Democratic Control of Capital

In the era of neoliberal globalisation, the mobility of capital is a major challenge for labour movements in many countries. Capital can move easily to those places that offer the best conditions for accumulation. It is gaining more power and is able to transform itself easily from tangible capital goods into liquid financial assets. More than ever, the power of capital can determine people’s lives. At the same time, governments of developing countries are offering incentives in the form of favourable policies on trade and tariffs, investment, taxation, special economic zones, and anti-union environments, to attract this capital. Consequently, there have been significant, growing inflows of capital, originating from industrialised countries including the newly industrialising economies (Hong Kong, South Korea, Taiwan, and Singapore), into Asia’s developing countries. In recent years, China has emerged as a key player with a growing number of its global transnational corporations (TNCs) investing abroad and participating in global supply chains. Other developing countries in Southeast and South Asia rely heavily on foreign direct investment in their economic policies.

This has resulted in the shift of world manufacturing from industrialised countries to developing nations in the period of internationalisation of monopoly of capital which was begun in the 1970s and has escalated in recent decades. This economic architecture that created a global production and global supply chain system has had a tremendous impact on working people. The system has hurt working people both in the core countries and peripheries. In the core, such as the U.S. and Japan, economies receive less investment and fewer employment opportunities, and wages are being driven down through globalised competition. In the U.S. the share of manufacturing in GDP has dropped from around 28 per cent in the 1950s to 12 per cent in 2010.[1] Japan has also seen a similar decrease.[2] In the peripheries, the competition between countries for foreign direct investment (FDI) and export markets is leading to the systematic establishment of anti-labour regimes to lock in comparative advantages based on cheaper, more manageable labour.

Since early 2000, Asia Monitor Resource Centre (AMRC) has been working to understand and deal with capital mobility by looking at the impact of global production and global supply chain system on workers. AMRC has been working with Asian Transnational Corporations (ATNC) Monitoring Network, through which unions and labour organisations in both capital-sending and capital-receiving countries can pursue concrete actions to improve the working conditions of workers in Asia. This strategy has a specific context, that is, to address uneven development in the region, as the full integration of Asia’s developing countries into global capitalist development from 1980s onwards was happened when neoliberalism policy was set up on the final stage. As a result, the policy has been pushed to be implemented in those Asia’s developing countries, primarily to remove all barriers in trade and finance, right in the time when developed economies were fully prepared.[3] The heavily-dependence of developing countries upon foreign direct investment (FDI) is reflected from this historical context.

As part of our efforts to grapple with the problems resulted in the development, a series of collaborative research papers and actions have been taken with various groups in ATNC Monitoring Network, and we realise that the issue of financialisation has been one of significant aspects of capital mobility that needs to be investigated.

Transnational Corporations and Financialisation

Financialisation is the term used to summarise a broad set of changes in the relation between the’ financial’ and ‘real’ sector which give greater role and domination to financial actors, institutions and motives. It has been used to encompass phenomena as diverse as shareholder value orientation, increasing household debt, changes in attitudes of individuals, increasing incomes from financial activities, and increasing international capital mobility.[4] This finance-led global economy has impacted severely on flexibalisation which has in turn been intensifying the mobility of capital. What has been happening with regards to downsizing of employment, pressure on wages, informalisation, and union busting, among others, are linked to and as the consequences of the financialisation.

The financial investors are the new master in the workplaces, who impose an extremely short investment horizon, together with sky-high expectations of returns on their investments. Shareholders make a prior request on the minimum rate of return from companies. As a result, companies are more and more required to focus on short-term goals, apply cost reductions, and carry out restructuring to serve the profit expectations of shareholders. The quantitative expansion of finance in the operation of domestic and international economies is huge.

For instance, foreign exchange transactions in the world economy have increased from US$15 billion per day in 1973 to US$ 80 billion per day in 1980, and then up to US$1,260 billion per day in 1995. Goods and services purchased in 1973 were only 15 per cent of total world trade transactions. However, by 1995 the figure fell down to less than 2 percent. It means that the explosion of 9.8 percent in currency trading has not been primarily for the purchase of internationally traded goods and services, but for financial transactions.[5] In the U.S. the total financial revenue has been drastically increased from $534 billion in 1956 to $508,456 billion in 2000. On the other hand, the GDP as percent of financial revenue has been rapidly declining from 79.6% to 1.9% at the same period. Derivatives trading – mostly futures contracts on interest rates, foreign currencies, treasury bonds, etc. had reached a level of $1,200 trillion, $1.2 quadrillion, a year. By comparison, U.S. GDP in 2006 was $12.456 trillion.[6] In addition, the international financialisation has resulted in net capital flows from developing to developed countries, thus imposing substantial costs on the former, while subsidising the U.S as leading issuer of quasi-world money.[7] Many studies further elucidate this phenomenon, showing that the profit of financial corporations has dramatically increased, surpassing the profit of non-financials corporations.

Financial transactions in the global economy are now mainly speculative.[8] A statistic shows that the global economic activity in 1971 was valued at US$1.4 billion per day, where 90 percent of it was for the real economy and long-term investment, while just10 percent was for speculative transactions. However, by 1990, the value had shifted dramatically: Only 10 percent of all financial transactions involved aspects of the real economy and long-term investment, and 90 percent can be said to involve speculative transactions. Other statistics have shown roughly the same figures. As recorded by New Internationalist, in 2000 alone, 95 percent of the US$1.5 trillion in global financial transactions was speculative; 80 percent of that sum could easily move out of a country within one to seven days, and 40 per cent could leave in less than two days.[9] Consequently, there has been also a qualitative expansion of the role of financial institutions, i.e. the transformation from being a servant of non-financial transactions to being a master of them, accumulating capital for their own profit through financial activity. This financialisation, which stands for the rapid growth of the sphere of financial circulation, was begun in the late 1960s in the U.S, then in Western Europe and elsewhere.

The Power and Network of Corporations

Searching for the best places for capital accumulation and driven by their financial corporations, U.S. TNCs were the first movers, but TNCs from other countries soon adopted the same cost-cutting strategy. In 1971, U.S. TNCs had 1,337 foreign affiliates, while Japanese and German TNCs had only 13 and 80, respectively. However, by 1983, the number had rapidly increased to 1,339 (U.S), 64 (Japan), and 241 (Germany), and in 1998 the totals jumped to 2,901 (U.S), 2,296 (Japan), and 1,764 (Germany).[10]

Although Asian TNCs from China, South Korea, Taiwan, and Singapore have grown in number and strength, Western TNCs including those who are operating in Asia still dominate the global landscape in the 21st century, due to their power and exclusive network of financial firms. Acting as global agents and providing the source for investment capital, Western financial corporations have monoplised the international ownership network. In fact, TNCs do not carry out their business in isolation but are tied together in an extremely entangled web of control. Vitali S (2011) [11] found that the top ten nations with the greatest number of powerful financial corporations which hold and control a global network are headquartered in the U.S. (163), Germany (101), U.K. (59), France (53), Canada (38), Japan (35), Italy (34), China (34), Netherlands (33), and Sweden (18).

In order to make their operations run more smoothly and easily, the corporations promote bilateral agreements or investment treaties. As of 2007, there were roughly 250 free trade agreements in effect, covering more than 50 percent of world trade.[12] These Free Trade Agreements have been actively promoted by the firms to remove trade barriers for the further expansion of capital. Governments in developing nations continue to facilitate capital by maintaining low-wage policies based on export processing and supply chain models, locking their country into low-added value production.

Series of Research Papers on Capital Mobility

The research papers chosen for this publication were presented at a meeting of researchers into capital mobility, organized by AMRC and held in the Philippines, 28-29 September 2010. The meeting was part of an attempt by AMRC and other labour groups in the ATNC Monitoring Network to identify the basis for a new solidarity between workers in Asia. On this occasion we presented research papers on Japan, China, the Philippines and Thailand. The concept and impact of financialisation on the region was a new topic resulting from these studies and has given rise to additional research which will be undertaken later. However, the discussion shows general impact of financialisation in terms of the massive flexibilisation and informalisation of workers in the region as illustrated in each chapter.

Japan’s Direct Overseas Investments and their Impact on Asian Workers

In their research paper entitled “Trends in Japan’s Direct Overseas Investment and its Impact on Asian Workers,” Kaneko Fumio and Tono Haruhi investigate Japan’s overseas investment using case studies on Toyota and Panasonic as their primary research. The authors explain that the Japanese economy has remained in a slump since the 1990s, and the number of workers in the manufacturing sector has been declining. During the same period, the number of part-time and irregular workers has grown, resulting in a sharp decrease in the number of full-time or regular workers. Under these conditions, Japanese companies are steadily increasing their direct overseas investments, resulting in an increase in the number of workers working for Japanese firms in many countries.

For Japan’s auto industry, China, India, and Brazil have emerged as important new markets. And as overall sales in Asia suffered the least impact from the 2008 global financial crisis, Asia has overtaken the U.S. as the principal market of Japanese automakers, allowing them to consolidate their supply and market networks in the region. On the other hand, the anti-labour strategy of these companies, including the irreguralisation of the labour force, continues. In the case of Toyota, its biggest production base is in North America, and production in Asia has decreased in 2010, except in Thailand where it has an annual production of 400,000 to 500,000 units. Toyota has also disclosed new business strategies, including the production of eco-cars following the 2008 crisis. The crisis has caused a 54 percent decline in the quantity of car production, as the market in America could not absorb existing output. Regarding FDI, Japanese capital in the automotive sector has decreased globally. Following the 2008 crisis, Toyota announced “the planned dismissal of 3,000 regular workers,” and afterward other Japanese TNCs started to dismiss workers. In Japan alone, around 7,000 non-regular workers in Toyota's main plant and domestic subsidiaries were laid-off. Workers in parts-suppliers have also lost their jobs.

Meanwhile in the electronics industry, Japan has taken more direct and immediate action, the closure of plants and dismissal of workers, in both domestic plants and abroad. Japanese makers of electronics have based their offshore production in Malaysia, Indonesia, Thailand, and Philippines. They have also expanded into China and Vietnam, and built marketing strategies to tap the newly emerging markets in the BRIC countries. However, these networks, dependent on external funding, are highly vulnerable to a capital turnaround. In 2008, the number of workers in Japanese electronics companies in Asia decreased. There has also been a decreasing number of those employed in Japan which has been referred as industrial hollowing out. Companies, such as Panasonic, suffered a sharp decline in 2007, and subsequently announced plans to shutdown its various offshore/domestic branches. Panasonic began a new strategy of focusing on eco-friendly product and the promotion of solar energy. In the region, the investment has shifted from ASEAN countries to China. Trends in Japanese FDI in Asia – both in electronics and the automotive industry – show the significant role of China in the current global economy.

China’s Going Global Strategy

The second paper highlights China’s going global strategy. Although China has been the recipient of huge amounts of foreign direct investment in the past 25 years, it has also begun to invest in other countries. China has been seeking new markets, securing resources, and obtaining technology as well as brands. The country commenced its overseas investments in the late 1970s, promoting its state-owned and subsidised companies around the world. Its overseas investment can be divided into three phases: The first from its beginning in 1979 until 1991; the second from 1992 to 1998; and the third from 1999 to the present. China’s FDI escalated after 2001 and a steadily rising trend can be seen from 2005 onward.

However, official data on China’s outward investment appears to be understated. There is also a lack of transparency and many irregularities regarding Chinese companies’ overseas investment. Figures on imports by trading partners show large discrepancies with official Chinese figures on the same trade. However, what is obvious is the impact of this strategy on Chinese workers. Official government statistics show that urban household consumption in the period between 1981 and 2005 increased, while in the rural households it declined. Thus, it has added push factors for rural Chinese people to migrate as labour to industrial zones across the country.

China has become a crucial manufacturing and capital-sending/originating country in Asia and other regions. Since there is a lack of transparency, it is likely that these funds could be sourced from social security funds, in which workers have made a significant contribution. While there are cases in Africa where Chinese investors are criticised for being aggressive and extractive, at home Chinese workers are suffering from exploitation, working in sub-standard conditions for low wages and without any type of social protection. The major challenge is that the most of these migrant workers within China are not easily organised.

Capital Mobility in the Philippine Automotive Industry and its Impact on Workers

The third paper discusses capital mobility in the Philippine automotive industry and its impact on workers. It describes the many links that the Philippine automotive industry has to the global auto assembly and auto parts industry. However, for the most part the domestic industry has been unable to benefit from trade and investment liberalisation measures, aimed at developing it over the past 60 years. At the same time, as a player at the lower end of the parts supply chain, the industry has often borne the brunt of negative trends in the global industry. The major manufacturers (OEMs) in the global auto industry, after years of unresolved overcapacity problems and heavy debt levels, were particularly vulnerable to the sharp downturn in the global economy in 2008-2009. Adding to these problems were a contraction in market demand and rising costs derived from higher energy and raw materials prices, pressures to address climate change issues, and consumer demand for the personalization of motor vehicles.

These problems were passed on to the subsidiaries of the OEMs and their parts suppliers, along with an intensification of the trend to transfer more responsibility for R&D and its attendant costs onto the balance sheets of the partners and parts suppliers. Additionally, the Philippine industry, whose only significant comparative advantage among ASEAN producers had been its low labour cost, was made more vulnerable to trends in the international economy by the adoption of the ASEAN Free Trade Agreement (AFTA) and other trade liberalisation pacts.

Despite attempts to put in place protectionist measures for the automotive industry, the local industry remained weak and underdeveloped, mainly due to limited domestic demand (due to slow growth in per capita incomes) which resulted in a diseconomy of scale among local producers. While local demand growth remained low, there was little impetus for sizeable domestic investment in the technology and supporting industries needed to make it competitive both at home and abroad. A total of 124 auto firms, both local and foreign, were surveyed and classified based on their supply chain role and ownership. Included in the sample were 14 subsidiaries of Asian auto giants, including Toyota Motor Philippines, Honda Cars Philippines, Mitsubishi Motor Philippines and Isuzu Philippines. There are also companies that only distribute CBUs (completely built-up), assembled outside the country, namely South Korean firm Hyundai Asia Resources, Inc. and Chinese company Kama Trucks. Purposive sampling was used, based on an official list of automotive firms from government agencies and major industry groups and chambers.

Based on the findings, the local automotive industry is shown to carry out low technological production processes and produce low value-added complimentary auto parts. Component specialists and integrators comprise the majority of all the auto firms sampled, with products and services ranging from stamping and molding to the manufacture of transmissions, car seats, car seat reclining adjusters, mufflers, brake discs, water pumps, carpets, molded rubber parts and other non-core automotive parts. The nature of underdeveloped production in the automotive industry is defined by foreign investments flowing into the country, which in most cases have not resulted in technology transfer. In recent years, manufacturing activities of existing Asian TNCs in the country have barely expanded, while the importation of CBUs continues to surge, especially Chinese auto imports. There had been no new investments to the automotive industry during the past decade, save for the foreign investment in motorcycle production. Should the trend continue, Filipino workers are bound for mass retrenchment and flexible labour schemes will worsen as companies downsize their operations. The final section of the report details a number of recent labour issues, including union busting action and serious health and safety issues in two companies, Toyoto Motor Philippines and domestically owned F-Tech Philippines, which produces parts for Honda and other auto firms.

Capital Mobility in Automotive Sector in Thailand

The last chapter describes capital mobility in the automotive sector in Thailand. Like many other Asian developing countries, Thailand has experienced massive trade and investment liberalisation. In particular, since early 2000 in compliance with the World Trade Organization’s Trade-related Investment Measures, Thailand has eliminated its local content requirement programme. The impact has been felt especially in motorcycle and automobile engine production. Additional moves toward further liberalisation followed, particularly the introduction of an import tariffs reduction schedule. As liberalisation in the automotive industry was enforced and coupled with investment incentives for business, major automakers from around the world established production facilities in a number of sites in the country.

As a result, Thailand has become one of the largest automakers in the region. The paper describes the map of production of the automotive industry, its international and domestic markets, production network, and the conditions faced by workers and labour unions. It also illustrates the vulnerability and precarity of outsourced and sub-contracted workers and other workers in this sector, who are vulnerable to being laid-off. As far as capital flows are concerned, this report describes foreign direct investment in the sector, portfolio investment, and lending from financial institutions such as the Japanese Bank for International Cooperation (JBIC), co-financing from the Bangkok Bank, and co-financing with Japanese and Thai banks. The author has found that the major players in the sector are multinational firms, including Honda, Toyota, Isuzu, General Motors and the Auto Alliance, a coalition of 12 car and light truck manufacturers.

Democratic Control of Capital

Analysing these reports, we have found that capital mobility and its aspect of financialisation have become the major and underlying factors of the precarity of workers. The papers in this volume illustrate that workers’ collective bargaining power has declined which can be seen in the intensification of irregularisation, union busting actions, company closures, and massive dismissal of workers reported across the region. In many cases, this condition has resulted in the weakening of militancy of workers in countries that used to be dynamic actors in the labour rights movement.

Capital mobility which has been intensified by the process of financialisation has brought about greater lost of workers’ control over capital. In fact, not all foreign capital will exit countries that restrict them with regulation. Risk of capital flight does not apply equally to all corporations. In many industries, including the automotive, production requires significant initial investment in dedicated capital equipment, and relocation is very costly and time consuming, therefore it would not be undertaken lightly. Nonetheless, the collusion of state and capital in the undermining of the legal mechanisms protecting the working people is obvious. The efforts to democratically regulate capital have always been impeded by the state and capital collusion for the sake of capital accumulation.[13]

Furthermore, companies have been driven to raise a maximum profit through the elimination of productive capacity and employment by strategies including restructuring and cost-cutting to reduce jobs and eliminate productive capacity. There are cases where productive capital has been invested into speculative financial capital. These strategies have been executed for the purpose of generating cash for share buy-backs to further boost share prices, which firms often have taken out loans to buy-back shares to increase shareholder value.[14] Financial markets today directly give an incentive to companies for reducing payroll through closures, restructuring and outsourcing. Needless to say, workers in virtually all sectors face the threat of rapidly changing ownership and the imposition of restructuring plans and short-term targets that are based on a financial market logic that places no value in real production, productivity or jobs.

Ways forward

The mobility of capital and the financialisation of economy are not a natural, unidentified process arising from finance and technological advancement or more rapid global information flows. Rather, it is a political project involving the active intervention of both global corporations and national governments by imposing immense range of new legal mechanisms and regulations serving their interests. This political project, therefore, should be the first agenda for unions to be dismantled, by promoting new legal mechanism and regulations to subordinate capital to people and to the democratic requirements established in international human rights standards.[15]

Second agenda is to increase workers’ collective bargaining. As employers become less tangible and employment relationship is increasingly disguised, the corporate has been much powerful vis-à-vis workers in generating social destruction and generalising insecurity. In this situation, unions need to enforce their collective bargaining with the employers by organising and mobilising working population in new ways to make the employer visible.[16]

Those efforts need to be put into perspective that the logic of capital accumulation has been extended to the level of society all over the world, in urban and rural, which was previously restricted within the factory or industrial zones in advances countries. Informalisation of labour now has been growing in all sectors, including to those who work in formal sectors. Along with informal workers, the irregular status of outsourced, casual and contract worker has been integrated into the circuit of capital. In addition, it is also important to be put into unions’ perspective that the financialisation has also been extended into individual life. The financial firms have been socialising the risks by disciplining society of taking risks. This has been the global agenda of financial corporations by undertaking financial literacy programs promoted by International Monetary Fund (IMF). The primary purpose of the program is to discipline the uniformed poor how to behave in a way that makes public or state regulation obsolete and enables the solution of the problems by market forces. As IMF mentioned in its report:[17]

"Overall, the transfer of risk from the banking sector to non-banking sectors, including the household sector, appears to have enhanced the resiliency and stability of the financial system - mainly by widely dispersing financial risks, including throughout the household sector. Policymakers may now need to take the next logical step by helping households to improve on their financial education and to obtain quality advice and products necessary to manage their financial affairs. In fact, there is a growing consensus, in both the public sector and the financial service industry, on the importance of promoting the financial education of households”.

Given that fact, other political agenda of unions and working population would be the resistance to risk shifting: a struggle for public housing, public pensions and public education, among others. However, such stands represent not a defense of the state as states themselves are integral to the risk-shifting process, but an attack on capitals' new frontier of accumulation. The awareness of the commodification of risk should be borne in mind that all struggle against risk shifting, be they over wages and working condition or pensions, mortgage repayments and bank fees are all struggle in the site of capitalist production.[18] Above all, those efforts require a unifying element of struggles from working population so that it can contribute a global context and impact. This “unifying element in all struggles against capital,” as Michael Lebowitz put it rightly, “is the right of everyone to full human development”.[19]

Last but not least, by providing this publication along with other efforts in the ATNC Monitoring Network, we hope that workers are able to play a significant role in building the democratic control over the state and capital, in order to reclaim their dignity and rights. We also hope that this volume can provide workers with a better understanding, and promote further discussion among those who want to see a continual improvement in working conditions for workers across Asia and beyond. ***


[1] Bellamy-Foster, John, McChesney, Robert W., Jonna, Jamil R., “The Global Reserve Army of Labor and the New Imperialism”, Monthly Review, Vol.63 No.6 November 2011, p.27-29.
[2] See Kaneko and Tono’s contribution on Japan in this volume.
[3] Dae-Oup, Chang, Capitalist Development in Korea: Labour, Capital and the Myth of the Developmental State, London: Routledge, 2009. p.122.
[4] Stockhammer, Engelbert, “Financialization and the Global Economy”, Working Paper Series No 240, Political Economy Research Institute, November 2010.
[5] Kotz, David, “Neoliberalism and Financialization”, paper published for a conference in honour of Jane D'Arista at the Political Economy Research Institute, University of Massachusetts Amherst, May 2-3, 2008.
[7] See Lapavitsas, Costas, “Finansialisation Embroils Developing Countries”, Papeles de Europa 19 (2009): 108-139.
[8] Kotz, David, loc.cit. By definition, almost all investment activities involve speculative risks, as an investor has no idea whether an investment will be a blazing success or an utter failure. However, some investments are more speculative than others. For example, investing in government bonds has much less speculative risk than investing in junk bonds, because government bonds have a much lower risk of default. See
[9] New Internationalist, February 2003, p.9.
[10] Hart-Landsberg, Martin, “Capitalism, the Korea–U.S.Free Trade Agreement, and Resistance”, Critical Asian Studies 43:3, 2011, p.320
[11] Vitali S, Glattfelder JB, and Battiston S, “The Network of Global Corporate Control”. PLoS ONE 6(10): e25995, 2011. Available on:
[12] Hart-Landsberg, Martin, loc.cit., p 323
[13] See also Mc’Obrien, Robert, and Williams, Marc, Global Political Economy: Evolution and Dynamics. London: Palgrave Macmillan, 2010, p.214-6.
[14] Stockhammer, Engelbert, loc.cit.
[15] Rossman, Peter, and Greenfield, Gerard, “Financialization: New Routes to Profit, New Challenges for Trade Unions”, Labour Education, Quarterly Review of the ILO Bureau for Workers’ Activities No.142, 2006, p.9
[16] Ibid. p.8.
[17] IMF, “Global Financial Stability Report”, April 2005. p.5. Available at
[18] Bryan, Dick, and Rafferty, Michael, “Deriving Capital’s (and Labour’s) Future”, in Panitch, Leo The Crisis This Time: Socialist Register 2011, New Delhi: Left World Book, 2010.
[19] Monthly Review, Vol. 63, No. 6, November 2011, p.46-51.
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