Abstract
Satyaki Roy’s book, Contours of Value Capture: India’s Neoliberal Path of Industrial Development, considers the process of deindustrialization in India and its implications for employment and the world of work in the country. The book impressively summarizes and describes the Marxist perspective on the absence of decent work even in the growth economies of the global South, such as India. It finds an explanation for the crippled state of the manufacturing sector in India, in “value capture” or the extraction of surplus in the labor process. Value capture entails low aggregate demand and, subsequently, low manufacturing activity, which in turn means that living conditions for the vast majority seeking work in India are poor. The distribution of the value captured in this process is decided by a “hierarchy of capital.” This hierarchy typically favors big capital over small; capital-intensive over labor-intensive sectors; design and knowledge services in the global North over manufacturing in the South; and in a newer development, finance over productive activities.
It follows that if India should overcome these challenges, it must develop labor-intensive sectors of production and lower inequality so that consumption demand from workers galvanizes the economy. The text acknowledges that this experience of India’s deindustrialization is similar to other developing countries’ and starkly different from the experience of advanced nations. It identifies that the Southern deindustrialization experience is complementary to the process of value capture in the labor process. The relatively higher value capture in the South, however, cannot be sufficiently explained by features such as labor productivity and gaps in aggregate skills of the labor force; these are treated in the text, almost as if they were exogenously determined. Instead, however, the gap between the North and South is deliberately maintained and mediated politically. Differences between the hierarchy of capitals in the global order remain unexplained by economistic factors such as the lower-skill labor force in the developing world or the depth of the capital market.
Roy reminds us that surplus extraction under capitalism has created (a) large reserves of surplus, underpaid and unpaid workers and (b) labor-saving technology. Overall, because of the first, the lack of demand in the economy lowers the stimulus for investment in productive manufacturing activity, and the second ensures that even marginal improvements in demand may never lead to expanding employment or decent work. The author points out that both the lower domestic stimulus for manufacturing and developments of technology combine with offshoring imperatives of global production networks (GPNs), such that even as some Southern countries account for a rising share of world manufacturing output, the share of manufacturing in their domestic output and employment has decreased. Yet, developed countries still account for 69% of the “value-added” or income generated in world output (p. 14), even as it only accounts for 17% of global manufacturing employment.
The text suggests that surplus extraction is higher in developing countries because of differences in the quality or skill of labor, productivity gap, the dominance of finance in the hierarchy of capital, and the ability of capitalism to rely on poorly paid, non-capitalist, and “unfree” labor contracts that are so predominant in the South, and especially in India. On the one hand, low-skill composition becomes low bargaining power for workers. On the other hand, monopoly and finance capital are able to suppress the wages of the working people.
Let us first discuss the case of the GPNs. It is no longer a matter of contestation that global manufacturing is fragmented and flexibilized. Roy explains that GPNs facilitate value capture by creating competition among countries of the Global South over lowering wages, to invite investments by multinational corporations. This competition over wages is itself the catalyst of offshoring in manufacturing, he contends, exploiting wage gaps through “labour arbitrage.” In addition, GPNs are characterized by “unequal exchange,” that is, suppression of the price of import commodities from the Global South to the North, which Roy also calls import price deflation. Unequal exchange and wage competition allow for higher value capture.
Although Roy’s understanding of GPNs recognizes their exploitative power and suppression of Southern incomes, it does not ascribe the formation of GPNs themselves to the imperialist division of the world. First, even if we isolate manufacturing in global production, the control exercised by monopoly capital in the South and the South–South competition over wages are explained only by the widespread destruction of petty production and material living conditions here, including in the rural areas where GPN production is rarely involved. Second, the ability of national governments to safeguard petty production and living conditions is compromised by the constraints placed on their fiscal capacity. This is a crucial element of the neoliberal global order that Roy’s thesis aims to unravel.
Import price deflation, then, is a consequence of the more generalized process of the suppression of incomes and erosion of the material means of subsistence, which Prabhat Patnaik and Utsa Patnaik have called “income deflation.” Value capture through offshoring manufacturing in GPNs is not an accident or an “outcome of some conspiracy”; it is accumulation through “encroachment” on Southern economies (Patnaik, 2008; Patnaik & Patnaik, 2016).
Value capture enacted by imperial encroachment is also not limited to the sphere of labor arbitrage. Indeed, amid the climate crisis, it is of critical importance to note that the environment and natural resources of the Global South also fall prey to Northern consumption and accumulation. The resource flows noted in the colonial period from India to Britain continue to the present day, especially in the neoliberal regime. For instance, Hickel et al. (2022) note that between 1970 and 2017, high-income countries were responsible for 74% of the global excess material use, whereas low-income countries were responsible for only 1%. 1 We know that agricultural and mining exports from the South are on the rise and are leading to political turmoil and coups across the world. The cumulative drain (which is their preferred term for the transfers that constitute “value capture”) from India through the colonial period and up to 2020 alone has been estimated by Patnaik and Patnaik (2021), at $64.82 trillion.
Jha and Yeros (2021) have called this the labor–nature–regulation arbitrage to consolidate the role of GPNs in the imperial appropriation of the South. The squeeze on the incomes of the vast majority of people, and their access to resources in the South, is not only accidental but a matter of design; indeed, Roy recognizes that the prevalence of “unfree” labor as informally contracted or “self-employed” labor is itself “a regime of accumulation.” This regime of accumulation is always a part of capitalism even as it deploys various juridico-political means to legitimize its use of unfree labor and includes self-employment “as disguised dispossession.”
Roy contends that in the South, such labor contracts exist “because capitalism cannot afford the ‘norms’ which it had to concede to in its “Golden Age’” (p. 120). Imperialist income deflation and immiseration, however, are separate from the suppression of wages. It provides stability to the capitalist system by preventing inflation and maintaining the value of money, and it provides a constant and cheap flow of natural resources and tropical commodities from the South to the core of global capitalism.
Similarly, Roy correctly points out that deindustrialization is at least partly caused by the primacy of finance capital over productive capital. This pushes capital to seek speculative gains from short-term investments over long-term productive ones. Roy notes that in India, the source of such capital is largely foreign, and that the depth of the stock market is still lacking relative to advanced countries like the United States. He suggests that this means that the possibility of debt-fueled consumption is lower in the nation, even as corporate activity is geared toward the interests of “absentee owners.”
Although the direct meddling of finance capital in production is critical, the text does not adequately recognize that international finance is a tool of primitive accumulation, wage repression, and the subversion of the policy space of governments. In doing so, it no longer works with monopoly capital in overt ways. Deregulation and policy space are crucial tools of finance capital in India, the force of which was perhaps most starkly noted in the 2016 demonetization exercise. It coercively (and painfully) opened up a huge new market for financial services, and the potential for data surveillance at a mass scale. Moreover, for the realm of material production, it came as a massive blow against domestic small and medium producers, and increased inequality (Chandrasekhar & Ghosh, 2018; Daya & Mader, 2018; Jain & Gabor, 2020).
In the South, the world of microfinance also provides an example through which the deepening of finance is actively used for rent-seeking, undermining public services, and ultimately increasing inequality. There are several case studies of the deleterious effects of private microfinance in the South, including in part causing a spate of farmer suicides in Andhra Pradesh (Bernards, 2022). Since several microfinance institutions provide credit for services that should otherwise be publicly provided, such as water and sanitation, Mader calls this expansion a process of “market-building,” or ultimately that of primitive accumulation over the realm of the self-reproduction of the masses in the South (Mader, 2018). Although Roy accurately notes new modes of primitive accumulation over land in India for industrial and financial use, this primitive accumulation is not dialectically linked in the text to the dynamics of international finance and global monopoly capital in their current form.
Contours of Value Capture is an important contribution to the debate on deindustrialization in the South. It correctly associates deindustrialization and the stagnation of manufacturing with the crisis of employment and livelihoods in India. It recommends, therefore, an expansion of domestic demand for goods produced in labor-intensive sectors to affect both growth and employment. The deindustrialization of India increases inequality and amounts to capture of value by those higher up in the capital hierarchy. However, if the text identified this value capture with the imperial control over the capacities of nation-states, it would be able to demystify the processes which construct the hierarchy between capitals.
Footnotes
Acknowledgements
At the time of submission, the author was affiliated with Jawaharlal Nehru University and the Global Partnership Network etc acknowledges their support.