Empowering Labor? Analyzing the Political Effects of Global Value Chains

• In Event: Emerging Challenges and Political Opportunities in a New Globalization Era

Abstract

Throughout the 20th century, multinational corporations (MNCs) played a significant role in diminishing the political influence of labor. Empirical studies confirm that MNCs exert a more pronounced impact on national politics and policies than domestic firms; indeed, MNCs have an extensive track record of advocating for domestic and foreign economic policies that are believed to erode wages, labor rights, and the negotiation strength of unions. Does this pattern persist today? Building on instrumentalist theories of the state, we hypothesize that global value chain (GVC) expansion toward developing countries provides labor in developed nations more political ‘room to move’. US-based lead firms engaged in deeply fragmented supply chains with less developed countries (LDCs) have fewer incentives to resist labor politics and lobby governments to constrain the expansion of labor-friendly policies in home countries. Among MNCs operating in manufacturing industries, preliminary results show that the growth in US upstream import exposure to developing countries results in a negative and statistically significant effect on corporate resistance to pro-labor policies. This suggests that as the demand for intermediate inputs shifts from US suppliers to developing country producers, US MNCs in manufacturing are less likely to get involved in domestic labor politics. These results underscore an understudied positive consequence of the global fragmentation of production on labor-capital dynamics.

Authors

• Niccolo W. Bonifai, Georgetown University

• Nita Rudra, Georgetown University