Prior to the pandemic, US consumers largely took global supply chains for granted. With roughly 80% of international trade conducted through transnational supply chains, consumers could place an order with an online retailer and expect their purchase to be delivered in a day or two, whether it was originally assembled in China, Bangladesh, or elsewhere.
COVID-19 upended all that. What began as a toilet paper shortage in March of 2020 has turned into a rolling series of supply chain disruptions that have affected everything from cars to cat food; reporters have taken to asking President Biden what he’s doing to make sure Christmas presents arrive on time. Because of these breakdowns, supply chains are visible once again, the nature and sustainability of their operations an open and urgent question.
Why might this concern LPE scholars, other than the fact that they too need toilet paper? In the rest of this post, I’m going to distill three lessons that supply chains can teach us about neoliberalism and the law. First, supply chains offer an exemplary illustration of how, in the name of market-making and efficiency, the law under neoliberalism is generally enforced on the weak but not the strong; second, the disaggregated and transnational structure of supply chains illuminates how the law can obscure the nature of corporate power; and third, the present breakdown of supply chains can help us understand how to hold corporate power accountable, even when domestic law is lacking or unenforced.
Lesson #1: State intervention is central to neoliberalism
While neoliberalism is sometimes understood as a kind of market fundamentalism that stands in opposition to state power, a closer look at the role of law and the state in creating supply chains shows that neoliberalism is better understood as legitimating active and violent state intervention in the name of making efficient markets. Of course, the state is not alone in this; some international institutions and laws also make transnational supply chains possible. Without the WTO and its predecessors, as well as the other investor-state dispute settlement mechanisms embedded in trade agreements that protect investors, supply chains would look quite different. But the state itself is also directly and intensively active in making supply chains – and neoliberal markets – possible.
Consider, for instance, the creation of Export Processing Zones (EPZs), spaces exempt from the national laws that otherwise prevail. Within these now more than 4000 zones, basic political rights like freedom of assembly are constrained or invalidated while national borders are effectively reshaped so that special expedited customs processing can be conducted literally at the factory gate. States facilitate supply chains and benefit capital by simply deciding not enforce labor laws that regulate wages, hours, and working conditions. The nature of just-in-time production, for example, can require wild swings in working hours from week to week and makes illegal forced overtime the norm in most industries. States fail to investigate these violations not out of negligence or poverty but out of a deliberate decision not to develop the capacity to do so. Meanwhile, workers protesting their wages and working conditions are routinely met with state violence, as their marches are deemed to violate laws governing assembly. This mix of state coercion and state withdrawal is characteristic of neoliberalism, which sees laws that facilitate market transactions as presumptively legitimate, whatever their democratic credentials (or lack thereof); regulating wages and overtime interferes with the efficient functioning of the market, while union-busting and worker repression is legitimated as necessary for businesses to function.
Reformers often call for the enforcement of local law, but once we appreciate why these laws aren’t being enforced in the first place, these calls will often appear fruitless. Often, enforcing the law simply isn’t to the benefit of ruling elites; in Bangladesh, for example, 10% of national legislators are garment factory owners. But more broadly, the protection of capital mobility under neoliberalism means that supply chains really can move production away from states that try to enforce workers’ rights. If workers in Bangladesh win higher wages, companies like Walmart can source from Vietnam instead.
Lesson #2 Focusing on the legal boundaries between firms obscures the nature of corporate power today
Neoliberalism offers a picture of supply chains as the efficient decomposing of corporations into more specialized units, a continuing of the division of labor that ultimately benefits everyone. This accords with the view of corporations as themselves ultimately made up of individual entrepreneurial market actors; in that spirit, economists Michael Jensen and William Meckling describe corporations as “simply legal fictions which serve as a nexus for a set of contracting relationships among individuals.” Against this individualizing neoliberal view, scholars have offered a picture of corporations as political entities – political because they are chartered by the state, because they intervene in partisan politics, and because they dominate us, implicating political values like freedom and justice.
But supply chains show that we need to push this reconceptualization further. By taking legally-defined corporate boundaries at face value, we allow leading brands to wash their hands of what happens in their supply chains, since most production is outsourced to other firms; Nike doesn’t own a single factory anywhere in the world. Consequently, when terrible injustices occur in the factories manufacturing for them – as when workers manufacturing Apple products for Foxconn Technology Group committed suicide rather than continue on the assembly line – the lead brand can deny legal and moral responsibility.
Notably, this is not how supply chain managers themselves understand the logic of supply chains. As the glossary maintained by the Council of Supply Chain Management Professionals (CSCMP) explains, supply chains are “material and informational interchanges,” and “supply chain management integrates supply and demand management within and across companies.” In other words, supply chains are a form of economic activity that cuts across corporate lines and that is fundamentally constituted by relations along the chain that are often orthogonal to legal boundaries between firms. Apple not only contracts with Foxconn to assemble its products but it also directs supply chain activity at firms with which they have no contractual relationship whatsoever – for example, coordinating engineering details with the firms that make the parts that go into the batteries of iPhones.
What’s more, lead brands in supply chains also seek to govern consumers. As CSCMP notably asserts, “all vendors, service providers, and customers are links in the supply chain.” Consumers may experience themselves as part of a supply chain only at the moment of purchase but in fact, firms acquire and employ vast amounts of data about consumers in the service of not only predicting demand but directing it. When speaking in their own trade press, firms are unembarrassed to say their aim is “retraining customers” to both buy their products and accept omnipresent corporate surveillance. Given their avowed aim at governing both workers and consumers, we should conceive of supply chains as themselves political entities, and we should understand the legal boundaries between firms as a tool these entities use to wield power and insulate themselves from accountability.
Lesson #3 Corporate power can be held legally accountable with movement power
Once we recognize supply chains as political institutions seeking to govern us, it becomes easier to see how they can be legally held accountable even when domestic law is lacking or unenforced. When more than 1,100 garment workers died in the collapse of the Rana Plaza building in Dhaka in 2013, survivors demanded compensation from the firms for which they produced, including Walmart and Children’s Place. Those companies used the legal boundaries of the firm to shield themselves from accountability and deny that the workers were part of their supply chains. They had never authorized production at those factories, which they did not own or contract with; production there had been outsourced from still other suppliers who had taken on more production than they could fulfill on their own. But the workers refused the idea that the legal boundary of the firm was definitive. We may say that, in denying that brands had the authority to determine the boundaries of their supply chain, workers sought to claim that authority as supply chain subjects. Consumers on the other end of the supply chain also claimed this identity and acted in solidarity, contributing to a transnational social movement for corporate accountability.
Ultimately, this movement resulted in the legally binding Accord on Fire and Building Safety in Bangladesh. Unlike corporate “codes of conduct” or “ethical sourcing” policies, which are unilaterally implemented by firms, the Accord is an enforceable agreement between multinational firms and workers organizations that commits brands to take responsibility for the conditions in the factories that produce their garments, and that commits them to spend their own money to improve working conditions in those factories. It also creates protections for freedom of association and the right to refuse unsafe work. In doing so, it breaks with neoliberal logics, acknowledging the reality of how corporate power operates in relation to national law, as well as the necessity of worker organization as a counterpower to holds firms to account. Others have also taken up this model, including garment workers in Lesotho and dairy workers in Vermont.
The COVID-19 pandemic has made it clear to all that, even setting aside concerns about sustainability and inequality, supply chains as currently constructed aren’t working. The current disruption has made visible the connections among supply chains, neoliberalism, and the law, as well as how demands for supply chain justice can be part of a larger resistance to neoliberalism. LPE scholars can contribute to this resistance and further unsettle the legal legitimation of neoliberalism by working in solidarity with these transnational social movements and workers organizations.