The Politics of Global Supply Chains

Kate MacDonald

• Publisher: Polity
• Year: 2014
• Print ISBN: 9780745661711, 9780745661704
• eBook ISBN: 9780745679730
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Globalisation
• Index: Politics & International Relations

The Politics of Global Supply Chains analyses the changing politics of power and distribution within contemporary global supply chains. Drawing on over 300 interviews with farmers, workers, activists, businesses and government officials in garment and coffee sector supply chains, the book shows how the increased involvement of non-state actors in supply chain governance is re-shaping established patterns of global political power, responsibility and accountability.

These emerging supply chain governance systems are shown to be multi-layered and politically contested, as transnational governance schemes interact with traditional state governance arrangements in both complementary and conflicting ways. The book's analysis of changes to the relationship between state and non-state actors within transnational governance processes will be of particular interest to scholars and students of globalisation, global governance and regulation.

The Politics of Global Supply Chains also suggests some practical ways by which the effectiveness and accountability of supply chain governance could be strengthened, which will interest both scholars and practitioners in fields of global business regulation and corporate social responsibility. Conclusions are relevant to the business and civil society actors who participate directly in non-state governance schemes, and to state regulators whose distinctive governance capacities could play a much greater role than at present in supporting transnational, non-state governance processes.

Chapter 1

Power and Governance in Garment Supply Chains

The book begins its journey through the politics of global supply chains with a detailed examination of the global garment sector. Global supply chains in this sector have been politicized in a highly visible manner – a proliferation of activist campaigns and consumer labelling schemes bursting into the public arena from around the early 1990s. It is also a sector of the global economy that has received extensive attention from scholarly analysis of globalized production systems (Ross 1997; McCormick and Schmitz 2002; Gereffi and Memedovic 2003; Hale and Wills 2005). These analyses reflect the significant transformations of the organization of production that have taken place in this sector over recent decades.

On the one hand, the participation of countries such as Nicaragua in labour-intensive and export-oriented forms of production, such as garment assembly, has been endorsed as an important economic development strategy. By building a comparative advantage in manufacturing, countries such as Nicaragua have been able to generate significant numbers of new jobs for low-skilled workers, as well as increased export earnings. Although potential longer-term benefits in the form of industrial upgrading remain contested and elusive, access to such short-term economic benefits have motivated sustained support from the Nicaraguan government for the country's extensive participation in garment supply chains. This support has been maintained since the country's change in 2007 from a liberal-constitutionalist to leftist Sandinista administration. Despite a shift in national discourse towards the disavowal of ‘neo-liberalism’ and assertion of a ‘human development’ framework in its place (ICTSD 2010), investor-friendly policy frameworks have largely been maintained (McCallum 2011), and major export processing zones such as Las Mercedes have continued to expand.¹

Nevertheless, the benefits of expanded job opportunities have been accompanied by persistent controversy surrounding the labour and social conditions experienced by workers in garment supply chains. The majority of workers engaged in garment assembly earn low incomes and come from socially marginalized backgrounds. In the Nicaraguan garment sector, the majority of workers are young women, often single mothers, with low levels of education.² Most live in urban areas (although increasing numbers of new, free trade zones are being constructed in semi-rural areas outside the Nicaraguan capital, Managua), and they come from communities in which there are high levels of both poverty and unemployment (CENIDH 2001: 12). Those garment workers who live in communities geographically proximate to the free trade zones are often particularly disadvantaged.³

The position of structural socio-economic disadvantage from which workers choose to participate in garment production contrasts starkly with the resources and influence of large corporate retailers and brands in countries to which the garments are exported, generating highly uneven power relations within the ‘buyer-led’ global supply chains that now dominate the industry. As discussed in more detail shortly, the term ‘buyer-driven’ supply chains reflects the capacity of large retailers and brand-named merchandisers located in sites of consumption to coordinate and control production processes further down the supply chain.⁴ Such powerful buyers are then able to exercise significant influence over the terms of exchange with lower-tier suppliers, many of which are based in developing countries (Dicken 2000; Gereffi et al. 2005; Hale and Wills 2005). Analysis of the sources and consequences of economic power within the supply chain is central to understanding the dynamics of global supply chain politics in this sector – highlighting the deeply political character of supply chain power.

Making sense of the increasing politicization of global garment supply chains also requires appreciation of how these systems of transnational economic power cut across and challenge the effective authority of state-centred national governance arrangements. Part of the story here is a familiar narrative about pressures from investors and market competition placed on national governments in production locations, constraining the capacity of governments to regulate factory conditions in accordance with codified commitments. Dynamics of this kind are examined below with reference to the range of policy makers and regulators within Nicaragua who shape the governance of garment production.

Importantly, however, the challenge to traditional models of state governance goes beyond such corporate and market pressures. The forms of economic power that penetrate state jurisdictions in producing countries also smuggle in various sources of influence from government actors in other jurisdictions where stages of the supply chain are located. As the analysis below shows, important influence over supply chain governance is exercised by state actors in the home countries of foreign factory owners, as well as countries where retailing and consumption of garment exports are located. In the Nicaraguan example considered here, executive, legislative and judicial state actors in South Korea, Taiwan and the US have inserted themselves in varying ways into supply chain governance processes, generating significant forms of extra-territorial state influence over the living and working conditions of workers in Nicaragua.

As the discussion below works through in more detail, these complex dynamics of multi-level power pose significant challenges to both the effectiveness and accountability of supply chain governance. The transnational distribution of supply chain power over publicly relevant outcomes is in direct conflict with the statist logics of public responsibility reflected in state governance arrangements.

Sources and Consequences of Economic Power Within Global Supply Chains

In order to understand both relationships of economic power within global garment supply chains and their highly political distributional consequences, it is helpful to first detail structures of supply chain organization. Conventional analyses of economic power in the global economy often focus on the influence of foreign investors over governments in countries where their facilities are located. Such direct influence can certainly play an important role in shaping outcomes, as we will see. However this emphasis misses many important dimensions of supply chain power, whereby the influence of foreign investors is often overshadowed by that of companies further up the supply chain, located in countries where the products will ultimately be sold. In this sense the garment supply chain can be conceptualized within a hierarchical structure, with consumers and retailers at the top, factory-owners, traders and/or importers in the middle, and workers at the bottom.

In what follows, the book's analysis works through this supply chain structure from the factory level at the bottom, to lead buyers at the top – mapping sources of power at each level, and demonstrating how such power is wielded to influence the social outcomes in which we are interested. At each level, the analysis first identifies the ways in which relevant decision makers contribute to determining living and working conditions among workers at the bottom of the chain. It then identifies how the workers' decisions in turn are shaped and constrained by incentives derived from the choices of decision makers above them in the chain, as well as by broader influences beyond the supply chain.

Economic Power at the Factory Level: Sources, Consequences and Constraints

In analysing sources of economic power over conditions of those workers involved directly in garment production, economic relationships at the factory level are a natural place to start, since the decision makers who have the most immediate influence over workers' wellbeing are the managers of the factories employing them.⁵ Most garment factories in Nicaraguan free trade zones are foreign owned, being financed mainly by US, South Korean and Taiwanese capital, though some factories remain locally owned. The companies owning and operating these factories vary in size; many Taiwanese factories are owned by larger enterprises headquartered in Taipei, while the majority of Korean and US factories are family-owned single enterprises.

In the Nicaraguan context, the actors with the most immediate control over working conditions are factory managers. Firm management at the factory or headquarters level wields greatest control over variables such as human resource management strategies, payment systems, overtime policies, and disciplinary measures – though sometimes elements of these decisions are made at headquarters level, where factories are part of bigger company groups. These policies are then codified within each factory's Reglamento Interno, or internal rules.⁶ The extent of managerial discretion over such variables is reflected clearly in the significant differences in practices observed between firms; the differences are particularly notable with regard to labour issues such as harassment by supervisors, discrimination, limits to freedom of association, and constraints on personal freedoms such as using bathrooms during shifts.⁷

One important example of such differences at the factory level relates to denial of the right to organize. Levels of unionization in Nicaragua are certainly higher than those in garment sectors in many other countries in the region (Ministerio del Trabajo 2011: 168–75), and tactics used to discourage unionization generally less violent. Nevertheless, serious and systematic obstacles to freedom of association still exist. These involve not only traditional tactics of threatening and firing workers who attempt to organize, but also attempts by management to form management-controlled unions (sindicatos blancos) as a means of impeding the formation of more militant (Sandinista-affiliated) unions. Often the pressure on workers not to organize is unspoken, but at other times it is absolutely explicit, with the particular approach taken varying considerably between different firms:

Above all what the Korean firms don't permit is having unions. It is forbidden in the Korean firms. It is officially forbidden. According to them, unions don't work, because they turn the workers against the bosses of the firm, the employer – this is what they say. In the firm where I was working, there were about five people who tried to form a union, and this was the explanation that they gave over the loudspeakers in the whole firm, that the union is no good because above all what they do is turn the workers against the employers.⁸

Workers also describe experiencing variation between factories in deprivations related to numerous aspects of their personal and political agency within the workplace. Those problems most commonly reported by a broad range of workers (both unionized and non-unionized) include discrimination in hiring and firing, denial of access to personal and medical leave, denial of sufficient time to go to the bathroom and to eat, compulsory overtime, excessive pressure regarding levels of work intensity, and general mistreatment by company managers and supervisors, most commonly in the form of verbal abuse, but also in some cases involving physical or sexual abuse.

Factory-level decision making can also influence health and safety practices. In this regard, common problems described by workers relate not only to immediate dangers and hazards,⁹ but also to poorly designed work environments (interacting with long working hours), and poor hygiene, particularly in the bathrooms and eating areas.

At the factory level, many differences in practices clearly depend on variations in the management styles and personalities of individual managers and supervisors. However, certain variables, such as the use of particular disciplinary practices, the degree of worker ‘harassment’ by line supervisors and to some extent management tolerance for union organizing, show systematic differences along national lines. The nationality of factory ownership and management reflects both differences in organizational culture and the broader business environment in the originating investor country in which that culture is shaped. Such differences between firms of different national origin were reported widely by those within business and worker organizations within the free trade zone, and also by business communities in the US, Korea and Taiwan.

Such reported differences resonate with some of the variables that scholars of human resource management and labour relations have identified when comparing Korean and Taiwanese to US factories. These include the greater use in Korean and Taiwanese managed factories of strategies such as top-down decision making and close supervision of worker behaviour, ‘collective’ incentive structures within piece-rate payment systems, and relatively little priority given to training and career development for middle-level local supervisors and managers (Paik and Teagarden 1995). Prevailing norms within managers' countries of origin seem to translate rather directly into management practices and associated working conditions experienced by Nicaraguan workers, as many of the upper management positions within foreign-owned companies are filled by staff working in Nicaragua on relatively short postings (often in the range of two years). This helps to explain notable differences between factories, and highlights the degree of autonomy decision makers at the factory (and company headquarters) level have to shape certain conditions.

Nevertheless, there are many important dimensions of worker wellbeing with respect to which factory managers are ‘structurally’ constrained in significant ways, despite their direct decision-making powers. In particular, wages tend to remain consistently low across factories (Movimiento de Mujeres Trabajadoras y Desempleadas Maria Elena...

Table of contents

• Cover
• Title page
• Copyright page
• Acronyms
• Acknowledgements
• Introduction: The Politics of Global Supply Chains
• Chapter 1: Power and Governance in Garment Supply Chains
• Chapter 2: The Emergence of Non-State Governance: Anti-Sweatshop Campaigns
• Chapter 3: The Private Sector Response: Codes of Conduct
• Chapter 4: Dispersed Power Within Coffee Supply Chains
• Chapter 5: The Transformative Challenge: Fair Trade as an ‘Alternative’ Institutional Model
• Chapter 6: Starbucks CAFÉ Practices: The ‘Responsible’ Corporation Responds
• Chapter 7: Interaction Between Initiatives: Diffusing Change Beyond ‘Niche’ Supply Chains
• Chapter 8: Lessons and Synthesis: Power, Responsibility and Governance Beyond the State
• Conclusion: Ongoing Political Contests in Global Supply Chains
• References
• Index