New international division of labour (NIDL)
The New International Division of Labour (NIDL) refers to the global shift in manufacturing and industrial activities from advanced economies to less economically developed countries, a trend largely driven by the rise of transnational corporations. This transition has its roots in the post-World War II economic landscape, where significant industrial power was concentrated in the U.S., Western Europe, and East Asia. As corporations sought to optimize profits, practices like offshoring and outsourcing became common, allowing companies to reduce production costs by relocating labor to regions with lower wage demands and fewer regulations.
While NIDL can stimulate economic development in host countries, it also raises concerns, such as environmental degradation and the potential exploitation of workers. For instance, as corporations moved operations to countries like China, they benefited from a large labor pool but later faced challenges due to rising costs and changing workforce dynamics. By 2020, as labor conditions in China evolved, many companies began relocating manufacturing to other Southeast Asian nations like Vietnam and Cambodia, which offered similar advantages of low-cost labor. Understanding NIDL provides insight into the complexities of global economics, labor markets, and the socio-economic disparities that characterize contemporary international trade.
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New international division of labour (NIDL)
The new international division of labour (NIDL) refers to the deindustrialization of advanced economies as they transition to becoming postindustrial societies, and the subsequent shift of manufacturing to less economically developed countries. This division of labor is related to the growth of transnational corporations. NIDL can help countries increase development of their economies; however, the process has potential negative effects. For example, industrial development often is associated with an increase in air pollution and other effects on the environment. Companies frequently use outsourcing, offshoring, and other business practices to reduce production costs and risk.
Overview
The major world economies of the late nineteenth and early twentieth centuries were manufacturing centers. The Industrial Revolution provided England, the United States, and other countries with cheap and efficient power to drive machine economies. Mass-produced goods offered the business class and middle class a path to prosperity. Industrialization also drove urbanization by shifting the labor force from rural agricultural areas to urban centers.
The shift in the world economy that led to the NIDL developed in the post-World War II years of the twentieth century. At that time, economic power was concentrated in three main areas: the United States, western Europe, and East Asia, particularly Japan.
Corporations boost profit by finding the most cost-effective operating plan. This often means finding the cheapest resources, including labor. During the 1980s, many major US corporations began moving manufacturing plants elsewhere in a process known as offshoring. In 1985, for example, AT&T closed its only residential telephone manufacturing facility in Shreveport, Louisiana, to Singapore. In 1987, General Motors moved production of A-body cars from the United States to Ramos Arizpe, Coahuila, Mexico.
Many manufacturing jobs have been offshored to countries with large pools of skilled and unskilled laborers. This practice sidesteps government minimum-wage legislation in countries with advanced economies and avoids demands for fair compensation made by labor organizations. Corporations can pay workers less, thereby increasing profits. Offshoring also permits corporations to sell products in other markets for less, due to decreased shipping costs.
Corporations have also turned to the practice of outsourcing. This differs from offshoring in that corporations remain in control of operations that are offshored, while outsourcing involves contracting with a third-party vendor that controls some or all aspects of the operation.
Conditions similar to those seen in the United States and Europe in the early twentieth century changed the global economic balance at the end of the century and into the early twenty-first century. China began to open to the global economy in 1978 and soon took on a major role. Many corporations moved manufacturing to China to take advantage of an abundance of labor, low wage demands, and few regulations. By 2020, however, China’s workforce had changed drastically. The nation’s one-child policy had reduced the birth rate, which subsequently decreased the labor pool. Workers were accustomed to a better standard of living and were less interested in low-level factory work. The cost of production in China had increased as the government moved to reduce pollution caused by the manufacturing sector. Many corporations had begun manufacturing in other nearby countries, including Cambodia, Indonesia, and Vietnam, during the 2010s. Vietnam in 2020 was likened to China in 1990, when the country’s factories were hiring workers as quickly as they could. Even Chinese companies were offshoring to take advantage of cheaper labor.
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