For sources, you may only use readings assigned in class.Follow instruction and Provide me with plagiarism report Question is attached below

Copyright © 2019 by Intan Suwandi All Rights Reserved Library of Congr ess Cataloging-in-P ublication Data available from the publisher ISBN paper : 978-158367-781-0 ISBN cloth: 978-1-58367-782-7 Typeset in Minion P ro and Br own MONTHL Y REVIEW PRESS, NEW YORK monthlyr eview.org 5 4 3 2 1 Contents Preface 1. The Hidden Abode of Global P roduction 2. Labor -V alue Commodity Chains: Power and Class R elations in the W orld Economy 3. Flexibility and Systemic Rationalization: Contr ol in Labor - Value Commodity Chains 4. “ W e ’ re Just a Seamstr ess ” : Case Studies of Two Indonesian Companies 5. The New Economic Imperialism: L ooking thr ough the Eyes of the Global South Appendix 1: Statistical Notes Appendix 2: Notes on the Methodology for the Case Studies Notes Inde x To K eagan Arkatedja, my ﬁery Red Preface AS A CHILD LIVING IN JAKAR TA , Indonesia, in the late 1980s, I was familiar with the blatant inequalities that characterized the city . Mansions built right next to the slums wer e something familiar, although I lived in neither . The presence of poverty was everywher e. I remember vividly seeing an old man ridden with lepr osy pulling a cart full of blocks of ice, every single mor ning on my way to school. Or a classmate, sitting right ther e next to me, wearing socks that wer e full of holes and a unifor m with faded colors companies that are catering to multinational corporations in labor -value chains, I wish to deliver an analysis of such chains by adopting the str engths of the various appr oaches I have discussed so far. 4 — “ We ’ re Just a Seamstr ess ” : Case Studies of Two Indonesian Companies I know that the sales department is supposed to service customers, but we also need to educate them, so that our company can run smoothly . This way, it ’ s not always the case when a customer tells us to do A, we do A. If they want B, we give them B. As it is now, we only follow their lead, and because we have a lot of customers, we have to run all over the place. — S TAR I NC . E XECUTIVE That ’ s why, in management, we can ’ t aﬀor d to be vague. We ’ re not supposed to . We must be strict. If yes, say yes. Be clear … . It ’ s not easy to manage human resour ce … . We must be car eful; if we mak e a mistak e in our decision, that ’ s it. All would go to shambles. Work ers would become uncomfortable, and ﬁnally, they would reach out to a thir d party, to a labor union. Then [chaos] would ensue. — S TAR I NC . E XECUTIVE IN A 2016 ARTICLE WRIT TEN BY an Asian Development Bank economist, Indonesia is hailed as a country with “ dynamic, youthful labor ” that has become “ a magnet for for eign investment ” and “ a driver of economic growth ” over the last twenty years. Indeed, as mentioned previously, Indonesia has been a hotbed for dir ect for eign investment, with FDI net inﬂows generally showing an upwar d trend for a few decades af ter the 1970s, with only a few downtur ns, especially following the 1997 crisis. And when there was a decr ease, such as the recent one that occur red in 2018, the Indonesian gover nment quickly responded by enhancing incentives for investors with an objective of attracting mor e foreign investments, such as revamping the “ tax holiday scheme ” by lowering the limit for eligibility in corporate income tax e xemptions, including mor e industrial sectors that would be eligible for the incentives, and providing a “ speedier application process ” for such incentives. 1 In addition to FDI, Indonesia holds the thir d place — “ defeated ” only by China and India, although the percentage is much lower than these two countries — in shar e of all jobs in global commodity chains. This suggests that Indonesia has also become a destination for the Low-Cost Country Strategy, or global labor arbitrage, wher e local companies produce materials or products as suppliers for for eign-based companies, including multinational corporations. Nik e Corporation is an example. It moved its pr oduction from South Kor ea to Indonesia in the 1980s, befor e it pulled out and moved to China, in its relentless quest to ﬁnd the lowest unit labor costs. 2 Several points can be evaluated her e. The ﬁrst is in relation to the claim pr oposed by systemic rationalization scholars and by Har rison regar ding the heightened competition that is said to drive the emer gence of production networks or commodity chains. The so -called competition is not in the for m of what these scholars imply in their discussions: it is not based on a system wher e everybody — big and small ﬁrms in both Global North and Global South — is engaged in ﬁghting amid competition. Dependent suppliers in labor -value chains, due to their small size and lack of power, may have to face such a heightened competition to get “ high-class ” multinational customers, for e xample, but it is a diﬀer ent story for these very high- class customers themselves. Even though it may be true that the world remains competitive for corporations in some respects, “ the goal is always the cr eation [or] perpetuation of monopoly power — that is, the power to generate persistent, high, economic pr oﬁts thr ough a mark up on prime production costs. ” 86 Systemic rationalization and lean, ﬂe xible production are not mer ely new management strategies to be more economical, just as global labor arbitrage is not only an imperative to sear ch for eﬃciencies needed for survival. Viewing it within the conte xt of the oligopolistic nature of monopoly capital, it is an attempt to extract surplus fr om work ers in places wher e they can be superexploited. In the conte xt of labor-value chains, these ar e mostly work ers from the Global South. But the classic example of Indonesian low-wage work ers, mostly women, sewing clothes or assembling electr onics for multinationals in sweatshops located in Export Processing Zones, is not the only way that Global South countries ar e incorporated into globalized pr oduction. Some variations exist; among them ar e the two Indonesian companies that are the subjects of case studies her e, Java Film and Star Inc. 3 Both ar e B2B (business-to -business) companies that are often refer red to as companies that belong to the “ capital-intensive ” category, as opposed to “ labor -intensive ” industries such as textiles and electr onics, although the number of workers varies accor ding to diﬀerent segments of their production. Java Film is a plastic manufactur er. Their plastic, known as ﬁlm, is usually sold as a material for “ ﬂe xible pack aging ” used for a variety of FMCG (fast-moving consumer goods, also known as consumer -packaged goods) products, from cigar ette wrappers to shampoo labels to food packages. Their customers can be (1) the companies that produce cigar ettes, shampoo, and food varieties, to which they sell the ﬁlm directly; or (2) companies that serve as converters, that is, converting companies that put logos, texts, etc. on the plain ﬁlm and transfor m them into labels used for packaging. Star Inc. is an example of this latter type. They buy materials fr om companies lik e Java Film and custom- print them. Depending on the customers ’ or ders, sometimes the ﬁnished goods produced by Star Inc. are in the for m of printed plastic ﬁlm, or pack aging “ bags, ” such as standing pouches for cooking oil. So it is possible that Java Film and Star Inc. have the same customers, and they of ten do . Included in their list of customers are several giant multinational corporations. Most of them are based in the triad — the United States, Wester n Europe, and Japan — wher e they export their goods dir ectly (or, in a very few cases, to their subsidiaries in neighboring Southeast Asian countries). This portion of their production is a straightforwar d example of these companies ’ participation in labor -value chains. They supply to multinational corporations in the Global North by e xporting the pack aging materials used by the brands owned by these multinationals, to be consumed in the home mark et. In addition, there are variations in the destinations of these pr oducts once they are ﬁnished. Most of the ﬁnished goods (appr oximately 70 per cent for each company) are sent to other factories, also in Indonesia, that pr ocess the ﬁnal products, wher e they ﬁll the packaging with the appropriate content. There are variations in this portion as well. If the customers are local (some of their customers are big Indonesian conglomerates), the ﬁnished pack aging is sent to their customers ’ factories. If the customers are multinationals, it is sent to the multinational subsidiary in Indonesia. After the pack aging is ﬁlled with their products, these multinational brands are then exported somewher e else, including to their home market, by the subsidiaries. A large portion of these brands, however, are sold dir ectly to retail within the national mark et. The executives I interviewed told me that this practice — selling the pr oducts wher e they are pr oduced — is a common strategy for giant multinational corporations, in an eﬀort to minimize the risks and cut production costs. Obviously, it is a much mor e cost- eﬃcient option compar ed to producing these products in the countries wher e the multinationals are located and then exporting them to their mark ets abroad. Export orders are deemed important and signiﬁcant for these two companies. Although the shar e of exports in their pr oduction output is not as lar ge as the domestic component, they assign special managers — whom I also interviewed — to deal with exports. R egar dless of this fact, even though Java Film and Star Inc. do not e xclusively engage in dir ect exports and their pr oducts are also consumed in Indonesia, as we shall see, the main customers who or der these pr oducts include big multinationals and, due to that, the companies deal with many issues related to ﬂe xible production driven by dominant multinationals, even when the multinationals are repr esented by their subsidiaries. The operating procedur es are the same in their pr oduction of pack aging for multinationals, whether the goods are for export or for the local mark et. Their business arrangement with multinationals is key her e, and it is their relationship with their multinational clients that will be the focus of this chapter . Regar dless of the diﬀer ence in the ﬁnal destination of their production output, these companies are still subject to the same processes that characterize systemic rationalization and ﬂe xible production. They are thir d-party subcontractors that supply to multinationals, while they also have their own suppliers, both national- and foreign-based. In this sense, they tak e the role of dependent companies within labor -value chains. The case studies of these companies ar e not meant to serve as a generalization, but rather as a complementary analysis that can help pr ovide a concr ete pictur e of what actually happens at the factory plants where commodities are pr oduced. Though ther e are alr eady plenty of academic analyses as well as jour nal reports on how factories in the Global South ar e run and how this aﬀects their work ers, in this study I present the viewpoint of management of two dependent companies to examine their relationship with multinational customers as well as with their workfor ce amid the processes of systemic rationalization and ﬂe xible production that gover n this relationship. Their views give us a window onto the companies ’ position within labor -value chains: as a r epr esentative of Global South capital, which, on the one hand, is subor dinate to Global North – based multinationals but, on the other hand, is exploitative of its own labor . C ONTROL OF T ECHNOL OGY Technology is a central component of pr esent-day labor - value chains. The development of technology, particularly information technology, allows production to be done outside the cor e companies but with contr ol largely exer cised by them. Both systemic rationalization and ﬂe xible production theories reject the idea that the supposed decentralized pr oduction networks or commodity chains oﬀer a mor e egalitarian envir onment for small ﬁrms. This, of course, holds true on the global level as well. Examples from Java Film and Star Inc. illustrate this situation. As dependent suppliers, they lack contr ol of many aspects of their operations, as we will see. One of the most important aspects is technology . Viewed thr ough a critical lens, even when the companies see technology as their way to excel in their respective industries, their business relationship with their customers, especially multinationals, suggests that at the end of the day the contr ol over technology is still held by the latter . Thus, it would be very diﬃcult for dependent companies to have signiﬁcant autonomy in terms of their technological development and innovation. Java Film and Star Inc. ar e not the gar ment, sneak ers, or electronics factories depicted in various studies, journals, or campaigns about the devastating impact of globalized production on assembly work ers, mostly women. Most of their executives diﬀer entiated their companies from those in labor -intensive industries and emphasized their technological and R & D (Resear ch and Development) components. Inside their factories — except in the few segments of their pr oduction sites wher e some form of assembly lines still exist (although they ar e nothing lik e what one would ﬁnd in Fo xconn plants, for e xample) — you would only ﬁnd lines of machines working automatically, with a few work ers here and ther e across the shop ﬂoors, the majority of them men. 4 These machines are operated remotely fr om a room ﬁlled with computers. Of course, labor still plays a major role in these two companies, and labor pr ocesses are subject to contr ol and working conditions can be problematic. But seen from “ outside, ” what comes to mind is the idea of high- tech, moder n factories that are neat and clean. One Java Film e xecutive even told me, “ I can conﬁdently say, we ar e the cleanest [factory] in Indonesia alr eady … . When our machine suppliers ’ technicians visited us from Ger many, they said, ‘ Wow, you ’ re really clean. ’ ” A t the Star Inc. plant, one can visit their R & D oﬃce and ﬁnd a moder n laboratory equipped with high-tech tools. The point is not only that these factories can be consider ed exceptional in ter ms of their cleanliness — these two factories produce plain ﬁlm or pack aging materials for a lot of food companies, so it follows that hygiene is an important factor — but also that top management claims that their companies excel in technology and R & D. In fact, both Java Film and Star Inc. see themselves as players in the niche mark et of their respective industries, a specialty that focuses on “ high-end, ” “ high-mar gin ” products. In the case of Java Film, this means that, with very few e xceptions — in cases wher e they produce low-end products “ just to keep the relationship going with certain customers ” — they do not pr oduce what they call “ commodity products ” lik e plastic bags. They only produce specialized products, lik e plain plastic ﬁlm that serves as material for cigar ette packages or food products (such as snacks or tea bo xes), or laminating material for magazine covers or smartphone bo xes. These pr oducts are consider ed high-end for at least two reasons, accor ding to the Java Film e xecutives: either (1) their speciﬁcations cannot be easily pr oduced by just any plastic company, or (2) even though the speciﬁcations are not that special, the pr oducts are designed speciﬁcally to ﬁt well with their customers ’ machines. For Star Inc., “ high-end ” (or “ middle-high ” ) pr oducts are related to the comple xities of the product materials; for example, pack aging that is made from aluminum foil, a material that is appar ently diﬃcult to handle. For both companies, focusing their pr oduction on such highend products is above all a strategy to survive the competition within their respective industries, thus reducing the scope of their competition. Java F ilm e xecutives of ten expr essed their inability to compete with Chinese and Indian plastic manufactur ers due to their scale. As one of them said, “ A lot of the big Indian and Chinese manufacturers that are our competitors, they have a lot of lines, lik e 15, 16 machines, big ones. But they sell very basic ﬁlm, like plastic bags … . We don ’ t compete on that. We try to have our own niche mark et. So niche market means … price is stable, doesn ’ t ﬂuctuate much. That ’ s the kind of market we want. ” The case is similar for Star Inc., which “ prefers ” to compete with a few of the established converting companies that also produce middle-high products instead of competing with a bunch of other companies, big and small, that still produce low-end products such as candy wrappers. With this, Star Inc. does not have to wor ry about the emer gence of many new, smaller converting plants, since they do not consider them as threatening competitors. When I talk ed to the executives in both companies, “ innovation ” seemed to be the buzzwor d. Because they played in the niche market, they told me, innovation and resear ch became their focus. Some executives would say that “ innovation is key, ” and their emphasis on pr oduct diversiﬁcation, wher e they produce various specialty ﬁlm (for Java Film) or pack aging materials (for Star Inc.), follows from this idea. Again, with the aim of reducing competition, a Java F ilm e xecutive ar gued that they had to “ mak e use of the technology and product development techniques ” they had at the time so that they did not have to face competition from the big plastic manufactur ers with giant plants. This notion was also entertained at Star Inc. One executive e xpr essed this in terms of being a leader in the converting industry : “ We used to be a follower, but now we want to be a leader . That ’ s why we must look for new innovations — new technology, the latest innovations, and top-of-the-line machinery . ” Some seemed more optimistic than others about this issue, but ther e was a consensus among the executives at the two companies that they wer e at least “ forced ” to be mor e “ technology -minded ” than other, similar companies because they were playing in the niche mark et. On the surface, this situation seems to correspond with the “ thriving of small ﬁr ms ” idea that Bennett Har rison rejects: smaller -size ﬁrms lik e Java Film and Star Inc. could e xcel because they focus on the niche mark et center ed on technological development. 5 But once we dig deeper, things are not as they seem. As I elaborated further on the issue of technology and R & D, it became clear that the executives wer e awar e that they had limited autonomy and contr ol in technology, among other problems. Ther e are, of course, some kinds of “ innovative ” application of technology in both companies. At Star Inc., for example, they try to apply the most eﬃcient printing techniques, which in general cr eate better results for their pr oducts. But the technology comes from mor e developed companies in the industries, often from cor e capitalist countries, and then lear ned and adopted by Star Inc. technicians. At Java Film, they try to e xcel, for e xample, in their choosing of perfect materials, including the use of better additives (materials that ar e not the main raw materials such as resin) that can incr ease the quality of their products. They also made small innovations, such as creating materials for window envelopes that do not requir e adhesives. But most of the time, for these two companies, what is consider ed innovation is often nothing mor e than meeting a customer ’ s need, namely ﬁnding a product mix that better suits the customer. For e xample, a pack aging product that is designated for liquid shampoo whose shelf life is ﬁve years is diﬀer ent than a packaging product that is designated for a food product whose shelf life is only six months. In addition, they need to think about climate. What kind of material is suitable for storing goods in a humid Indonesian climate, or suitable for the climate of the countries they ship their goods to, in the case of exports? A t Star Inc., they of ten have to test a new material composition in or der to cor rectly cater to the speciﬁcation given by a customer . Not long before the interviews, Star Inc. had to develop a packaging for cooking oil that would pass the “ drop test ” of two meters. They had to ﬁnd the optimal composition for this pack aging, based on speciﬁcations given by the customer . For e xample, how many micr ons should be applied for the thickness? Or what is the ideal ratio of the raw materials, that is, how much nylon and how much low-density polyethylene should be used? These are common practices at Star Inc. The discussion is divided into thr ee sections. The ﬁrst section examines how dominant multinational companies contr ol the technological knowledge in labor-value chains, depriving the dependent companies of their autonomy . The second section focuses on the issue of ﬂexibility, especially in ter ms of the speciﬁc processes demanded by multinationals from their suppliers, and the thir d examines how such pr ocesses enable various for ms of contr ol over labor and the labor process. That issue aside, the studies of systemic rationalization and ﬂexible production are particularly useful in placing the signiﬁcant question of contr ol into the realm of commodity chains, bridging the abstract workings of the world capitalist economy and the concr ete processes that happen between ﬁrms as well as inside the ﬁrms (labor -management relations and the labor pr ocess). But ther e is a caveat. They are useful as long as we are able to reconte xtualize the issue within the frame of the workings of exploitation and capital accumulation under monopoly capitalism. Customers of ten do, however, ask for suggestions when it comes to cost reduction. Multinational customers ar e good at this. And sometimes this phenomenon is conﬂated with the idea of “ innovation, ” per haps inﬂuenced by the rhetoric of the customers themselves, in which they push their dependent suppliers to “ innovate ” to accommodate their need to cut costs. One common request fr om multinationals is for Java Film and Star Inc. to pr ovide materials that are as thin as possible that can still work for their speciﬁcations and do not reduce their quality by much. An e xample was given by a member of the Star Inc. mark eting team, who told me that a Europe-based multinational customer was “ very eager to ask us to innovate — what kinds of cost cutting can you give us? ” Every year, this customer invites Star Inc. repr esentatives to attend their innovation seminar . “ We have to come up with ideas, to contribute to the development of pr oduct speciﬁcations, either ones that are initiated by them or by us. [We have to tell the customer] oh, we have a new machine now, we can do this or that now . They suggest that we give them an update every three months. ” For the e xecutives of dependent suppliers whose companies lack contr ol of technology, sometimes this order to innovate is translated into an opportunity to lear n. What is important in their minds is that their companies have access to the know-how of multinationals and use it to their own advantage. It is common for multinational customers to ask Java Film and Star Inc. to reduce the thickness of their materials — such as by reducing the micr ons or the layers — in a quest for cost reduction, as illustrated in this e xample: [P rospective clients fr om a Eur ope-based multinational] told us to come and meet them. They said, “ We want to mak e this pack aging product. ” Let ’ s say, it used to be 12 micr ons [in thickness], now they wanted it to be 8 microns only. And then, they asked us to shar e, “ How much can you save? How much savings can you oﬀer if you used such-and-such materials? ” It was to the point that they called the supplier of that 8-micr ons material to come meet us so that Star Inc. could buy from them. If then our factory pr oduces too much waste, they would tell us to come again. They demanded that we ﬁx the problem … . But pack aging like that, ther e ’ s a lot of development surrounding it. That ’ s why, actually, one of the beneﬁts of having multinationals as customers is that they always cr eate trends, they have innovations. And since we are alr eady their prefer red supplier, we will be the one who will be given the opportunity, befor e others, to [learn from them]. W e must grab this opportunity . This encouragement to innovate from customers lik e this often creates conﬂicts and misunderstanding within Java Film and Star Inc. management. When mark eting relays such a message to the R & D team, the for mer expects the latter to engage in gr oundbr eaking innovation. As expr essed by another executive at Star Inc.: “ This is wher e the mark eting team misunderstands. They demand that our R & D develop a material that is, say, better than that of our competitors. That ’ s diﬃcult for us. We do not have the facility to manipulate materials. What we can do is mer ely changing one material with another — from another supplier, I mean. ” But even plastic manufactur ers like Java Film have very limited abilities to innovate gr oundbr eaking materials. They, too, just like Star Inc., are occupied by the demands given by their own customers, especially multinational ones. A Java Film e xecutive told me, “ [Multinationals] of ten request to us, ‘ Can you mak e this and that? ’ … Well, they have better technology, so what they alr eady know, we don ’ t, that ’ s why they give us a lot of requests. F or the local customers, it ’ s the other way ar ound … we can say to them, ‘ Why don ’ t we change it this way, isn ’ t it better? ’ ” Multinationals may well be a role model for dependent suppliers who can only wish they could achieve such status, especially in terms of resear ch and development. Even when people from the R & D or pr oduction departments are willing to engage in eﬀorts to contribute to meaningful innovations, their attempts are often halted by executives fr om other departments, especially those who focus on the ﬂe xibility of the company, such as those from the mark eting or ﬁnance departments. As a Star Inc. executive said, it is actually possible to mak e an eﬀort, “ but the problem is, are we willing to spend the money? Resear ch needs funding … . If we look at multinationals, they always have a budget for their R & D, and it ’ s huge. ” Another Star Inc. executive concludes that at least for a while his company “ would still be a follower, ” because the technology they have, “ it all came fr om outside! ” The best thing they can do, accor ding to another Star Inc. executive, is to copy this technology : “ The knowledge is there, it ’ s being shar ed. You cannot say that you can build your own without the help of the U.S. or [Eur ope], because basically they are everywher e now. They can develop the technology, but you can buy this technology . This is what China has been doing. They developed it, China copied it … . So it ’ s up to us to grab those resour ces and make use of them. ” Such a cheery tone, however, hides an important concer n by many of the executives, a fear that they ar e really dependent on the dominant companies that feed them. Although not everyone shar ed this feeling, a certain term was well known among the executives I interviewed: seamstress . Conversations going on among them expr essed the fear that they wer e mer ely tailoring in accor dance with speciﬁcations given by their customers without having any signiﬁcant agency or autonomy . The relationship between them and their multinational customers, in particular, is clearly not equal. This was e xpr essed succinctly by a Star Inc. executive: “ The way I see it, as a converting company, when we deal with multinationals, it feels that we ’ re just a seamstr ess. That ’ s what we are. ” In Indonesian, the wor d “ seamstr ess ” ( tukang jahit ) denotes a person who accepts various orders from people at his or her house or little shop. Unlik e a distinguished skilled tailor, a seamstr ess often accepts menial jobs such as ﬁxing pants that ar e too big, sewing buttons to a shirt, etc. This is how they see themselves as companies. They must accept or ders from powerful customers who dictate to them what to do in the pr ocess. All the examples above illustrate the fate of dependent companies. As downstr eam suppliers of dominant companies, they do not have the capacity to engage in meaningful innovations that can allow them to catch up in the intricate web of labor-value chains. The knowledge, the know-how, is tightly contr olled by dominant companies through various means, including steering the way resear ch and development is done within dependent ﬁrms. The dr eam of Java Film and Star Inc. to become leaders may well remain a dr eam. The technology they have is mostly technology given to them by their customers — the intr oduction to new materials for certain product speciﬁcations; the application of certain processes in accor dance with customers ’ needs; the manipulation of product mix es to accommodate cost-r eduction imperatives of their customers; and so on. Core multinational companies — with their top-notch facilities and ﬁrsthand access to innovative technologies in their ﬁrst-world headquarters — are most lik ely to remain at the top of the hierar chies. Their “ global reach, ” bor rowing the ter m used by radical scholars Richar d Barnet and Ronald M ü ller, enables them to also contr ol where their technological knowledge goes and how it should be applied. 6 As expr essed by a Star Inc. executive: “ Multinationals usually ar e ahead in ter ms of technology because they are worldwide in scope. What the world is doing, they would be the ﬁrst at the scene to understand it, compar ed to [us] local companies. That ’ s the diﬀerence. Their technology is much advanced. But that forces us to keep impr oving our own technology, our R & D. ” The problem is, as implied above, such eﬀorts by dependent suppliers to impr ove their technological knowledge or autonomy is often aborted by the constant demands of multinational customers to do things in ways that cater to, and only to, their needs. Systemic rationalization has allowed dominant companies to transfer their responsibilities in most aspects of pr oduction to their dependent suppliers. In ter ms of technology, the imperative to cut costs is given to their suppliers thr ough various requests. But as we shall see below, technology is not the only means by which dominant companies try to sustain and enhance control in labor-value chains. Fle xible production has given birth to myriad “ rational mechanisms ” that systematically allow dominant companies to gover n these chains. These companies are not mer ely a seamstr ess in the sense of their lack of control of technology, but also in other areas. D EMANDED F LEXIBILITY Indonesia: Where Production Happens and the Market Is Targeted In some cases, the tar geted mark et is the one in which production occurs. Nik e, for example, not only relocated pr oduction to China, but it also took advantage of the mark et potential of the most populated country in the world. As Walter LaF eber writes: “ For if cheap labor pr ovided lar ge proﬁt mar gins, 1.5 billion Chinese consumers could provide net proﬁts beyond imagination. ” 9 Indonesia, the fourth most populated country, with mor e than 260 million people and growing, is another case of this. Not only is its workfor ce targeted, but thr ough their subsidiaries in Indonesia, multinationals compete against each other to captur e this targeted mark et. Expressed through the views of Java Film and Star Inc. e xecutives based on the or ders that came from customers, the mark et outlook seems good for the ﬂexible pack aging business. Many of my interviewees cited a high growth in pack aged goods consumption in Indonesia as a reason for the booming of their cur rent business and their optimism for the near futur e. One Java Film e xecutive who holds a high position in the management hierar chy expr essed this clearly . Citing information gained from a Eur ope-based giant multinational client with hundr eds of brands around the world, he said: “ I think, you know, this country [Indonesia] is booming. At a ridiculous rate. FMCG gr owth, [our multinational customer] told me, it ’ s 30 per cent year to year . From the past thr ee years to the next ten years, it ’ s crazy you know, 30 per cent. ” The same interviewee also cited the incr eased capacity of their top local conglomerate customer as a positive indicator that business is doing well. When I later interviewed management executives of Star Inc. in 2015, the mark et story was not quite as optimistic, with some personnel citing a slowdown in demand in the Indonesian market in the last six months. Accor ding to them, it was a strange anomaly, and it had happened across industries, including automobile, textile, and FMCG industries — a patter n that aﬀected their customers as well. 10 One executive ar gued that it was lar gely inﬂuenced by the devaluation of the Indonesian rupiah. What they did not cite was that Indonesia ’ s economic growth as a whole, as documented in an OECD report that year, had in fact “ moderated in recent years, reﬂecting weak er international demand and slow investment growth. ” 11 Most important, average wage growth “ has been slow, ” as an Asian Development Bank review showed in 2016, “ rising at less than 2 percent a year in real ter ms over the last ﬁve years. ” 12 Not to mention the annual per capita income of mer ely US$9,300 in purchasing power parity terms, and a rising Gini coeﬃcient (a measur e of inequality, of income, for example) in the last decade. 13 But this bad news on the macr o level did not seem to signiﬁcantly aﬀect Star Inc. The factors that inﬂuence it may vary, including a big strike that occur red at their main competitor ’ s plant, for cing those customers to go to Star Inc. instead. Or, as one executive who knows the company ’ s ﬁnancial situation well stated, Star Inc. is “ not widely aﬀected ” by slowdowns because of their customers ’ pr oﬁles: “ Our top twenty customers are at the top in their business. These customers, most of their pr oducts are the top brands in Indonesia. ” Although it is not clear if the same characteristics can be applied to Java Film, the fact that some of the company ’ s major customers ar e cigar ette companies — local and multinational companies that cater to both local and foreign mark ets, including one of the biggest players in the industry, a leading U.S.-based cigarette company, which in the last decade or so has acquir ed one of the major Indonesian cigarette companies — means that a small slowdown in growth in other products can be oﬀset by relatively stable demand for cigar ettes, accor ding to one Java Film e xecutive who constantly monitors the P ur chasing Managers Inde x. This faith in the promising patter n of FMCG growth rate was also cited as the reason for the two companies ’ expansion. During my interviews, while Java Film was adding a pr oduction line in their factory, Star Inc. was building an additional factory comple x. As expr essed by another Java Film e xecutive: “ Why do we e xpand? Because ther e are needs to do so . Of course, befor e the expansion, our mark eting team resear ched it. They saw that the converting industry, the packaged food industry — their growth has never slowed down. Just look at [a top local customer], we can monitor them. Every time they added their machines, we knew . [These big customers] alone have taken a lot of our [production] capacity … . If their capacity incr eased, of course we need to increase ours as well. ” Java Film is not the only ﬁr m within the commodity chain that studies its mark et. What is more inter esting is how the dominant companies at the end of the chains, such as multinationals, study targeted mark ets like Indonesia. Companies that sell daily car e products such as soap or shampoo, for example, or that sell food such as coﬀee or snacks, adjust the size and pack aging of their products in accor dance to market prefer ences. This knowledge seems to be well known across management teams at Star Inc. They told me that a large segment of Indonesian consumers show a patter n of “ unique ” behaviors. One particular characteristic is that their lower purchasing power leads to buying in small quantities. As a Star Inc. executive puts it: Indonesia is still relatively poor . So, in the advanced countries, it is probably diﬃcult to ﬁnd shampoo pack aged in small sachet bags. You cannot buy one sachet of shampoo, or a sachet of seasoning for cooking. They prefer buying in bottles, which are actually cheaper [considering what you get for the price]. I can use the whole bottle of shampoo for a month. But her e, buying in bottles is often consider ed too expensive. So they buy only one sachet. It is actually in the end mor e expensive, but since they have limited amount of money to spend, they can only buy it that way . Who is beneﬁtting from this behavior? W ell, indir ectly, pack aging suppliers like us. Whether or not the success of these kinds of small pack aging in Indonesia is indeed caused by the socioeconomic status of Indonesian consumers, the above quote implies that this kind of ﬂexibility in product design was sought after by dominant companies because selling pr oducts in small pack ages is deemed more proﬁtable (at the expense of customers). So, at the end of the day, such buying behaviors ar e indeed beneﬁcial for suppliers lik e Star Inc., which experience an incr ease in orders from dominant companies that compete to captur e a market with such distinctive characteristics. As a result, not only do dominant companies pr oduce hundr eds of brands but varieties within the same brand. In Indonesia, you can have many types of SKU (Stock Keeping Unit) of, say, a particular anti-dandruﬀ shampoo brand. The bottles will be mostly sold in the gr ocery stor es, but the sachets will be sold in warung , tiny stores in the neighbor hoods that sell everything from salt and sugar to daily car e products. The question is how this “ good for business ” strategy is actually implemented in labor-value chains, and what the consequences ar e for companies lik e Star Inc. to be the executor of such pr oduction processes. Systemic rationalization enables dominant companies to shif t the dynamic demands of the mark ets “ in a ﬂexible manner and within incr easingly tighter schedules to the dependent companies and segments of the production chain. ” 14 In other wor ds, the responsibility to engage in such ﬂe xible processes is transfer red to the suppliers, namely the dependent companies in the Global South, lik e Java Film or Star Inc. 15 As we will see later in this chapter, not only does such rationalization aﬀect the or ganization of work within dependent ﬁr ms — including pr oblems created by a “ ﬂe xible appr oach ” in production processes — but it also aﬀects the labor process that is embedded in this organization of work. “ We Oﬀer Higher Flexibility ” : What Dependent Suppliers Must Do to Survive One of the main selling points of Java Film is that they always aim to pr ovide quality products and excellent service to meet customers ’ needs. They call this “ mark et oriented. ” The idea of being “ market oriented ” has aspects of ﬂexible production, including the company ’ s willingness to engage in “ ﬂe xible appr oaches ” in dealing with customers ’ demands. At Star Inc. ﬂe xibility is even mor e pronounced. It is indeed one of their main selling points. All of the Star Inc. executives I interviewed wer e fully rehearsed in this understanding, and the idea of ﬂe xibility seemed to gover n their organization of work as a whole. Sometimes, ther e is room for suggestions, wher e Java Film and Star Inc. ’ s R & D departments would suggest several pr oduct developments to their customers. One inter esting example is the use of oxo -biodegradable materials. Java Film was able to adopt this technology fr om outside and then suggested it to some multinational customers that pr oduced pack aged snacks such as potato chips with packaging that was not biodegradable. The customers refused the suggestion, citing that the price was too high, as well as the lack of guarantee of safe storage practices. As told by a Java F ilm e xecutive: “ Customers don ’ t want to pay a higher price for that one. And then the storage condition. Indonesia is quite diﬀer ent. Direct exposur e to sunlight. When you have a biodegradable ﬁlm, it will deteriorate after some [e xposur e] to sunlight and oxygen. So it ’ s diﬃcult, since the supply -chain management in Indonesia is still chaotic. ” What needs to be noted here is that ﬂexibility seems to be a strategy undertak en by Java Film and Star Inc. to survive amid competition fr om other converting companies in Indonesia and those located in neighboring countries. Sometimes the competition is about who can oﬀer lower prices, especially from other countries, but companies lik e Star Inc. seem to wor ry mor e about competing with strong competitors on the national level, because these domestic competitors target the same big customers. Especially with their claimed focus on playing within the niche mark et by producing high-end products, Star Inc. wor ries mor e about the competitors in the same league that can oﬀer good- quality products. One of them is an established multinational in the converting industry, Sun Printing (a pseudonym). Once a role model to follow, Sun P rinting has now become mor e of a rival of almost equal quality, accor ding to Star Inc. executives. In the converting industry, it is a common practice that ﬂe xible pack aging companies like Star Inc. do not serve as single suppliers to their customers. Customers prefer having multiple suppliers, in particular for safety reasons, in case one of their suppliers cannot deliver a shipment on time. But competition among dependent suppliers is still pr esent and alive, especially in ter ms of being able to tak e the lion ’ s shar e of customers ’ orders. Sun Printing is well known for its e xceptional quality, but they ar e also infamous among their customers, accor ding to the Star Inc. executives, for their rigidity . Due to their established system of production, Sun Printing requir es all customers to follow their rules. For e xample, ther e is no exception to the delivery time; everything has to be done in accor dance to their Standar d Operating Procedur e (SOP). The Star Inc. executives I interviewed seemed to agr ee on one thing: Sun Printing could survive with such a rigid system because they ar e a big multinational that alr eady has bargaining power and a strong base of customers, many of whom are from the same country in which this company is based. Star Inc. would not be able to experience the same fate, accor ding to its executives, even when the quality of their pr oducts are up to par with that of Sun Printing. Star Inc. has no choice other than to oﬀer ﬂe xibility . As voiced by one executive: “ [Fle xibility] cannot be eliminated. I don ’ t think so. If we want to grow big, considering the scale that we ’ re in now, we do need to sell ﬂe xibility . That ’ s a challenge. ” Another executive emphasized the competition aspect: “ W e ar e trying to be a ‘ strategic supplier, ’ one who can be relied on by our customers. Fle xibility leads us to opportunities, so that what can ’ t be gained by our competitors can be our gain … . Whatever our competitors cannot supply due to unr easonable time constraints, we must be able to take over . ” Similar reasons wer e given by the executives at Java Film. One of their biggest national competitors, Techno Plastic (a pseudonym), is not as ﬂe xible as they are. If customers ask for a rush delivery, or faster than what was originally agr eed upon, Java Film is willing to accommodate it. “ W e ar e mark et-oriented, ” said one of the executives. “ W e ar e ﬂe xible in meeting our customers ’ needs. Meaning, if they want us to deliver the product faster, we can do that, as long as they infor m us in advance. Techno Plastic, not so much. Because to accommodate such changes, the machine settings need to be reset, and they ’ re not willing to do that. At Java Film, we can manage such a thing. That ’ s why we ’ re gr eat. Or so I hear d. ” Flexibility is one of the major characteristics in today ’ s labor -value chains. And one for m of ﬂexibility, as Har rison points out, is functional ﬂexibility, wher e dominant companies within the chains adopt new technologies and other means that allow them to engage in rapid product design or changes in the instruments of production. 7 This “ necessity ” to engage in ﬂe xible production is often driven by the “ ﬂuctuating and changing ” demands of the mark et. 8 In the conte xt of monopoly capitalism, such demands drive oligopolistic dominant companies, such as Europe- or U.S.- based multinationals, to compete against each other in product innovations and mark eting strategies aimed at capturing increased mark et share. Flexibility can mean several things for these companies, but some of its common aspects include the ability to deliver on demands and to anticipate a certain amount of incr ease or decr ease in shipping, as well as a willingness to accept rush orders. A Star Inc. executive who of ten deals dir ectly with customers told me: “ For e xample, the regular lead time is 30 days. So, af ter we receive our pur chasing order, say, today, we will deliver the goods 30 days from now . But for certain cases, we can help mak e it faster, less than 30 days. ” This often means that the pr oduction team needs to halt whatever projects they are doing and change the settings on some of their machines to accommodate the new or der . After this rush or der is done, they need to go back and continue the disrupted process. (All of these aspects will be discussed in the ne xt subsection.) What is inter esting is that, even though both kinds of customers are consider ed high-class, the way business is done with the privileged local customers is not the same as with the multinationals. This is where the characteristics of labor -value chains can be seen clearly . While giant local customers may have more leeway, say, in getting a rush order done due to their owners ’ personal connection to the bosses at Java Film or Star Inc., or solely because they have established a good relationship with the company due to their stable ﬂows of repeat or ders, the way multinationals exert contr ol and push for ﬂexibility are done thr ough systemic rationalization. In this conte xt, the power relations ar e clearly unequal — the pr ocesses involved in systemic rationalization are reﬂected thr ough the ability of multinationals to exert contr ol over their dependent suppliers. And hardly any executives e xpr essed eager ness in dealing with multinationals. On the contrary, many of the interviewees expr essed their prefer ence to deal with local customers instead of multinationals. The question is, then, what is the most irresistible beneﬁt of having multinationals as customers? That is, other than big volumes, which some e xecutives cited as one of the main reasons why multinationals ar e consider ed desirable customers. One answer is, of course, that the more high-class customers you get, the better . But behind this obvious reason is another, mor e subtle, factor : multinationals, according to these executives, ar e an important sour ce of some kind of a “ guarantee seal. ” Once you can gain the trust of a (giant) multinational company with worldwide operations and engage in business with them, you will gain a name in the industry . A Java Film e xecutive called this “ brand equity . ” “ Let ’ s say I supply to this customer A, which is a well-known [multinational]. W e can tak e that as brand equity . Then we can use it as a refer ral: we have supplied to customer A. ” Another Java Film e xecutive gave a speciﬁc e xample about how diﬃcult it was to win the heart of a leading U.S.-based cigar ette multinational company in an eﬀort to be their supplier, an eﬀort that was worth it in the end since the multinational had since become their regular customer : “ It was not easy to get them. Tests, trials, all of that, almost two years. But once we got in, [we ’ re set], because they do not easily change their supplier … . I hear d from people at the mark eting department that if our ﬁlm is bad, [their production] would automatically be [disrupted]. I hear d that [their machines] could wrap 600 packs of cigar ettes in one minute. It means 10 packs in one second. Can you imagine the speed? If our ﬁlm is bad, I ’ m sure all those cigar ettes would become waste. ” The point here is that the cigar ette multinational company would not risk changing their supplier if they were not sure about the quality of the ﬁlm, along with its technical compatibility with their machines. These executives took the beneﬁt of having multinational customers seriously, believing that they had helped boost their companies ’ business, especially in eliminating competitors and gaining stability in incoming orders. This view was expr essed clearly by a Star Inc. executive, who also stated that the top twenty customers of Star Inc. ar e “ pr obably the mark et leaders in their ﬁeld ” : So, like last month, when we had a meeting with our creditors, I ask ed, “ How are our competitors doing, and how do you compar e us with our competitors, considering the economy slowdowns and the depreciation of the USD? ” And they said, “ You ar e diﬀer ent. We cannot compar e you with your competitors. ” I asked, “ Why? ” “ It ’ s because of your customers ’ proﬁles. ” So, if you see [Eur ope-based giant multinationals], even though we have a slowdown, they continue doing their expansion. They have a budget of mor e than 8 trillion rupiah [appr oximately US$600 million] for 2010 – 15, and they haven ’ t stopped doing this e xpansion. They have several factories in diﬀer ent areas in Indonesia, and [this multinational] is the number one customer of Star Inc. This strategy to open opportunities, however, is not applicable to every single customer . I later learned that the mor e “ high-class ” the customer is, the more ﬂexible these companies can be. Ther e is a consensus among executives, both at Java Film and at Star Inc., that “ high-class ” customers consist of basically two gr oups: (1) big local conglomerates who are leaders in their mark ets, and (2) multinational companies. Each group has its own beneﬁts for these companies — the for mer may be higher in numbers than the latter, but multinationals give orders in big volumes. In addition, the owners of some companies that belong to the ﬁrst gr oup are friends with the owners of Java Film and Star Inc., and that automatically gives them some privileges. But in one way or another, these two gr oups are consider ed high-class because they oﬀer these factors: high proﬁt mar gins and stable volumes. This prestige, however, comes with a high price, payment of which can be seen thr ough various demands that Java Film and Star Inc. must meet in or der to please their big multinational customers. Some executives claiming, “ to be honest, ” they would otherwise pr efer local customers because often their price is actually better . This is partly inﬂuenced by a form of bur eaucratic contr ol exer cised in systemic rationalization pr ocesses called open- cost systems. It is common for multinationals to demand that their potential suppliers reveal their cost structur e, often as a requir ement for participating in a bid for orders. This enables multinationals to have access to the detailed structur e of their potential suppliers ’ costs (including material costs, labor costs, compression costs, and expected pr oﬁt). Sometimes advertised as a practice that can reinfor ce a clean and transpar ent business, this system allows multinationals to evaluate the costs according to their own price benchmark and control their suppliers ’ costs to reduce their own. 16 It is also not uncommon for multinationals to apply an international benchmark for the price, as stated by one Java Film e xecutive: “ Mostly a multinational would squeeze your price until the end. Because they have the bar gaining power, you know . They have [the information on] global purchasing and procur ement, so they know which areas give them the best [price]. With that, they then know how to apply a benchmark … . So they will use the [lower] Indian price as a benchmark to get the [higher] Indonesian quality, for instance, or Chinese price to get our service. ” This can create challenges for the two companies, especially when they ar e pitted against competitors from the neighboring countries that can oﬀer a much lower price. Even competition within the niche mark et itself can still be alarming at times. For Java Film, Thai plastic manufactur ers are tough competitors, while for Star Inc., it is the Malaysian companies: “ Many of my customers import from Malaysia. And their price is indeed good. I don ’ t know how they do it, to be honest. Their price doesn ’ t even cover our total cost! ” Even the suppliers ’ pr oﬁt mar gins are contr olled. As a Star Inc. executive reveals, “ So [these multinationals] just say, ‘ OK, your over head costs should be this much, X percent. And this X percent should already contain your proﬁt. ’ Yes, they can even go that far! … W e can ’ t fool them, saying, oh this material, for example, costs 20 cents, while it ’ s actually 10. They would tell us to change our cost structur e. How do they know? They compare it to the other suppliers ’ costs. That ’ s how cunning they are! ” As another Star Inc. executive puts it, “ If they only gave you a 20 per cent mar gin, well, that ’ s how much you get: 20 percent. ” If multinationals feel like some costs, say, raw material costs, in the list are too high, they will, in the wor ds of yet another Star Inc. executive, “ help their suppliers impr ove ” by suggesting “ how to reduce our material costs. ” This may include technical suggestions about how to reduce waste, or suggestions about wher e to buy the materials, a suggestion that is often diﬃcult to follow because Star Inc. alr eady has regular suppliers. Ther e are also times when the kind of contr ol exerted by multinationals is reduced to its simplest for m. Highlighting the unequal bar gaining power between them, a Star Inc. executive who deals a lot with customers e xplains how local subsidiaries of big multinationals of ten oﬀer business opportunities accompanied by thr eats: They always threaten us, “ Can you help us or not? If you can ’ t [fulﬁll these demands], we ’ ll go to someone else. And once we ’ ve done it, don ’ t you dar e beg us for orders! ” I ’ ve been treated that way by them. Another time, they told me to come and challenged me, “ You want this or der? Two weeks completion — can you do that? ” I said, “ W e can ’ t, Ma ’ am. ” She was furious, saying, “ I gave you the opportunity and you refused! ” … W ell, that ’ s multinational for ya. If you tak e their oﬀer, that ’ s it, you have to serve them till death, and sacriﬁce your other customers … . All their demands, we have to meet them. They act as if they ’ re kings! When I ask ed a Java Film e xecutive who also e xpr essed her concer n about the pressur e to succumb to their multinational customers ’ demands why their company continued to succumb, she responded with a laugh, followed by a short answer : “ Because the big ﬁsh always eats the small ones. ” On many occasions, this feast is hidden behind a series of demands and rationalization processes that dependent suppliers lik e Star Inc. comply with in order to survive the competition on the “ small ﬁsh ” level. The following further elaborates on these contr ol mechanisms within labor-value chains. Just-in- Time Delivery and Other Problems In chapter 3 , I addressed several means by which dominant ﬁrms contr ol the dependent ones, including their suppliers, made possible by development in information technologies. Among them are delivery on demand systems, which is often refer red to as the JIT (just-in-time) delivery system. Systemic rationalization pr ocesses also enable dominant companies to demand other aspects of ﬂe xible production, especially in ter ms of functional ﬂexibility, including incr eased speed in the completion of purchase orders, an ability to accommodate rapid changes in pr oduct designs and varieties, and other aspects. Although both local and multinational customers can demand these things from Java Film and Star Inc., e xamples given by their executives when it comes to this subject revolve ar ound their multinational customers. Given their emphasis on the importance of multinationals for their business and their pr estige, it is possible that they are mor e willing to accept such demands from their multinational customers. But the mor e probable reason is that, unlik e the more traditional relationship between these companies with their local customers, their relationships with multinational customers ar e mor e regulated thr ough systemic rationalization, wher e practices like JIT delivery are integral to their business pr ocesses. Sometimes this understanding is expr essed in simpler terms, wher e many executives see multinationals as “ very demanding ” customers, if compar ed to their local counterparts. And the demand for ﬂexible delivery tak es a large shar e of their concer n. Delivery on demand systems are one of the cor e practices in lean production, and it is often associated with the Japanese management mantra, kaizen , which can roughly be translated as “ continuous impr ovement. ” The JIT system was originally developed by the Toyota Motor Company, and thus is of ten refer red to as the T oyota P roduction System. A ccor ding to Japanese management guru Masaaki Imai — who popularized the term kaizen in management and wrote two books on the subject, Kaizen and Gemba Kaizen , as well as founding the K aizen Institute — JIT is “ a system designed to achieve the best possible quality, cost, and delivery of products and services by eliminating all kinds of muda [waste; non- value-adding activities] in a company ’ s inter nal processes and deliver products just-in-time to meet customers ’ requir ements. ” Further, Imai states, JIT aims to achieve a “ lean pr oduction system ﬂe xible enough to accommodate ﬂuctuations in customer needs … . JIT dramatically reduces cost, delivers the pr oduct in time, and greatly enhances company proﬁts. ” 17 Putting it another way, JIT is how dominant companies put pr essur e on and transfer responsibility to dependent companies thr ough a series of delivery demands. As the online Investopedia blatantly states, it is an inventory strategy that “ companies employ to incr ease eﬃciency and decr ease waste by receiving goods only as they ar e needed in the pr oduction process, ther eby reducing inventory costs. This method requir es producers to for ecast demand accurately . ” This often means that dependent suppliers must deal with inventory pr oblems, often resulting fr om missed for ecasts, which their multinational customers try to avoid by implementing the JIT system. From the viewpoint of systemic rationalization theories, systems such as JIT “ impact the working situations in upstr eam and downstr eam companies. In these areas hectic everyday manufacturing operations oﬀer neither scope nor capacity to deal with such additional demands. In many instances this results in a considerable intensiﬁcation of work and a concur rent e xtension of working hours. ” 18 But the problems created by the JIT delivery system ar e not always created by missed for ecasts. Sometimes, delivery on demand is done solely to help dominant companies save inventory costs. Another Java Film e xecutive e xplained that they had to accommodate customers ’ demand of ﬂe xible delivery because many companies had alr eady adopted this system to “ save as much inventory cost as possible. ” He continued: “ So, some customers would say, ‘ OK, I ’ ll order 200 tons from you, but I need you to ship it to me every other day . ’ We try to meet such needs. ” The request is not always that simple, however, and Star Inc. knows this very well. Of ten the JIT system is set to transfer responsibilities of dealing with the consequence of missed for ecasts to dependent companies. The issues include how the management of Star Inc. has to deal with the “ buﬀering ” problem. Due to the delivery on demand procedur e, suppliers like Star Inc. must implement a buﬀering policy, which means it is imperative that they get their ﬁnished goods ready and stor e them in their warehouses, to be sent only when their customers need them. Not only do these goods have to be shipped whenever the customers demand them, but the supplier also must be ready to accommodate any sudden incr ease or decr ease in product demands missed in the customer ’ s initial for ecast. At Star Inc., they cr eated a policy to accommodate up to 20 per cent incr ease or decr ease of their top customers ’ needs. As told by a Star Inc. executive who was involved in pr oduction planning: OK, for example, we have these two big [Eur ope-based] multinational customers. One of them put in a big order for the pack aging of this seasoning brand [let ’ s call it B]. When I ﬁrst joined the company, there were pressing issues — they said that the customer was scr eaming at us so many times, and that we wer e struggling with the time requir ements needed to send B. Once, the customer made a mistak e in their planning and ﬁnally came to us for help, and we helped them by shipping the goods on a Sunday! I was told that they at least appreciated it. Our mark eting team always reminds us that “ we have agr eed that we need to buﬀer up to 20 per cent. ” But the order for B is humongous. The amount needed to supply B in a month is almost equivalent to one war ehouse. On the one hand, [it ’ s a problem to anticipate a 20 per cent incr ease] by storing all of the goods ther e. It ’ s impossible. But on the other hand, we also must be ready to anticipate a decr ease by 20 percent out of what they promised us to tak e in the following month. It ’ s like that. Storing the ﬁnished goods is not the only problem created by the JIT pr ocedur e. Flexibility in delivery and the responsibility to anticipate missed for ecasts also aﬀect the other end of production: planning for the pur chase and storing of raw materials. As a Star Inc. executive who deals with suppliers for their materials explains, the readjustments of delivery have a signiﬁcant impact on the situation at the pur chasing end: For ecasts can also miss. Even after the pur chasing order was ﬁnalized. For e xample, a customer had a thr ee- month pur chasing order, 10,000 [rolls] in September, 20,000 in October, 30,000 in November . The planning department has calculated, right? And we have received that calculation. But in the pr ocess, the customer can say, “ Oh, our war ehouse is full for September, ” and they only want to receive 8,000. It means that we have a surplus of 2,000 rolls. The planning department will forwar d this info to [the purchasing department]. And we need to readjust. Or say in September the customer asks us to deliver 15,000 instead of 10,000. W e need to readjust as well. That ’ s how we work. But sometimes the materials we pur chase are alr eady on their way . If they are imported, we cannot cancel … . Or [for domestic suppliers], even after we tried to be adamant about postponing the shipping, they ar e not willing to do it. Lik e it or not, our storage will have to accommodate them. Precisely because multinationals ar e awar e of the prestige gained by their suppliers when working with them, they play the game well. They know that many will “ line up ” to get orders from them. On the contrary, suppliers lik e Java Film and Star Inc. have to abide by an unwritten rule that they cannot work with oligopolistic multinationals that are the competitors of their (also) oligopolistic multinational customers. One of Star Inc. customers is one such multinational. During my visit, this customer ’ s toughest competitor, another multinational that was also a mark et leader, started to “ knock on their door ” for a business deal. But Star Inc. was hesitant to accept the oﬀer, claiming that they “ had to be careful ” about it, since they fear ed the wrath of their current customer, whose shar e in their production output was too big to risk. This issue also shows that companies lik e Star Inc. not only deal with their customers, but also with their suppliers. But unlik e multinationals who can exert pr essur e on and make unreasonable demands of their suppliers, dependent companies cannot do the same thing to the upstr eam companies that supply their materials. To an e xtent, Star Inc. ’ s notable gr owth has gained them some status in front of their material suppliers, but it is not comparable to that of multinationals who ar e their customers. Constrained by various factors such as limited availability of certain materials and the domestic monopoly of certain industries that pr oduce the needed materials, Star Inc. is quite powerless. Mor eover, unlik e the multinational customers who can demand ﬂexibility from Star Inc., the U.S.-based multinationals that become Star Inc. ’ s suppliers ar e often inﬂe xible in their business. Per haps, accor ding to the same executive quoted above, “ because their bur eaucracy is already so structur ed and organized. ” If ther e are options available, Star Inc. prefers to buy their imported materials from other companies, lik e South Kor ean suppliers. But mor e often than not, ther e are no other options. In general, both Java Film and Star Inc. e xecutives, especially those who deal dir ectly with production and planning, prefer mor e limited forms of ﬂexibility, precisely because they create pr oblems, and are often at odds with the pr oduction goals of incr eased productivity and eﬃciency, including the decr ease in waste. 19 In a 1992 article about systemic rationalization, Dieter Sauer and his colleagues argue, “ The ‘ new type of rationalization ’ pursues contradictory goals: the incr ease of ﬂexibility in company administration and manufacturing processes in order to better fulﬁll constantly changing mark et requir ements with respect to quality and quantity, and the achievement of a mor e cost-eﬀective production system under conditions of ﬁer cer competition. ” 20 In a sense, then, ﬂexible production provides contradictory processes for these two companies. On the one hand, they have to oﬀer ﬂe xibility to meet the “ needs ” of their customers and to get ahead of their competitors, which will result in gr eater proﬁt. On the other hand, the imperative of capital accumulation for ces them as ﬁrms to incr ease productivity and eﬃciency thr ough cost-r eduction strategies and other means. Flexible production, however, often results in ineﬃcient and wasteful pr oduction. Let us e xamine this contradiction ﬁrst. Both Java Film and Star Inc. have limited capacities in their pr oduction, and they have to work with this limitation to accommodate a variety of products order ed by their customers. When they oﬀer ﬂexibility to their customers, these varieties become mor e comple x and create challenges for pr oduction. People fr om the pr oduction and planning department would say that they prefer “ long-run ” orders, for which they can run one article in their machines for a long time, without inter ruption, until the order is ﬁnished. This requir es only one-time preparation, wher e they set the machines, and so on, at the beginning of each process. This kind of production process would enable production teams to easily ensur e higher eﬃciencies and the reduction of waste. But such an ideal pr ocess is diﬃcult to achieve. Due to the functional ﬂe xibility demanded by their customers, they often must inter rupt production processes to fulﬁll rush orders due to ﬂuctuating mark et demands that their customers aim to meet. One of the simplest examples of this pr oblem was explained by a Java Film e xecutive, who claimed that long- run or ders are har d to come by because many customers demand just-in-time delivery . When a customer demands Java Film to ship pr oducts only twice a week, they have to divide the production several times into smaller orders, even though the pr oduct was order ed in a large quantity . Otherwise, they would not be able to use the machines for other orders from other customers. This cr eates pr oblems because it requir es the production department to engage in multiple programming changes for their machines, among others, which is bad for eﬃciency and risks the incr ease of waste. Sometimes the Java Film sales department can sell the wasted ﬁlm for a cheaper price to other companies, but that alone does not serve as a suﬃcient remedy for the waste issue. This practice illustrates what P aul Baran and Paul Sweezy call the “ interpenetration of the sales eﬀort and pr oduction process. ” They note that sales eﬀorts such as product variations no longer serve as a mer e addition to production under monopoly capitalism; instead, these sales eﬀorts now reach back into the pr ocess of production. They “ incr easingly invade factory and shop, dictating what is to be produced accor ding to criteria laid down by the sales department and its consultants and advisers in the advertising industries. ” This interpenetration has made the two processes (sales eﬀorts and production) so indistinguishable that it causes a “ profound change in what constitutes socially necessary cost of production as well as in the natur e of the social product itself . ” 21 For the supplier who actually mak es the products, the product variations strategy requir es a high degree of ﬂexibility . Multinational customers that deploy such a strategy can demand ﬂexible production depending on what is highly demanded in the mark et. So, rather than sticking with what was agreed in the SOP and expr essed in their pur chase order, this customer can change the order in the middle of pr oduction. If the customer sees that the Spider man packaging sells more dearly one month, they would ask Star Inc. to send only the Spider man the following month, regar dless of what the original order was. Or, in the case of brand B, as explained by the executive, “ If all of a sudden, say, because of certain pr omotional periods, this customer would suddenly change plans: ‘ This week I need you to send me the 20 grams one instead of the 7 grams one. ’ If you ’ re a rigid supplier, you would deﬁnitely say no, because it would disrupt the whole pr oduction process … . They have to reprint stuﬀ, everything. Most converting companies would refuse to do this, because it would cr eate ineﬃciencies and plenty of waste. ” Though this executive claimed that Star Inc. started to try limiting these kinds of or ders, they still could not get away from it. And this got on their collective nerves, as management had to face conﬂicts every time. W eekly meetings become inter -departmental “ battlegr ounds, ” where diﬀer ent teams would argue back and forth about which orders needed to be prioritized, and which orders could be postponed, and how much disruption could be tolerated on the shop ﬂoor . While the mark eting department would push for ﬂexibility to get mor e orders from their top customers, those in pr oduction and other departments would try to resist this tr end because their eﬃciencies would suﬀer . At the same time, both ﬂe xibility and eﬃciencies are demanded by the company ’ s owners. The same executive quoted above e xpr essed this concer n: “ We have yet to for mulate good management policies on how to do this … . Now, everything seems vague. Production teams would say, ‘ W e ’ ve told you that we ar e pr essur ed to reduce the variant waste by such-and-such amount! ’ But the other party [mark eting teams] faces pressur es to increase [sales]. So what would you do? ” From what I gather ed from my interviews, the winner seemed to be ﬂe xibility . As a member of the production team told me, “ We sometimes have to mak e sacriﬁces, meaning, we allow the waste to be high, because we have to cut the ongoing production of a certain product in order to ﬁt in a diﬀer ent product. ” The important question now becomes: who bears the bur den of such a contradiction in systemic rationalization processes? Sur ely the executives I interviewed had to deal with the customers and all the chaotic consequences of their demands for ﬂe xibility, but in the end, the ones who deal dir ectly with production are the dir ect producers of the commodities these companies mak e: work ers. In the next section, I will examine how the mechanisms described above inﬂuence the or ganization of work that creates contr ol over the labor process. M ANAGEMENT AND C ONTROL OVER THE L ABOR P ROCES S Another example was pr ovided by a Star Inc. executive. Multinationals, accor ding to my interviewees, often engage in a pr oduct variation strategy in an eﬀort to captur e the dynamic (both domestic and export) mark et demands and defeat their competitors (other big multinationals). This is where they create several types (or SK Us) of pack ages for a certain product. Sometimes the SK Us are in the for m of diﬀer ent designs. For e xample, a juice drink brand mark eted for kids has a few variations of packaging with cartoon characters: Spider man, Elsa from the Disney movie Frozen , Belle from Beauty and the Beast , etc. But mor e often, the pr oduct is also pack ed in diﬀer ent sizes, each with its own design variations. Let us go back to pr oduct B, a seasoning brand owned by a Eur opean multinational that is one of the main pack aging customers of Star Inc. This seasoning brand has multiple SKUs, each with a diﬀer ent volume: 7 grams, 20 grams, and so on. The 7 grams one is packaged as a simple sachet, wher e you can throw it away once it is used, while the 20 grams one is pack aged in a standing pouch and designed for multiple uses. Star Inc. then has to apply a diﬀer ent product design for each SK U, and each SKU has to be manufactur ed separately. Even though the executives of both companies would pr efer to see their companies as “ high-tech ” oriented, or even refer to them as “ capital-intensive, ” they could not dismiss the fact that labor and the labor pr ocess wer e issues that kept showing up again and again. This was especially pr ominent among the executives in the human resour ce and production departments, because they wer e the ones who managed labor on a daily basis. And when it came to the discussion of wages and unions, our conversations sometimes became heated. When I visited Java Film in 2012, they were in the middle of bargaining with the labor unions with minimum wage the main issue on the table. The provincial gover nment had just issued an increase in the minimum wage, but vagueness related to categories of wages based on types of industry, along with other factors in relation to this incr ease, led to a series of tough bargaining sessions. In addition, ther e had been many protests in the industrial comple x where they were located. At a Japanese automobile factory, pr oduction was disrupted for about a week due to a labor strik e. The combination of protest thr eats by their own work ers and a suspected “ inﬁltration ” by a militant labor union at their own plant made the management nervous. Although they did not expose these sensitive issues in the management meetings I attended, during those meetings, the issue of pr oductivity and eﬃciency was discussed a lot, partly in an eﬀort to oﬀset the inevitable rising labor costs. When I visited Star Inc. in 2015, their main competitor, Sun Printing, e xperienced a major strik e at their plant, a strike that led them to terminate employment of mor e than a thousand work ers and caused their production to halt. Star Inc. was afraid that the same thing would happen to them, for good reasons. The main factor that caused the strik e was a regulation on overtime imposed by a standar dized rule applied by Sun Printing ’ s multinational customers, some of which wer e also customers of Star Inc. Although this rule already had been issued by the Indonesian gover nment in 2003 through federal labor laws, only then did it become a major problem, since the biggest multinationals, thr ough a thir d-party evaluation system called URS A (Understanding the Responsible Sour cing Audit), requir ed their suppliers to comply with the overtime rule. 22 If not, suppliers would not pass the audit and the business between them and their multinational customers would be terminated. The rule states that work ers can only work overtime for a maximum of three hours a day, fourteen hours a week. Sun Printing work ers were not happy about it. Work ers with low wages often had to depend on other factors such as ear nings from overtime work, so the possibility of losing these extra ear nings was a serious concer n. Before the rule was imposed, the way work was organized at plants such as Sun Printing and Star Inc. of ten depended on their work ers ’ overtime labor, especially when rush orders wer e involved. Ther e might be more to the cause of the strik e, but that alone forced Star Inc. management to reor ganize their incentive system in a way that would compensate the loss from the new overtime rule. W ork ers would still get the same amount of ear nings through the new incentive system without having to work overtime, but they would be forced to work mor e eﬃciently and productively . At a glance, this case seems lik e a common strategy by the company ’ s management to ﬁx things and avoid further problems, but if we look closely, what happened her e is an example of how management or ganizes work to extract surplus value fr om their work ers, driven by systemic rationalization processes imposed by their multinational customers. For ecasts ar e trick y to begin with, especially when dealing with FMCG (which, true to its name, involves “ fast- moving ” goods) and unpr edictable mark ets like Indonesia. A Java Film e xecutive addr essed this speciﬁc issue as one of the most diﬃcult challenges in his company : “ The biggest challenge [in] Indonesia, for me, is forecasting. We manufactur e plastic. So I sell a lot of food packaging, liquid shampoo packaging. The tough part is getting forecasts. A lot of goods are sold on the str eet, on bicycles. Unlik e in the United States, you can ’ t actually ask your distributors to give you accurate ﬁgures of sales and so on. So we deal with ﬂuctuations … meaning that today this customer can have no order, tomor row ten tons, and the ne xt day a hundr ed tons. ” Even though Java Film and Star Inc. do not ﬁt the ster eotypical image of factories in the Global South, the issues of labor and the labor process are still central to their pr oduction. Out of appr oximately 800 employees of Java Film and 1,500 of Star Inc., a majority of them work on the shop ﬂoors. Certain segments of pr oduction are mor e labor - intensive than others, with the majority of shop-ﬂoor workers placed in the ﬁnishing area at Java Film and in the bag-making ar ea at Star Inc. And although the rest of the segments ar e mainly computerized (automatic), labor still plays an important role. In both plants, the responsibility for monitoring machines, checking defects, and other related pr ocesses is held by work ers. Sometimes these tasks are done manually . As an example, when I observed the Java Film plant, I saw that a work er had to stand still next to a running machine to mak e sure that the product did not have any stains or other defects in it. This work er had to immediately notify others if he saw any defects. First, as a part of the outsour cing process, transfer ring production to dependent suppliers in the Global South does not mer ely gain multinationals lower unit labor costs, but it also serves as a means to transfer responsibilities for and criticisms of possible labor violations to such suppliers. 25 Thr ough the application of these inter national certiﬁcations, multinationals can have their ammunition ready : since audits have been done by the third party, the suppliers are supposed to comply with the rules. Thus, if ther e are violations, the responsibility is on the suppliers, not on them. Second, for the suppliers themselves, the well-being of work ers is not the main reason why they bother to get these certiﬁcations, the pr ocess for which, accor ding to my interviewees, is really complicated and tak es a lot of their time. Without these certiﬁcations, however, these suppliers would not be able to do business with the big multinational corporations. As Har ry Braver man writes, “ the humanization of work ” has never been the focus of management “ habituated to carrying the labor processes in a setting of social antagonism and … has never known it to be otherwise ” — instead, it is always about costs and contr ols. 26 Third, as systemic rationalization theories show, such evaluation criteria imposed by dominant companies are one of the strategies aimed at increasing the overall productivity of the entir e production chain. It is a means for dominant companies to for ce their dependent suppliers to reevaluate and, if necessary, change their or ganization of work in ways that are deemed mor e productive and eﬃcient. But, as explained in the pr evious chapter, productivity is not the main goal; it is lower unit labor costs. Thr ough the enfor cement of more productive and eﬃcient ways to work, multinationals aim for a reduction in pr oduction costs by their suppliers. With the open-costing system discussed above, suppliers have very little room to mark up their costs — this ability to easily contr ol suppliers ’ costs and proﬁts means that, when suppliers ’ costs are lower, their selling price is lower, too . During my interview period in 2013 at Java Film, not long af ter they passed an audit for yet another inter national certiﬁcation, a big banner was displayed in front of the factory . It read: “ Safe and Healthy W ork Is a Mandatory Condition for an Incr ease in Productivity and Eﬃciency . ” This saying, although it appears as a mere slogan, actually reﬂects what such certiﬁcations mean for capital within labor -value chains. When an or ganization of work is highly structur ed and everybody follows the rules — say, in the name of work safety or a healthy environment — it leads to an increase in productivity and eﬃciency, and productive and eﬃcient work leads to a reduction in pr oduction costs. Accidents, for example, cr eate distractions at the shop ﬂoor . As this executive e xplains: We had this one accident in 2011. Until today, that employee can ’ t work at his pr evious position. We had to move him to an administrative position. That was af ter a year of [sick leave]. So, how pr oductive is he in his cur rent position? T wo years, zer o. His pr oductivity is zer o … . Until today he has back problems, and that really interfer es with his productivity . Not to mention the employee who, due to his own carelessness, fell in the elevator … luckily it was not bad. But we lost another person. And what does that mean for HR? HR needs to ask the other employees to do overtime, or ﬁnd new employees, right? Obviously, safety matters for productivity . And then health issues. Well, if we have a lot of employees who ar e sick, even with pr oper medical notes — say an employee calls in sick — either the productivity at his section [within his department] will go down, or we need to hir e a replacement. Mor eover, the imposed rule about overtime, for example, is not mer ely a means to mak e sure that work ers do not overwork (and, as the case of Sun Printing suggests, when overwork pay is given, work ers prefer to do overtime so that their ear nings incr ease), but to mak e sure that they work mor e productively and eﬃciently . If we refer to K arl Mar x ’ s law of value, when the possibility of lengthening the working day, as part of the capitalists ’ eﬀort to increase absolute surplus value, is small, then the options are to incr ease absolute surplus value elsewher e, through incr easing the intensity of labor — in which nonpr oductive “ pores ” in the working day are minimized, amounting to an implicit incr ease in the length of the working day — and to increase relative surplus value thr ough incr easing the productiveness of labor, which is “ the quantity of products yielded by the same quantity of labor in a given time. ” 27 As a Java Film e xecutive told me, “ W e ar e trying a lot of things right now — revitalizations, relocations [of work], so that pr oductivity can be incr eased, so that our overtime rate would not be like in 2012. Our tar get is that overtime should be reduced by a minimum of 30 per cent. ” One characteristic of systemic rationalization is the use of evaluation criteria that dominant companies impose on their dependent suppliers. 23 In global commodity chains, such certiﬁcations bear many names, each with its own claimed measur ements aimed at evaluating suppliers ’ compliance with rules regar ding safe working conditions, hygienic envir onments (especially for food-r elated industries), wages and overtime, whistleblower protections, etc. Among them are URS A (as mentioned above), the many versions of Inter national Organization for Standar dization (ISO 9001, ISO 14001, ISO 18001, ISO FSSC 22000), and Sede x. Both Java Film and Star Inc. had to under go several of these audits in their attempt to get big multinational customers. The audits were done by a third party that would then issue the certiﬁcates and report it to their pr ospective customers, or publish the reports that could be accessed by pr ospective customers. While certiﬁcations lik e this certainly aﬀect work ers positively in some areas, the reason behind such certiﬁcations is not always workers ’ well-being. One can argue that this is a for m of bur eaucratic contr ol where the labor process is subject to the ﬁrm ’ s law rather than dir ect supervisor ’ s contr ol, as Richar d Edwards proposed. 24 In this case, however, the scope is global, wher e the ﬁrm ’ s law itself is aﬀected by inter national regulations that become an integral part of pr oduction networks led by multinationals. Star Inc. ’ s reor ganization of their incentive system can also illustrate this point. The reduction of the number of overtime hours led management to cr eate a “ better ” system in which work could be car ried out mor e productively, and this created an impact on the labor pr ocess. The incentive system is applied for work ers who are below the supervisor level. Production work ers (work ers who are involved dir ectly in production) get full incentives, while non-pr oduction workers (such as administrative staﬀ) get less. But within each of these segments, incentives are distributed evenly to the work ers. The evaluation that becomes the basis of how much incentives are ear ned by work ers is based on three criteria: production output, variant waste, and retur ns (how much goods are retur ned by customers due to defects). All three are related to pr oductivity and eﬃciency . Production output is connected to the speed of work ers. This “ technical contr ol ” of the labor process by the mechanism of machines is applied to lar ge segments of the Star Inc. plant and inﬂuences the production ﬂow as a whole. 28 But the simplest one to understand is the process in the printing division. To get maximum pr oductivity, the printing machine has to be set to the highest speed, and work ers have to keep up with this speed. This criterion is related to the second one, variant waste. V ariant waste means the diﬀer ence between the projected (allowed) waste and the actual waste produced. Inter estingly, this factor also inﬂuences output. If your goal is only to reduce waste, then your pr oductivity can also slow down. For e xample, they can set the machine to the lower speed just to reduce waste. So, in this case, work ers are expected to juggle the speed of their work and the attention to waste reduction. As Braver man writes, “ Machinery oﬀers to management the opportunity to do by wholly mechanical means that which it had previously attempted to do by organizational and disciplinary means. ” 29 For Braver man, machines can be controlled and paced in accor dance to “ centralized decisions ” by management stationed in the oﬃce, suggesting that control can be removed fr om the site of pr oduction. In this case, machines wer e also a means to contr ol the labor process away from the shop ﬂoor, but its execution is mediated by the incentive system, designed by management to dir ect the labor process in ways that can incr ease production output and minimize waste at the same time. In addition, work ers also must make sure that defects can be minimized, since the “ retur ns ” criterion is measur ed by this aspect. On the one hand, workers can get more earnings with the incentive system, but on the other, their labor process is subject to an invisible contr ol, namely the possibility of losing their extra ear nings. For management, this system allows them to avoid conﬂicts due to the loss of overtime ear nings and, at the same time, receive a “ bonus ” — the pr oductivity and eﬃciency incr ease expected by their customers. Also in a continuous eﬀort to cut costs, Java Film tried to maintain the practice of hiring outsour ced workers through employment agencies for certain positions such as security and cleaning services — a kind of “ numerical ﬂexibility . ” 30 This was done amid pressur es from labor unions, as a part of their ongoing bar gaining, to hire these outsour ced workers as permanent employees. However, the company had already started doing this and, due to the hirings, the incr ease in labor cost was inevitable, even though they tried to push down the increase during the bargaining with the labor unions. Although some of the executives denied that this wage incr ease matter ed for them (since the company is not consider ed “ labor intensive ” and that labor costs only make up a fraction of their total costs), others expr essed their concer ns. Especially for the human resour ce department, this was quite a big deal, since certain segments of production — namely the “ ﬁnishing ” segments — still needed many work ers. This was further inﬂuenced by the companies ’ multinational customers ’ refusal to consider buying at a higher price in accor dance with the rising labor cost. When asked whether Java Film could incr ease selling prices due to minimum wage increases, an executive told me that sometimes they could, since the open-costing system allowed them to incorporate such incr eases in their calculation of total cost. “ But a lot of times, ” he said, “ such increases cannot be passed on to the clients, to be honest with you. It ’ s not easy . Especially multinationals, they would say, ‘ Yes, true, wages have gone up, but your eﬃciencies need to be incr eased as well! ’ So they would try to oﬀset it that way . It ’ s up to negotiating. Diﬀer ent results per customer . ” Thus, the means to increase productivity was dir ected towar d tightening the control of the labor process instead. These means include diﬀer ent forms of contr ol. During my interviews at Java Film, the company was just beginning to develop a perfor mance-based incentive system, utilizing new Key Perfor mance Indicators (KPI), aimed at creating “ continuous impr ovement ” or kaizen . During that period, the executives wer e all about kaizen , since they were actively pursuing Japanese customers. These customers ﬂew directly from Japan to visit the factory and demanded they mak e changes, including installing an air shower, and inspected minor details to suggest impr ovements. In his second book on kaizen , Imai stresses the importance of managers ’ involvement on the shop ﬂoor (or what he calls gemba , “ wher e real action occurs ” ). One of the main ar guments that Imai oﬀers is that once managers are reluctant to be involved in gemba aﬀairs, “ management has lost contr ol of the workplace. ” 31 Taking inspiration fr om the concept of kaizen , Java Film e xecutives cr eated speciﬁc measur ements of workers ’ perfor mance that included discipline factors, such as how many sick leaves, days when workers arrive late (measur ed in minutes), absence without notice, warning letters received, and so on. Each department would also set their own measur ements of workers ’ perfor mance, based on their own indicators. Examples given include the volume of product retur ns, operation perfor mance, as well as customer complaints. Similar to Star Inc. ’ s incentive system, this is a way for management to control the labor process — discipline thr ough the promise of rewar ds. Other strategies take many forms, from reconﬁguring work-shif t schedules (such as eliminating long shifts to reduce overtime) to reinfor cing discipline, to cutting energy use in the oﬃce space. Reducing overtime was done despite the risk of labor unr est. I was told that work ers were expr essing their dissatisfaction, but management refused to back down and instead used the issue of overtime as a bar gaining chip. One executive told me: “ I just told [the work ers], ‘ I ’ ll be blunt with you. You want this much incr ease [in wages], OK, ﬁne, but I will eliminate all your overtime! ’ I would take that measur e. If necessary, I will change the three work-shif ts to four, so there won ’ t be any overtime. ‘ Very sor ry, ’ I said. ” However, aside from the inﬂuence of certiﬁcation systems on the or ganization of work, the contradiction that was bor n out of the demands for ﬂexibility and for increasing productivity does in the end aﬀect work ers and their labor process. The bur eaucratic contr ol imposed by multinationals is just one means among others. What cannot be controlled by management, such as waste and other productivity aspects that are lost due to the changing priorities of customers in their pursuit of ﬂe xibility, as well as the incr ease in the minimum wage, is oﬀset by a relentless eﬀort to incr ease productivity and eﬃciencies in other areas. As someone from the Java Film human resour ce department said about the increase in minimum wage, “ It naturally follows that the challenge is how to increase employees ’ productivity . What we don ’ t want to happen is that this wage increase is not accompanied by an increase in productivity — or that the productivity goes down instead! ” A similar sentiment was expr essed by Star Inc. executives: “ If [work ers] want to be paid more, I need to know how high their labor productivity is, per hour . It needs to be measur ed ﬁrst. ” Although many of my interviewees recognized that wages should incr ease following inﬂation and other factors, in the end, these increases were never “ free. ” When ask ed whether they would prefer robots or robotic equipment than human labor, many interviewees said “ yes ” without hesitation. This reﬂects a global patter n of automation, where manufactur ers in North America and Wester n Europe see the move to the use of robots and other automated systems as a viable option to “ reduce labor costs, enhance quality contr ol, and improve throughput. ” 32 At Star Inc. in particular, ther e were talks within management circles to implement a new war ehouse system equipped with robotic components. A Star Inc. e xecutive told me, “ W e ’ ve done it several times — laying oﬀ employees because we adopted new technology . What was done manually before, it is now automated. ” These executives ar gued that, with robots, the quality is mor e consistent, the errors can be minimized or eliminated altogether, the pr oductivity is higher, and waste can be detected early . Citing another executive fr om another company, an interviewee said, “ And machines never complain. ” However, some also expr essed that the human role in their pr oduction processes cannot be eliminated. They still need human decisions and labor in operating the system, even on the lowest level at the plant. This is in line with what systemic rationalization scholars argue to begin with, that “ the development of system technology did not aim for total automation since a system of this size and comple xity would demand the presence of several operators. ” 33 The human role remains important in the company ’ s pursuit of ﬂe xibility . As expr essed by another Star Inc. executive, “ If all is done by an automated system, we won ’ t be able to continue being ﬂe xible. If the order was given today and then, with 30-days ’ lead time, ” if ther e are changes in delivery time or or der priority, “ we will need a human being to intervene so an exception to the system can be authorized. ” And considering how ﬂe xible their company tries to be, he said, “ it is likely that our exceptions e xceed the nor mal, ongoing setting. ” For other e xecutives, the consideration is related to the ability to invest in e xpensive technology . If the implemented technology is not too expensive, such as the automatic reject system in the bag-making segment on the shop ﬂoor, it is lik ely that management would do it. But unlik e North American or European manufactur ers who are eager to invest in such technology, companies with weak er capital do not have an equivalent ability to execute their plans whenever they please. 34 Thus, if the investment is deemed too e xpensive, they think twice: “ W e ’ ve been talking about this, putting robots in the war ehouse — how many people can we cut? … How much is the cost? And I want to compar e to the investment cost, is it beneﬁcial or not? I want to know whether, if our labor, at this moment and for the next ﬁve or ten years, would not be as expensive as it is in the U.S. or in China, would it still be really beneﬁcial for me to invest in technology? So I need to know, I need to see ﬁrst. Because if I look at our labor cost now and compar e it to our investment cost of having this, you know, huge investment, it ’ s not that [good]. ” Another Star Inc. executive told me the importance of implementing “ awar eness ” to workers about the value they added to the company ’ s products: “ Whenever we have an employee gathering, we tell them, ‘ Ther e ’ s your stamp on this product. ’ Then we also relay our customers ’ complaints to our employees. ‘ See, if you don ’ t work well, this is the result. ’ That way they can understand. ” This r hetoric is especially important for managers who lead pr oduction teams. As one of them said, they always told the work ers on the shop ﬂoor that “ added value originates from our department … If we talk about engineering, planning, or quality contr ol, they ’ re just supporting elements. The added value, the converter in a converting company, is located within pr oduction. ” Ironically, this awar eness about the importance of workers ’ labor in production — the value work ers added to and embedded in the ﬁnished goods — is used as an instrument of contr ol, with the illusion that workers perfor m skilled labor to produce these goods and are not in any way separated from the pr oduct of their labor . The line of reasoning her e is that, since work ers are the ones contributing to the pr oduction of these goods, they need to car e mor e about the products. It does not matter that these work ers have almost no contr ol over the direct production of use values, or that their labor has been degraded, unskilled to the point that it is relatively easy to replace. Other times, management applies the “ home ” r hetoric to pacif y workers. As someone from the human resour ce team told me, “ We mak e it clear to our work ers, ‘ Remember, this is our home . The company wher e we work is the paddy ﬁeld whose soil we plow. We work together her e to build … . If our business grows, if the results ar e good, we get our shar e [of this success]. ’ ” Similarly, this rhetoric pr ovides an illusion that work ers have shared ownership in the means of production, though in reality, work ers lose contr ol over their own labor once their employer buys their labor power . Also, this rhetoric is a way to curb union activities at the plant. In an eﬀort to push labor unions out, management at Star Inc. encourages their work ers to see the company and its management as “ a family ” that they can turn to whenever ther e are pr oblems. In 2015, Star Inc. had only one union, and it was the company ’ s inter nal union, which was only aﬃliated with, but was not a subsidiary of, an outside labor union independent of the company . The management was eager to keep things as they wer e. They wanted to avoid the problems and headaches that executives in companies lik e Java Film e xperienced (in 2013, Java Film had thr ee unions) every time they had to deal with the “ unruliness, ” as a Star Inc. executive called it, cr eated by the pr esence of independent unions. But such motivational rhetoric does not always work or does not work on its own. T o k eep things “ safe, ” Star Inc. e xecutives instructed their supervisors and superintendents — who led daily factory brieﬁngs at the beginning of each work-shif t — to always watch out for rumors of gatherings or meetings organized by “ inﬁltrating ” unions. They also trained their supervisors and superintendents about what to do should such things happen. In the meantime, when manual labor is still involved, the management can only enfor ce stricter discipline or apply a more structur ed organization of work practices to better control the labor process and hence reduce the chance of human er rors. A few Star Inc. e xecutives e xpr essed their concer ns about how diﬃcult it was to enforce discipline on the shop ﬂoor. One of them, who was involved in the production team and helped develop the incentive system at the company, told me that everybody should “ do their best, ” down to the work ers in the lowest position. Inspir ed by the concept of gemba kaizen , he emphasized the importance of management control on the shop ﬂoor: “ It ’ s not as simple as I say, of course. Even after being encouraged by the incentive system, ther e ’ s no guarantee that they can work well. That ’ s why we need management ’ s presence. Every single deviation needs to be evaluated. If, at one point, ther e are employees who need to be reprimanded, or even given a war ning letter — we have to do that to provide some deter rent eﬀect. ” The same e xecutive told me later that “ discipline is the most important thing for Indonesia ” and e xpr essed his opinion about the virtue of military training as an instrument in shaping one ’ s discipline habits. These simple forms of contr ol complement the other forms of contr ol discussed previously . Braverman writes that the labor process was subject to contr ol even befor e Taylorism pr evailed. But Taylor “ raised the concept of contr ol to an entirely new plane when he asserted as an absolute necessity for adequate management the dictation to the worker of the precise manner in which work is to be performed . ” 36 Even though Tayloristic work may not be as pervasive and omnipresent in the era of systemic rationalization, some forms remain, as illustrated in the discussion above. And at its cor e, Tayloristic or ganization of work “ drastically reduced the skill and discr etion of work er in the labor process. ” 37 On the shop ﬂoor at Java Film or Star Inc., work ers who occupy low positions are not requir ed to have meaningful skills. Any signiﬁcant training that could actually increase skills is reserved for work ers who are in certain strategic positions, especially if being gr oomed to be managers. 38 For the rest of the workfor ce, they need a capacity to obey and follow orders. This was expr essed clearly by a Java Film e xecutive: “ [Machine] operators ’ work is repetitive: this, that, this, that … . I think the skills needed to operate those machines ar e minimal. It ’ s not lik e operators of the CNC machine [used in other types of manufacturing], who always need to have an updated knowledge of the sof twar e. Our machines just requir e repetitive tasks. ” The work is “ simple ” not mer ely because it is the natur e of the job or the machine per se, as the executive above seems to imply, but because the or ganization of work has been structur ed in such a way that enables deskilling to happen. “ This is the pivot upon which all modern management turns, ” writes Braver man, “ the control over work through the contr ol over the decisions that are made in the course of work. ” 39 Taylorism and the practice of moder n management revolves ar ound the “ dissociation of the labor pr ocess from the skills of the work ers ” through means such as “ the separation of conception from execution ” that, in tur n, reﬂects the use of “ monopoly over knowledge to contr ol each step of the labor process and its mode of execution. ” 40 In this conte xt, the majority of workers on the shop ﬂoors, especially the “ operators ” or those who only operate the machines, are divor ced from any knowledge regar ding the technological know-how of production. They mer ely execute but ar e not involved in any conception of pr oduction itself, which is done in the management cir cle, at the oﬃces, away from the shop ﬂoors. The executives I interviewed possess the knowledge of the technology and have the power to contr ol the extr emely expensive machines, the same machines that “ do not requir e any skills ” from the work ers who operate them on the shop ﬂoor. As they told me themselves, it took a lot of time and plenty of trial-and-er ror for them to ﬁgur e out many things in relation to how the machines work and how to mak e them work well. What they relayed to their work ers was merely a list of strict procedur es about what to do and, especially, what not to do, in order to avoid lost output caused by mistak es in the operation of the machines. Obviously, the machines are not so simple. It is the detachment of knowledge from the work perfor med by these operators that makes it meaningless. And it is the decisions contr olled by management, inﬂuenced largely by the contr ol exerted on them by their multinational customers, that enable the degradation of work to happen. W HAT C AN B E L EARNED? Since Java Film management could not really do much with some segments on the factory ﬂoor, which ar e computerized and requir e only a small amount of manual labor, they focused instead on what they refer to as “ ﬁnishing ” segments. Manual labor is still applied in these segments because it is still diﬃcult to mechanize the tasks. Why is it diﬃcult? A Java F ilm e xecutive tried to e xplain: “ Because each customer has diﬀer ent requests. Some ask for such-and-such size, the pr oduct has to be this way, one roll of plastic has to be this long, even up to the requir ement of how hard the bundling should be, and a lot of other things. That mak es it diﬃcult to mechanize. So in the end, we still requir e a lot of labor. ” This diﬃculty of managing labor seemed to be perceived as a persistent problem, both at Java Film and Star Inc. The top e xecutives at the factories wer e trying to design a mor e cost-eﬀective system that would reduce er rors in pr oduction and thus reduce unnecessary rework. Of ten, then, mechanization is preferable whenever it is possible. Thus eﬀorts wer e taken to reduce the number of work ers in every task, such as implementing new machines that can automatically detect errors. Mor e direct and simple for ms of contr ol like this are utilized not only in relation to pushing unions out, but also in the general pr ocess of production. Of ten, simple contr ol is justiﬁed by a stereotypical view of Indonesian work ers, namely that they are either lazy or intellectually challenged and thus diﬃcult to manage. As a Star Inc. executive said, “ You know, Indonesians. You always need to monitor them. ” A Java F ilm e xecutive e xpr essed the same concer n. He even claimed that with machine operators it was really hopeless. What you can do, he said, is to focus on impr oving the skills and disciplines of the supervisors: “ If the supervisors are all right, then the operators will be too . ” But at least, he continued, “ Indonesians can still obey orders if you watch their back. ” David Gor don refers to this use of simple for ms of contr ol as the “ stick strategy, ” where ﬁrms “ exer cise contr ol with the armies of supervisory staﬀ. ” Mockingly channeling management ’ s voice, Gor don writes: “ Can ’ t trust your work ers when left to their own devices? Peer over their shoulders. W atch behind their backs. Recor d their movements. Monitor them. Supervise them. Boss them. Above all else, don ’ t leave them alone. ” 35 The third characteristic of production in the two companies, in which they produce multinational brands for the local mark et — even though it does not quite ﬁt the common case of global labor arbitrage — illustrates yet another form of participation by Global South companies in labor -value chains. R ather than dir ectly exporting their pr oducts to the tar geted mark ets outside of where these multinationals are based, this particular system is deemed much mor e eﬀective as a means to cut costs. In this conte xt, multinationals target huge mark ets like Indonesia, dir ectly invest in the country, and build their subsidiaries so that production can be done close to the mark et itself and, in the process, outsour ce parts of their production processes to thir d-party suppliers. Thus, even though it involves intra- ﬁrm trade relations by multinationals thr ough their subsidiaries, it does not precisely illustrate “ producer -driven ” chains — which are solely characterized by for eign direct investment — because these chains also involve arm ’ s length contracting practices in which multinational subsidiaries outsour ce the production of their pack aging materials to third-party suppliers. 41 In the conte xt of all three of these characteristics, Java Film and Star Inc. serve the role of dependent companies in labor -value chains, driven by the sear ch for low unit labor costs by Global North capital that seeks to captur e value from Global South labor, which is realized in the price of the commodities consumed in the home mark et or in Indonesia. The price of multinational goods sold in Indonesia may be lower than that in the North, but this does not translate into lower proﬁts for multinationals. Instead, with the interpenetration of the sales eﬀort and production process, such as a mark eting strategy that involves many product diversiﬁcations of a speciﬁc item (including cases in which end consumers have to pay a higher price by buying the product in tiny pack ages), it is very reasonable to assume that the pr oﬁt rate is high. What is important is that mechanisms of both systemic rationalization and ﬂe xibility are applied, and these are practices by multinationals that captur e value at the end of the chain, since a large shar e of the proﬁts (or the surplus value extracted fr om the exploitation of work ers that make their products) that results fr om these practices goes to multinationals in the North. The sear ch for low unit labor costs is the main drive behind the decision to move production outside of Wester n Europe, the United States, or Japan. And it is due to this attainment of low unit labor costs that such multinationals are able to reduce their total pr oduction costs. We know from the interviews that multinational corporations have — and indeed, contr ol — the knowledge and technological know-how of ﬂexible pack aging in their area. Those I interviewed expr essed that they wer e often genuinely surprised that their customers “ actually knew better about pack aging ” than their own best experts. Thr ough this kind of contr ol, multinationals maintain their monopoly over knowledge and use it to dictate and direct the production of their pack aging materials in ways that are absolutely beneﬁcial for them. It follows, then, that other than additional practical reasons, multinationals, even those that dir ectly invest in the country thr ough having their subsidiaries and factories ther e, are reluctant to deal with their own pr oduction of pack aging, not because they do not know how to do it, nor because they do not have the resour ces needed to execute it, but because it helps them mark up their prime pr oduction costs — an eﬀort to perpetuate and enhance their monopoly power, as discussed previously . In a way, there is an inter esting and rather complicated combination of how surplus is extracted. For e xample, not only do multinationals perfor m extraction at their subsidiaries ’ plants in the South thr ough the attainment of low unit labor costs, but they also do it at their thir d-party suppliers ’ plants. The latter involves arrangements that hide mor e aspects of the unequal capital-labor relations on the global scale — e xecuted thr ough systemic rationalization and ﬂexible production mechanisms. The main goal of such mechanisms that is clear thr oughout the case studies presented in this chapter is the externalization of costs , a process that is per haps most clearly seen when companies like Java Film and Star Inc. pr oduce pack aging materials directly for exports to the multinationals ’ home countries. But whether gear ed towar d export or the local mark et, multinationals outsour ce their production to exter nalize the costs resulting fr om ﬂe xible production to accommodate ﬂuctuating mark et demands. In this way their proﬁt rate is not at risk. Java Film and Star Inc. bear the responsibility for fulﬁlling ﬂe xibility that is problematic for productivity and eﬃciency measur es. Multinationals do not want to place the totality of this burden on their own subsidiaries, since that way they must pay the price, so they transfer a large part of this bur den to their suppliers. Waste management becomes a major issue in Java Film and Star Inc., both waste of pr oducts and waste of labor created from the customer demands of pr oduct variations and a ﬂe xible delivery system that requir es them to buﬀer in cases where forecasts are missed or sales projections alter ed. This fact alone disrupts their productivity and eﬃciency, and as a result, they have to constantly face conﬂicts within their own management cir cles, as well as change their organization of work in ways that can oﬀset the loss resulting fr om this wasteful pr oduction. Materials and ener gy use make up the two highest components in their production costs — and the requir ement to be ﬂexible leads to considerable waste in relation to these two factors. Many parts of the pr ocess of ﬂe xible production cannot be contr olled; no matter how eﬃcient their planning is in the face of ﬂexibility demands, ther e would still be plenty of materials and ener gy wasted in the process. In the end, the main thing they can do is to contr ol the labor process of their work ers through a series of reor ganizations of work that aims to cut costs in places that can still be manipulated by management. This is another responsibility that is transfer red to them by their multinational customers, who mak e sure that they can avoid their own responsibility by requiring that their suppliers pass thir d-party audits and inter national certiﬁcations. Then, the rest follows: the contr ol over the labor process is enhanced in the era of systemic rationalization and ﬂe xible production. Conﬁr ming what the theories discussed in chapter 3 suggest, the case studies presented her e show that moder n management has not been largely characterized by the elimination of alienation of labor, a trend towar d professional and skilled work, or an extensive “ humanization of work ” in general, as authors like Robert Blauner, Michael Pior e, and Charles Sabel claim. 42 Tayloristic or ganization of work still pr evails, and is even enhanced, especially in the periphery wher e production happens and the global reserve ar my of labor is lar ge. This occurs within layers of unequal capital-labor relations in which dominant multinationals based in the North can ﬁnd numer ous ways to exploit work ers in the South through the former ’ s contr ol over the dependent companies where the latter is employed, often without dir ect involvement or visible traces. 5 — The New Economic Imperialism: Looking Thr ough the Eyes of the Global South An important part of the modus operandi of imperialism is in the intellectual domain, wher e it promotes incor rect theories of trade and of unemployment combined with illogical methods of measuring poverty to show a decline when deprivation is actually on the rise. — U TS A P ATNAIK AND P R ABHA T P ATNAIK , A T HEORY OF I MPERIALISM THE CLAIM THA T THE ENTIRE CONCEPT of imperialism as a political-economic reality should not be car ried over into the twenty -ﬁrst century, that it should, in fact, be abandoned, proposed not only by conservative think ers but also by some on the left, is tempting to entertain, as it