Increasing Role of Developed Countries in the World Economy - Assignment Example

Question 5: What do you understand by the term ‘contemporary international division of labour’? In your answer, discuss how it is affecting patterns of production and distribution both between and within the developing and developed worlds. Introduction Contemporary or new division of labour occurs as a result of the process of globalisation. Over the last few decades, the forces of globalisation (increased use of information and communication technologies and interconnectedness of the global economy) have had a profound effect on the manner in which labour, as a factor of production, functions. It has been stated that as a result of globalisation, labour is now more mobile and flexible (Smith 2003, p. 404). The mobility of labour can be seen within the context of how jobs can be easily transferred from one region to another through the process of off-shoring. On the other hand, the flexibility of labour can be interpreted within the context of how new jobs are being created and changes in labour relations. Therefore, the term “contemporary international division of labour” refers to the current state of the global economy in which globalisation has affected the process of production, the flexibility of labour and the role that hitherto undeveloped countries play in the global economy. It is important to note that contemporary international division of labour is an ongoing issue that is affecting production and distribution in the global economy. The following is an examination of how contemporary international division of labour is affecting production and distribution patterns both between and within the developed and developing worlds. Increasing Role of Developed Countries in the World Economy One of the major effects of the new international division of labour is an increase in the role that developing economies are playing in the global economy. Historically, the world has been divided into three zones, based on the economic performance of the nations in particular regions of the world and the level of political influence that they wield. Following the effects of the World War Two, the developed countries in the west formed the what was referred to as the first world while several other countries that were performing relatively well formed the second world. The third world was composed of the majority of economically weak and politically unstable countries in Africa, Asia and South America. One of the defining characteristics of countries that formed the second and third world groups is that they largely depended on exporting cheap agricultural or primary materials to the more developed countries (International Monetary Fund (IMF) 2014, p. 22). Thus, the only way in which the less developed countries participated in global affairs was via commodity trading. However, as a result of globalisation, there has been a radical shift in the balance of international trade (IMF, 2014, p. 23). Currently, countries that were less developed are developing at relatively fast rates, thanks to their increasing role in the global economy. The rise of the role of developing countries in global economic affairs is represented by the performance of a number of countries that are now collectively referred to as BRICS. The following countries make up BRICS: Brazil, Russia, India, China and South Africa. One defining characteristic of these countries is that they are currently experiencing rapid economic growth to the extent of catching up with the traditionally developed countries of the west (de Almeida, 2009, p. 2). Another defining characteristic of these countries is that they are now influencing a high level of political power in the global arena as a result of the interconnectedness of the global economy (de Almeida, 2009, p. 3). The rise of BRICS has been attributed to many factors, the most important ones being an accumulation of capital from foreign direct investments (FDI) and the diversification of the predominant economic activities in these countries (James, 2008, p. 41). The development and implementation of policies that attract FDI to these countries has created surplus capital which is a necessary factor for economic development. Similarly, the diversification of the economic activities in the BRICS economies in the form of the rise of the service sector and less dependence on exporting primary commodities has helped to increase the level of influence in international trade that these countries have. Therefore, it can be seen that contemporary division of labour, as a result of globalisation, has contributed to a shift in international trade over time. Currently, countries that primarily depended on the export of primary commodities are experiencing relatively high rates of growth because they can attract FDI and diversify their economic activities. This is changing relations between the developed and developing countries by blurring the line between traditionally developed and undeveloped worlds. The Shifting of Jobs Another important effect of the contemporary international division of labour arises from the manner in which jobs can now easily shift from one region to another as a result of globalisation. Over the last few decades, the world has been witnessing the migration of jobs from the developed countries to the less developed countries in regions such as Asia and even Africa. Corporations in the west have been outsourcing their non-core functions to some companies in the less developed regions of the world. The reasons as to why companies have increasingly embraced the trend of off-shoring jobs are many, however, one of the main ones relates to the need for companies to cut their operational costs and increase profitability (Kennedy & Sharma, 2009, p. 220). It has been noted that the off-shoring trend can be attributed to the classical problem that firms face within a capitalist system, which is how to increase profits as a way of growing capital (Todo, 2012). Thus, well-established companies in the developed countries have been forced to address the problem of dwindling profits by outsourcing their non-core functions to other organisations in the less developed regions of the world. The attractiveness of less developed regions of the world lies in their appetite for investment and availability of relatively skilled but affordable labour (Hardy, 2013). Off-shoring has had profound effects within the developed and developing worlds. Within the developed countries, off-shoring still remains an important socio-political issue in the developed world. For long, it has been argued that off-shoring by firms in the developed world has serious consequences on the local economy in the form of loss of jobs (The Economist, 2013). However, it has also been argued that off-shoring has long-term benefits on the domestic economy as a result of increased profitability and growth of the companies that are off-shoring their non-core operations. In practice, it is difficult to determine the net effect of off-shoring on local economies (Kovak, Oldensky & Sly, 2015, p. 3; Todo, 2012). Since the process largely relies on the decisions of firms, which are motivated by the need to make profits, it is difficult to assess the net effect of outsourcing on unemployment levels of the domestic economy. However, what is important to note is that as a result of the rise of off-shoring, social and political discourse in the developed world is shaped by the commitment of governments to tame the wave under what is now referred to as re-shoring. But as much as off-shoring has been blamed for the plight of workers in developed economies, it has also been identified as a problem to workers in developing economies. Hardy (2013) points out that when multinationals in developed economies outsource their manufacturing services to companies in the developing world, this process does not necessarily benefit the local workers who do the job. The case of how Chinese workers at Foxconn are exploited by the working conditions at the giant factory is cited as an example of the negative impact of outsourcing on the lives of individuals in developing countries (Hardy, 2013). Foxconn handles the manufacturing functions of leading companies such as Apple. Therefore, it is clear that contemporary division of labour has led to the rise of off-shoring among multinational companies. Large corporations in the advanced economies have been forced to outsource their non-core functions to small firms in the developing parts of the world. This practice, which is motivated by the need for the companies to keep their operational costs down and grow their capital, has spared political controversies within domestic economies as well as in the countries to which the large companies outsource their non-core functions. Increased Work Flexibility and the Decline of Organised Labour The third important effect of the new division of labour relates to the manner in which labour is now organised and the role of labour unions in the professional lives of workers. Throughout history, labour unions have played an important role in the working lives of individuals (Deveau, 2013). Although labour unions have shaped the professional lives of workers in various ways, one of the most important ways in which this has been witnessed over time is in safeguarding the interests of the workers. Jessop (2013) traces the role that organised labour has played in fighting for the rights of workers throughout the developed and the developing economy over the years. It is observed that since its birth centuries ago, the labour movement has provided a stable, predictable and reliable working environment for workers in many economies in the world over time (Deveau, 2013). However, there is a consensus among researchers that the new international division of labour has disrupted the manner in which labour was organised and the importance of labour unions (Deveau, 2013; Jessop, 2013; Tremblay, 2004). Tremblay (2004, p. 2) observes that currently, the global labour force is defined by the high level of flexibility among workers and the declining need for individuals to rely on labour unions to fight for their rights. Whereas various factors can be attributed to the high level of flexibility and the declining need for labour unions among workers in the current times, it appears that some factors such as technological changes and market dynamics have played prominent roles. On the one hand, the rising use of information and communication technologies makes it possible for workers to accomplish tasks from remote locations and communicate with each other in real time (Tremblay, 2004, p. 4). On the other hand, companies are driven by the need to shift their resources to products and projects that have the potential to succeed on the market and this means that they are constantly looking for employees with different sets of skills to help them achieve their objectives (Rodgers, 2007, p. 6). Therefore, as a result of the increasing use of information and communication technology on the one hand and the need for companies to adapt to changing market conditions on the other, it is argued that currently, labour is defined by the absence of barriers between job categories, lack of traditional hierarchies at the workplace and the rise of individuals with multiple skills (Tremblay. 2004, p. 2). It has also been argued that the decline of unionisation and the rise of highly flexible working conditions may have far-reaching effects on the state of labour in the world in the current times (Rodgers, 2007). For example, it has been pointed out that workers who are not unionised may be less productive and committed to their work than those who are unionised. It has also been pointed out that the increasing level of flexibility among workers in the current times is affecting the earning power and future of workers based on various factors like their gender, the level of skills and location (Rodgers, 2007, p. 7). Conclusion In conclusion, globalisation has altered the manner in which division of labour is currently organised. As a result, contemporary division of labour, as it is currently known, has a profound effect on production and distribution within and between the developed and the developing worlds. These effects can be summed up into the following: off-shoring, the rise of BRICS and increasing labour flexibility. The practice of multinationals shifting their non-core activities to the developing countries affects not only the domestic economies but also the economies of the developing countries. Similarly, the rise of BRICS is shaping economic and political relations between the developed and the developing parts of the world. Lastly, increased job flexibility and the decline of organised labour unions are affecting workers in the developed and developing worlds. References de Almeida, P. R. (2009). The BRICS' role in the global economy. Trade and International Relations for Journalists. Retrieved from http://www.brics.unipr.it/paper/de%20Almeida_2009.pdf Deveau, D. (2013, April 9). Why flexible and adaptability will become critical to the future organised labour. Financial Post. Retrieved from http://business.financialpost.com/executive/why-flexibility-and-adaptability-will-become-critical-to-the-future-of-organized-labour Hardy, J. (2013). New divisions of labour in the global economy. International Socialism: A Quarterly Review of Socialist Theory (Issue 37). Retrieved from http://isj.org.uk/new-divisions-of-labour-in-the-global-economy/ International Monetary Fund (IMF). (2014). Macroeconomic developments in low-income and developing countries. IMF Policy Paper. Retrieved from https://www.imf.org/external/np/pp/eng/2014/091814.pdf James, H. (2008). The rise of the BRICS and the new logic in international politics. International Economic: The Magazine of International Economic Policy. Retrieved from http://www.international-economy.com/TIE_Su08_James.pdf Jessop, B. (2013). Fordism and post-Fordism: A critical reformulation. Retrieved from https://bobjessop.org/2013/11/05/fordism-and-post-fordism-a-critical-reformulation/ Kennedy, R. E., & Sharma, A. (2009). The services shift: Seizing the ultimate offshore opportunity. Upper Saddle River, NJ: Pearson Education, Inc. Kovak, B., Oldenski, L., & Sly, N. (2015). The labor market effects of offshoring by U.S. multinational firms: Evidence from changes in global tax policies. The World Bank, Macro, Trade and Finance Series. Retrieved from, http://www.andrew.cmu.edu/user/bkovak/Kovak_Oldenski_Sly.pdf Rodgers, G. (2007). Labour market flexibility and decent work. DESA Working Paper No. 47. Retrieved from http://www.un.org/esa/desa/papers/2007/wp47_2007.pdf Smith, S.W. 2003, Labour economics. London: Psychology Press. The Economist. (2013, January 19). The story so far: Offshoring has brought huge economic benefits but at a heavy political price. Retrieved from http://www.economist.com/news/special-report/21569574-offshoring-has-brought-huge-economic-benefits-heavy-political-price-story-so Todo, Y. (2012, July 12). Effects of offshoring on home employment and skill upgrading, Voxeu. Retrieved from http://voxeu.org/article/effects-offshoring-jobs-and-skills-evidence-japan Tremblay, D-G. (2004). The new division of labour debate and women’s jobs: Results from a survey conducted in Canada from a gendered perspective. Research Note No. 2004, 10A, Tele University. Retrieved from https://www.teluq.uquebec.ca/chaireecosavoir/pdf/NRC04-10A.pdf Read More