the alternative would have been people continuing to rely on the black market and the state getting no dollars at all.

Eckstein continues, listing several more measures the state took with regard to remittances to attempt to achieve its own goals. They had previously portrayed emigres negatively and had limited how much Cubans could bond with their overseas relatives. Now they had to change their tune, because they needed the emigres to visit Cuba and bring dollars with them. This was a political risk, as the emigres would bring with them negative opinions about the Castro regime that they would share with their relatives on the island. Cuba even allowed more emigration to increase the remittance-sending base living overseas.

Compared to other nations, Cuban emigres were different. Those who left decades before for political reasons sent less money than Dominicans or Salvadorians (the two nations Eckstein uses for comparison) even though they were wealthier. Cubans also had fewer relatives abroad who could send remittances. Those who emigrated after 1990 were more similar to remittance-sending relatives from other nations.

She also mentions racial disparities. Whites were more likely to oppose the Castro regime and leave, compared to Blacks. Therefore, whites in Cuba are more likely to have relatives abroad who can send them money (assuming their relatives can get over their hatred of the Castro regime and actually send it... which many did not). Remittance receiving families were also disproportionately urban. This increased inequality in Cuba, which runs counter to the government's goal of equality. Eckstein notes that in other nations, remittances counter inequality; in Cuba, it widens it.

Remittances also reduce adherence to revolutionary values. In addition to promoting materialism, it also led to corruption, rent-seeking, and theft.

On the other hand, remittances provided much needed hard currency, and it alleviated political pressure by taking the edge off of the deprivation Cubans faced in the early 1990s. But the benefits to the state are limited. Cuba imported less in 1999 than it did before the start of the Special Period, even with all of the dollars from remittances it received. And its debt increased during that time as well. The influx of dollars also eroded state control over the economy, for example, by fueling the black market. And it eroded the value of work, since jobs paid in pesos the equivalent $10-$20/mo in dollars. It encouraged people to skip out on their peso-earning job to engage in sideline activities that brought in dollars. (I bought a handmade dress in Cuba in 2010 for $15, and I was told the price was equivalent to about half a month's income.)

The influx of dollars brought a domestic brain drain as highly skilled professionals who earned only pesos turned to low skilled work (such as working in tourism and even prostitution) that gave them access to dollars.

Eckstein's greater point, that remittances may bring benefits to the families who receive them while simultaneously working against the goals of the state, is a good one. However, Cuba is such a strange and unique case compared to other nations that I find it doubtful than the specific findings from Cuba are broadly applicable to most other nations that receive remittances.

Taylor: "Remittances, Savings, and Development in Migrant-Sending Areas."

Taylor, J Edward. 2004. "Remittances, Savings, and Development in Migrant-Sending Areas." Pp. 157-73 in International Migration: Prospects and Policies in a Global Market, edited by Douglas S Massey and J. Edward Taylor.

Taylor begins by stating that other scholars are essentially incorrect in referring to remittances as a negative for local development. He says this is because they underestimate the amount of remittances (in part because it's hard to estimate the value of in-kind remittances) and don't consider how remittances boost the economy in the area that receives them, or the multiplier effect they have in the local economy in the receiving area. Taylor believes that remittances are helpful because they have an "equalizing effect" in receiving areas, since they increase the incomes of households at the bottom to middle of the economy, and can even help those households achieve economic mobility (p. 157).

Taylor then begins to attempt to quantify remittances. He makes a few significant points. First, remittances are not equally distributed around the world; some countries and areas within countries receive more of them. In some areas, remittances are greater than a quarter of the value of export revenues. Globally, they are greater than the value of official development assistance. Studies also suggest that the value of remittances is a significant percent of household income in receiving families. In short, the value of remittances is not at all trivial.

In the next section, Taylor refers to the "new economics of labor migration" (NELM). According to NELM, "migration is hypothesized to be partly an effort by households to overcome market failures that constrain local production" (p. 160). For example, if an area does not have a good insurance market, remittances provide a form of insurance against a loss of farm income because the remittance income will be there even if the crops are lost or prices crash so that the crops don't bring in the needed income.

Taylor says this is a different way to view the connection between migration and development compared to neo-classical economics and dependency theory. A major difference is that this approach connects the reasons for migration with the effects of migration to sending areas. It leads to new types of research because researchers now don't just ask about remittance income and migration, they also ask about all aspects of farm income and production. This allows for new forms of analysis compared to before.

I find it interesting that so much of the literature Taylor reviews is framed as a simple matter of markets (i.e. migration is due to "imperfections in capital markets" on p. 161), and there is no mention of social and political factors. I also find it difficult to understand all of the economics in the lit review, and suspect much of it to be bullshit. (That goes along with my general suspicion that a lot of what economists say is bullshit.)

One point that makes sense is that remittances might increase agricultural productivity by allowing receiving families to invest in their farms in ways that increase productivity. However, remittances may also be a way to reduce risk by spreading it out over diverse activities. Taylor says it could be a combination of the two, and I believe it is. Even simply being able to purchase inputs outright instead of on credit reduces the need to pay interest; or being able to purchase land instead of leasing it increases profits. That is, in the former case, to the extent that the purchased inputs actually help instead of hurting the farm, which is something I have my doubts about. (For example, see Glenn Stone's work on farming and deskilling in India.)

In citing Adams (1991), Taylor notes that policy can play a role, because policies that depress prices for agricultural output discourages investment. That is, if you aren't even going to make much money for growing something, why would you invest money into growing it (or growing more of it)?

Taylor finally sheds light on why some scholars think remittances are bad. In the first year of migration in one study, "a $1 change in remittances produces a less-than-$1 change in total incomes of remittance-receiving households" (p. 161). I can only imagine this is because the labor of the family member who migrates was worth more at home on the farm than the amount they can send in remittances. If that's not the case, then I totally don't understand how the heck this can be possible. In any case, measured 6 years later, every $! sent in remittances produces more than $1 in increased household income. Taylor later makes clear that this is because the remittance income allows the family to invest in a way that increases their ability to make money (for example, purchasing land or agricultural inputs, purchasing livestock, or buying inputs outright instead of on credit).

His point is that there is variation "across time and settings" in the effects of remittance income and "the positive effects clearly depend on the magnitude of migrant remittances and the profitability of investing in new production activities or techniques" (p. 162). He notes that this can be limited in three ways: environmental and market constraints, or policies that disadvantage agriculture. In other words, if your land is infertile in the first place, you won't get much bang for your buck by investing in a tractor or hybrid seeds, etc. Likewise, if the prices you'd get for what you produce are low either (perhaps because of policies like free trade agreements), you won't get much economic benefit by investing in agriculture. In any case, Taylor thinks this variation could account for why some studies found remittances are more harmful than beneficial.

In the next section (p. 162), Taylor states that treating each household as its own isolated economic unit is wrong because it ignores the interaction between households. Honestly, this is flipping obvious and any economist who misses it should have his or her degree revoked. When one household in a village receive money from abroad, they spend it locally, and that puts money into the hands of other families in the area. Or foreign corporations as the case may be if they are buying seeds from Monsanto or DuPont. But some of the money goes to the local agro-input dealer at least. This is freaking economics 101. The money multiplies in the local community. The agro-input dealer takes the extra income and uses it to buy whatever he or she needs too - shoes, school fees, food, medical care, etc. And whoever sells them the shoes or food, etc, turns around and spends the money to meet their own needs, and so on. Presumably the entire value of the money is not re-spent each time, because some of it may be saved. Additionally, some of it is going to distant corporations and not to local families. (For example, if a family purchases DuPont seeds at the agro-input dealer, part of the value of their purchase goes back to DuPont. But the part retained as profit stays in the community, as do the part that pays wages of the workers in the store.) So thank you Taylor for explaining elementary economics to a lot of people who should have known better.

Jumping off of this point, Taylor says that it's crucial to examine household expenditures in remittance-receiving households because that tells you how the remittances provide indirect benefits to the local economy through the multiplier effect.

Later, Taylor provides a clearer explanation based on a study in Michoacan, Mexico: "Remittances from migrants stimulated non-remittance income in the Michoacan-survey households in three ways. First, they enabled migrant households to purchase inputs (i.eg., fertilizer) that increased income in the short run. Second, they provided migrant-sending households with funds to invest in income-producing assets - particularly livestock - which created new sources of local income in the long run. Third, they created expenditure linkages in the local economy that transmitted the positive effects of remittances to other households - including those that did not have migrants in the United States" (p. 166). As a result, every $1 received resulted in $1.85 additional income in the receiving household. Within the village as a whole, every $1 in remittances increased village income by $1.60 (p. 167).

I have to admit, this article is doing a lot to reinforce my general notion that economists are idiots. Taylor's essentially explaining all of this, all of which makes perfect logical sense, because it flies in the face of what economists had accepted as truth about remittances.

Sunday, December 24, 2017

Friedmann, John. 1986. "The World City Hypothesis."

Friedmann, John. 1986. "The World City Hypothesis." Development and Change 17:69-83.

This was written in 1986, well before the other books and articles on world cities I've read. It's also written before the rise of the Internet. However, since one of the seminal works on world cities was written by Saskia Sassen in 1991, I suppose that was before the rise of the Internet too.

Friedmann traces his ideas back to works by Harvey and Castells in the 1970s linking "city forming processes to the larger historical movement of industrial capitalism" (p. 69). In the early 1980s, scholars began linking the study of cities to the study of globalization. This is Friedmann's jumping off point. He states, "My purpose in this introduction is to state, as succinctly as 1 can, the main theses that link urbanization processes to global economic forces" (p. 69).

Friedmann provides seven theses:
  1. "The form and extent of a city’s integration with the world economy, and the functions assigned to the city in the new spatial division of labour, will be decisive for any structural changes occurring within it." (p. 70)
  2. "Key cities throughout the world are used by global capital as ‘basing points’ in the spatial organization and articulation of production and markets. The resulting linkages make it possible to arrange world cities into a complex spatial hierarchy." (p. 71) Interestingly, he states that all but two world cities are in core countries (the exceptions being Sao Paolo and Singapore). More recent literature about world cities names a large number of cities in the Global South (periphery) as world cities. He suggests three sub-systems of world cities: an American one centered around New York, Chicago, and LA; an Asian one centered around Tokyo and Singapore; and a Western European one. Notably, when he was writing the USSR was still intact, Germany was divided, and China's economy had not yet taken off.
  3. "The global control functions of world cities are directly reflected in the structure and dynamics of their production sectors and employment" (p. 73). These cities are centers of finance, high level business services like advertising and accounting, and global transport and communications, as well as homes to major corporate headquarters. These cities have a "dichotomized" labor force, with highly paid professionals and many more low skilled workers.
  4. "World cities are major sites for the concentration and accumulation of international capital" (p. 73)."
  5. "World cities are points of destination for large numbers of both domestic and/or international migrants" (p. 75).
  6. "World city formation brings into focus the major contradictions of industrial capitalism - among them spatial and class polarization" (p. 76).
  7. " World city growth generates social costs at rates that tend to exceed the fiscal capacity of the state" (p. 77).