Sweatshops and monopsony power – a review

Leicester is a medium-sized city in the centre of England.  It has come into the limelight in the last few weeks because of an outbreak of COVID-19 in the city, forcing a local lockdown, while the rest of England starts to ‘come out’.  Leicester has a relatively high British Asian community and many are concentrated for work in the garment industry.  And it is here that the COVID outbreak seems to have emerged.

The reason is clear. Garment workers in Leicester work out of tiny, unsafe factories or even homes, employed for below poverty wages ($5 an hour!) and they have worked throughout the coronavirus crisis lockdown. These small businesses had to carry on because there was really only one buyer, the online retailer, British Asian owned BooHoo.  Like Amazon, Boohoo has made a fortune during the pandemic with shop-based retailers in lockdown.  Its profits are registered in the tax haven island of Jersey. And it dominates the Leicester garment industry.  It’s a classic example of monopsony power.

We often see the concept of ‘monopoly’ in political economy and leftist circles as a relevant category for modern capitalism. We don’t usually recognise ‘monopsony capitalism’.  But we should.  This is where Ashok Kumar’s book, Monopsony Capitalism Power and Production in the Twilight of the Sweatshop Age fills a gap.

Whereas, monopoly implies a dominant or hegemonic seller in the market for goods and services, controlling prices and keeping out potential rivals, monopsony implies the control of the market by a dominant buyer over many smaller sellers.  The capitalist labour market is one key example, where capital exerts relative monopsonic power over workers, unless they are organised in unions etc.

The Boohoo monopsony in Leicester is repeated on an even larger scale with major retailers like Walmart in the US or Amazon globally, or manufacturers like Nike or Apple or food producers like Nescafe or Del Mar, which exert huge monopsonic power over their suppliers (in farming, garment and footwear, electronics etc).

Kumar is a lecturer in International Political Economy at the School of Business, Economics and Informatics at Birkbeck University. His book takes us to the heart of the monopsonic capitalism globally through the value chain of cheap garments and shoes in the shops of the ‘global north’ to the sweatshops of Bangladesh and other countries under the domination of the multi-nationals.

Monopsony Capitalism argues that the garment value chain globally relies on the unequal power dynamic of many suppliers and few buyers – monopsony. The result is a low level of surplus value capture at the production phase of the supply chain, which ensures chronically low capital investment in the peripheral countries’ industry.  Cheap labour and many suppliers are preserved, as opposed to the use of machinery and fewer, larger companies. Fragmentation and low capital investment in garment and footwear value chains creates low barriers to entry, resulting in bidding wars between thousands of smaller firms from around the world.  Indeed, a ‘sweatshop’ can be defined as a workplace where labour has essentially no bargaining power.

The Rana Plaza tragedy of 2013 when a massive garment factory in Bangladesh collapsed, floor upon floor, crushing many of its occupants was a catalytic moment. “The Rana Plaza disaster proved a monument to the complete and utter failure of Western activism: 1,134 workers perished.”  Consumer boycotts and campaigning in the global North against ‘sweatshops’ proved to have had no effect.

But what has happened since shows another way out of this nightmare. After Rana Plaza, the Bangladeshi unions demanded new safety conditions, similar to the way in which reduced hours and better safety was fought for in cotton sweatshops of mid-19th century Britain that Marx records. By August 2013, 45 garment factory unions had been registered with the Bangladeshi government. The unions used a ‘hot shop’ organizing model, following the trail of labour unrest from case to case, factory to factory, establishing and strengthening union footholds. An almost endless pool of small garment firms across the globe began to steadily disappear, absorbed into larger rivals or forced to merge.  Thus, Kumar argues the monopsony power of the multi-national retailers increasingly faced oligopolistic companies, driven by their workforces to demand better prices and terms.

Kumar’s book analyses workers’ collective action at various sites of production primarily in China, India, Honduras, and United States, and secondarily in Vietnam, Cambodia, Bangladesh, and Indonesia. Action by labour in these countries have “tested the limits of the social order, stretching it until the seams show, and forcing bosses to come to the proverbial table, hat in hand, to hash out agreements with those who assemble their goods.”

In these case studies Kumar reveals that there has been increasing supplier-end consolidation, raising the surviving suppliers’ share of value, and so facilitating self-investment and higher entry barriers.  Workers struggles over wages and conditions have altered the balance of economic power between the multi-nationals and the domestic suppliers.

Kumar reminds us that Marx and Engels argued that global capital would generate a global proletariat that would ultimately be its undoing. But perhaps collective worker action is the exception under capitalism. Maybe capital’s structural advantages in certain sectors, like garment and footwear, have effectively resolved the dialectical struggle in favour of capitalists.  Kumar’s case studies suggest otherwise. The garment sector (and vertically disintegrated value chains generally) are also “animated by the logic of competition, which moves inexorably in the direction of consolidation, thereby reducing the monopsonistic power of buyers. while changes in the value chain are reflected in the bargaining power of workers.”

Kumar confirms that Marx’s law of accumulation still operates, namely that capitalism must increasingly come to rely on ‘dead labour’ (technology and so on) and less and less on ‘living labour’ (workers) and that includes the peripheral ‘emerging economies’ too. Higher levels of ‘dead labour’ start to create higher barriers to entry:  Why? “Because the smaller the organic composition of capital, the less capital is required at the beginning in order to enter this branch and establish a new venture. It is far easier to put together the million or two million dollars necessary for building a new textile plant than to assemble the hundreds of millions needed to set up even relatively small steel works.”

Relying on this fundamental trend in capitalist accumulation, Kumar reckons “there is a change in the air.” In China, India, Honduras, Vietnam, Cambodia, and Indonesia many factories already have a relatively high organic composition. It becomespossible to glimpse another world where bosses come to the proverbial table, hat in hand, to hash out agreements with those who assemble their goods. When labour unions, activists, and advocates marshal their resource  – financial, moral, political, and human – to support smart, focused, bottom-up organizing in large, increasingly integrated firms, garment workers will transform their industry.”

Once barriers to entry have been established among the domestic suppliers it will be impossible to tear them down and return to monopsony power. Sweatshops occur where surpluses are limited, and production is diffuse and isolated from consumption. But competition eventually creates a centralized industry, with a few mega-firms in a few locations.  Then suppliers ascend, giving workers the high ground too.  But as Kumar says, “whether this is indeed the twilight of the sweatshop age or a new race to the bottom may ultimately depend on the self-organization and demands of the working people.”  That applies to the garment sweatshops of COVID-19 Leicester too.

12 Responses to “Sweatshops and monopsony power – a review”

  1. wiltoncm Says:

    Caro Roberts, parabéns pelos artigos. Eu os tenho publicado aqui no Brasil, traduzidos com o Google Tradutor no blog progressista do Luís Nassif, um importante jornalista daqui.

    Em relação ao ao aumento da automação, ela também não enfraquece o trabalho, na medida em que gera desemprego estrutural na produção de valor, principalmente na indústria, onde se produz a maior parte do valor?

    E isso não acaba por levar o próprio capital a uma crise final, uma vez que o valor (capital) é trabalho?

  2. vk Says:

    This may explain why the working classes of the First World countries are resorting to fascism (“populism”) instead of socialism: in their calculations, it may be more promising to try to put the Third World countries’ working classes “back to their place” (i.e. to the Belle Epoque of the social-democratic era of 1945-1975) instead of risking all-in in a communist revolution (i.e. socialism).

    • antonio Says:

      ‘’ In their calculations, it may be more promising to try to put the Third World countries ’working classes“ back to their place ”
      Yes, this is true in my opinion. On the ‘demand side’ (the working class) it is never convenient to forget the existence of the ‘workers aristocracy’ already detected in the nineteenth century by K. Marx. Today they can be aristocratic workers who make their personal and selfish calculations (the scientific literature of the egotropic economic vote endorses it), the majority of workers of the 1st world with respect to the workers of the 3rd world. And within the 1st world, the state employees and the employees of large corporations are aristocrats with respect to the rest of the workers. No, these aristocrats are not the first to join a socialist revolution. This does not mean that socialism should forget about them and should not try to win them over to their cause.
      But on the supply side of the political sub-market (the parliaments), it should not be forgotten that today it is impossible for a worker to be able to choose something other than far-right populist parties (Bolsonaro, Trump, Johnson, LePen, etc. .) and something different from soft and regressing social democratic parties (Syriza, Podemos, Labor, etc …). The capitalist class (banking, industry) does not allow it and does not finance other parties. This will happen until the Bolshevik party of the 21st century arrives, which, also in a parliamentary minority but with a civil majority, arrives to storm the skies. That disruptive political event can happen in the next 2/3 decades at most if the thesis of the revolutionary cycle is true (which it is, but that is another topic). It will be at the end of the cycle and with a large population in extreme poverty.
      Regards,

      • Wilton Cardoso Says:

        Caro,
        Eu tenho minhas dúvidas sobre a capacidade dos trabalhadores se organizarem e fazerem a revolução. O trabalho, substituído por máquinas, participa cada vez menos da produção de valor e por isso está enfraquecido. E a psique dos indivíduos, inclusive os pobres, se estrutura como capital individual, que se vê como empreendedor (não é só ideologia, mas estrutura mental).
        Neste ponto, acho que a crítica do valor está certa ao afirmar que o Marx da emancipação pela luta de classes estava equivocado. Mas o Marx da teoria do valor-trabalho está mais atual do que nunca e o capitalismo está colapsando por substituir trabalho por automação, embora só o trabalho produza valor.
        Os trabalhadores, ou estão ficando supérfluos ou são superexplorados. Mas infelizmente, sua revolta da classe se exprime como neofascista e não socialista.

    • mandm Says:

      Samir Amin theorized that China would (eventually) reach a point in the development of its productive forces where it would be compelled by the imperial powers to turn to comprador status within the US hegemonic global order or de-link and turn to full socialist development. (I interpret MR’s views are similar.). I think you believe that China has been moving in a socialist direction, even within the neoliberal system (that seems to be forcing its hand). Do you still believe that?

      • mandm Says:

        I should add that I asked the above question because I detected a strong note resignation among Brazilians commenting here regarding the neoliberal onslaught against ex and existing left regimes (and the left in general) in the Global South. Maybe that’s because I don’t speak Portuguese…

  3. Takla Makan Says:

    There is an important question about highly verticalized supply chains. If the producers are producing only to one firm, thereby, their costs are being controlled by the monopsony (the final firm who’s make the final product), etc, are they producing commodities in the classic sense? (individual producers competing among themselves in the market). Inside the factory, workers are not producing commodities, the commodity is the final product. Is it different when the production phases are outside the factory but they have a similar social relation? Thanks !

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