New International Division of Labor

The new international division of labor (NIDL) refers to social and spatial changes in the demand for and organization of labor that began during the late 1960s, when patterns of investment and production shifted from being organized primarily at the national scale to being organized primarily at the global scale. The term was coined by Fröbel, Heinrichs, and Kreye during the 1980s to describe shifts in the location of German industrial investment away from specialized industrial zones within Germany toward regions within the global periphery with an abundance of low-cost labor. The NIDL marked a situation that was significantly different from the classical division of labor espoused by classical political economists Adam Smith and David Ricardo. Whereas Smith argued for the separation of the labor process into specialized tasks to maximize productivity in Britain's industrializing economy, Ricardo built on these ideas in his theory of comparative advantage to argue that countries should specialize in the production and trade of goods that were relatively (rather than absolutely) lower in cost. Together, these theories supported an international division of labor where workers in the Third World almost exclusively produced raw materials used in First World industries, whereas workers in the First World primarily produced the manufactured goods consumed in the Third World. Under the NIDL, the old international division of labor was transformed as an increasing number of transnational corporations (TNCs) began to establish production in the Third World that was geared primarily for markets in the First World. Whereas in some cases production represented a change in the firms' internal division of labor, in other cases it represented a shift in the location of the firms' production away from traditional First World locations.

Fröbel and colleagues identified three factors behind the shifting orientation of firm manufacturing[Page 333] production away from domestic markets toward global ones. First was the presence of a virtually inexhaustible supply of labor in the Third World that was extremely cheap, easily mobilized for production, and easily replaced. Second was the ability of firms to fragment the production process into tasks that could be carried out by labor with minimal skill. Third was the existence of transportation and communications technologies that could facilitate the partial production of manufactured goods in multiple geographic locations. Whereas technological innovations reduced the cost of transporting bulky goods from sites of final production and consumption, changes in communications also allowed firms to exert greater managerial control from a distance. These three factors were integral to the ability of firms to subdivide the commodity production process into fragments located in any part of the world with the most profitable combination of capital and labor. These factors, however, should also be understood as part of the general intensification of competition among corporations in response to the slowdown in productivity and declining profits during the 1960s. This is a situation that a number of writers have attributed to the general crisis of the Fordist system of production, consumption, and income distribution that characterized most advanced industrial economies from the 1950s through the 1970s.

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