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SOCIAL PRODUCTION IN 19th CENTURY

Capitalist industry has already made itself relatively independent of the local limitations
arising from the location of sources of the raw materials it needs. The textile industry
works up, in the main, imported raw materials. Spanish iron ore is worked up in England
and Germany and Spanish and South-American copper ores, in England. Every coalfield
now supplies fuel to an industrial area far beyond its own borders, an area which is
widening every year. Along the whole of the European coast steam-engines are driven
by English and to some extent also by German and Belgian coal.
the limits of the development of the market, in capitalist society, are set by
the limits of the specialisation of social labour. But this specialisation, by its
very nature is as infinite as technical developments. To increase the
productivity of human labour in, for instance, the making of some part of a
whole product, the production of that part must be specialised, must become a

special one- concerned with mass production and, therefore, permitting (and
engendering) the employment of machines, etc. That is on the one hand. On
the other hand, technical progress in capitalist society consists in the
socialisation of labour, and this socialisation necessarily calls for specialisation
in the various functions of the production process, for their transformation
from scattered, isolated functions repeated separately in every establishment
engaged in this production, into socialised functions concentrated in one, new
establishment, and calculated to satisfy the requirements of the whole of
society. I shall quote an example:
Recently, in the United States, the woodworking factories are becoming
more and more specialised, new factories are springing up exclusively for the
making of, for instance, axe handles, broom handles, or extensible
tables....Machine building is making constant progress, new machines are
being continuously invented to simplify and cheapen some side of
production.... Every branch of furniture making, for instance, has become a
trade requiring special machines and special workers.... In carriage building,
wheel rims are made in special factories (Missouri, Arkansas, Tennessee),
wheel spokes are made in Indiana and Ohio, and hubs again are made in
special factories in Kentucky and Illinois. All these separate parts are bought
by factories which specialise in the making of whole wheels. Thus, quite a
dozen factories take part in the building of some cheap kind of vehicle (Mr.
Tverskoi, Ten Years in America, Vestnik Yevropy, 1893, 1. I quote from
Nik. on,[5]p. 91, footnote 1).(Lenin)

SOCIAL PRODUCTION IN 20th CENTURY(early and late)

a very important feature of capitalism in its highest stage of
development is so-called combination of production, that is to say, the
grouping in a single enterprise of different branches of industry,
which either represent the consecutive stages in the processing of raw
materials (for example, the smelting of iron ore into pig-iron, the
conversion of pig-iron into steel, and then, perhaps, the manufacture
of steel goods)or are auxiliary to one another (for example, the
utilisation of scrap, or of by-products, the manufacture of packing
materials, etc.).

Combination, writes Hilferding, levels out the fluctuations of

trade and therefore assures to the combined enterprises a more stable
rate of profit. Secondly, combination has the effect of eliminating
trade.
Vertical integration is the degree to which a firm owns its upstream suppliers and its downstream buyers.
Contrary to horizontal integration, which is a consolidation of many firms that handle the same part of the
production process, vertical integration is typified by one firm engaged in different parts of production (e.g.
growing raw materials, manufacturing, transporting, marketing, and/or retailing).
There are three varieties: backward (upstream) vertical integration, forward (downstream) vertical
integration, and balanced (both upstream and downstream) vertical integration.

A company exhibits backward vertical integration when it controls subsidiaries that produce some
of the inputs used in the production of its products. For example, an automobile company may own a
tire company, a glass company, and a metal company. Control of these three subsidiaries is intended
to create a stable supply of inputs and ensure a consistent quality in their final product. It was the
main business approach of Ford and other car companies in the 1920s, who sought to minimize
costs by integrating the production of cars and car parts as exemplified in the Ford River Rouge
Complex.

A company tends toward forward vertical integration when it controls distribution centers and
retailers where its products are sold.

Examples
One of the earliest, largest and most famous examples of vertical integration was the Carnegie
Steel company. The company controlled not only the mills where the steel was made, but also the mines
where the iron ore was extracted, the coal mines that supplied thecoal, the ships that transported the iron
ore and the railroads that transported the coal to the factory, the coke ovens where the coal was cooked,
etc. The company also focused heavily on developing talent internally from the bottom up, rather than
[2]
importing it from other companies. Later on, Carnegie even established an institute of higher learning to
teach the steel processes to the next generation.

Late Nineteenth- and Early Twentieth-Century Economic Trends

The U.S. economy changed dramatically during the late nineteenth and early
twentieth centuries, as the country transformed from a rural agricultural nation to an
urban industrial giant, the leading manufacturing country in the world. A number of
important trends and developments characterized this tumultuous period.
1. The Creation of a National Market
The early American economy was characterized by smaller, local markets, centered
around big cities. The vast expansion of the railroads in the late 1800s changed this,
tying the country together into one national market, in which goods could be shipped

for sale across the country. The railroads also provided a tremendous impetus to
economic growth because they themselves provided such a massive market for goods
steel and lumber, for example. In the late nineteenth century the railroads
represented the first "big business." The railroad industry was the largest single
employer of labor in the U.S., and helped standardize America economically, socially,
and culturally.
2. Territorial Expansion
The rapid expansion of the railroads made vast areas of land available for commercial
agriculture, with 430 million acres coming under cultivation between 1860 and 1900
(more than doubling the available acreage). Twelve new western states were added to
the union between 1867 and 1912. 1890 was a significant turning point, bringing both
an end to Indian resistance (symbolized by massacre at Wounded Knee, South
Dakota) and the "closing" of the American frontier the West had become so
populated by this point that there were no longer any unsettled frontier regions.
3. Mass Production
As the country expanded and industrialized, increasing emphasis was placed upon
mass production and mass distribution. By speeding up production and increasing the
output of goods, an industry could lower costs and maximize profits. In 1913 Henry
Ford installed the worlds first assembly line, with dramatic results. In 1910 it took 12
hours to build a Ford Model-T. In 1914 it took 1 hours. Ford was able to cut the cost
of his autos from $950 in 1909 to $295 in 1923. He sold 79,000 autos in 1912 -- in
1921 he sold 1,250,000. As a result of mass production, factory owners often found
themselves able to produce more goods than the market would absorb. They therefore
needed to increase consumer demand, and to do so they turned to the growing
industry of advertising, which worked untiringly to convince consumers that
they needed the new products that were pouring off factory assembly lines. Brand
names, trademarks, guarantees, slogans, celebrity endorsements, and other gimmicks
were used to entice potential customers. Estimated expenditures on advertising rose
from $682 million in 1914 to almost $3 billion in 1929.
4. Consolidation and Centralization the Rise of Trusts
This period witnessed the growth of gigantic corporations referred to as "Trusts"
that dominated key industries. Through strategies such as vertical integration,
horizontal integration, and cutthroat competition, industrialists such as Andrew
Carnegie in steel and J.D. Rockefeller in oil built enormous economic empires, with
control centralized in their hands. Numerous industries were affected by this trend, as
more and more economic power was wielded by fewer and fewer people. This

concentration of power alarmed many Americans and sparked cries for reform, but
Rockefeller defended the trend toward consolidation, stating that "The day of the
combination is here to stay. Individualism is gone, never to return."
SOCIAL PRODUCTION IN 2nd HALF OF 20th CENTURY
A major trend in the post-war development of the auto-industry has been its gradual
integration in two related but distinct senses.First is the integration of production,as
auto-manufacturers standardige model lines and components across geographical
borders.By vertically integrating across borders,multinational firms can create
operations which have little purpose outside the network as a whole,and are less
vulnerable to nationalization.As Forbes commented in 1972: No single unit of Ford
of Europe is really self-sustaining,so that if any government should attempt to take
one over,it would get a business dependent on Ford subsidiaries in other countries
for components,for markets and for management.The new automatic transmission
plant Ford is building at Bordeaux,for example,will supply Fords US and European
operations.If the French should ever decide to take it over,unless they develop
alternative markets for their output,they would very probably get something of very
little long term value.Ford would unquestionably be hurt ,but its loss might not
constitute any appreciable gain for anyone else.A transmission plant in this respect is
not like a copper mine or an oil well(Forbes 1st July1972).
This shows precisely the value of integration as a strategy for multinational
firms.More over,sub-processes can be spleit up in ways that minimize costs,lessen
vulnerability to nationalization(as above),or reduce the chance that a strike in one
country will paralyse production in other parts of a companys network. .(capital
beyond borders:states and firms in the auto industry1960 94 Kenneth P.Thomas)
A firm persuing complex integrated strategies needs to be seen,therefore,as consisting
of an integrated set of corporate functions,each with(potentially)varied geography.In
this strategy,intra-firm transactions of goods and services play,by necessity,an
important role.Furthermore,because each element of production chain is highly
dependent upon all other elements within the system,information and coordination
requirements are high.In this respect,advances in information technology have played
a pivotal role in turning the potential for operating and effectively coordinating
spatially dispersed function into a reality for many TNCs.The resulting product is a
complex bundle of inputs,produced in variety of locations,assembled in host or home
countries for sale in those countries or anywhere of the world.To identify such a
product with a single country becomes,therefore,less and less meaningful a fact that
may make it increasingly meaningless to identify a product as Made in(name of the
country) but rather requires an identification as Made by(name of the firm).In a
sense,TNCs seem to be in the process of replicating at the international level the

degree of integration of production achieved et the national level ,especially in

their home countries. <world investment report 1994>
Everyone,for example,identifies ICI as a British firm,Ford as a US firm,NEC as a
Japanese firm,Volvo as a Swedish firm,Siemens as a German firm and Samsung as a
Korean firm.Yet each of these MNEs has its shares quoted on a number of stock
exchanges throughout the world and the membership of their Board of Directors is
multinational, while an increasing proportion of their value added activity is
undertaken outside their home countries.Even more difficult to identify the true
nationality of ownership of a MNE,that is,itself,fully or partially owned by foreign
interests.(multinational enterprises and the global economy, Dunning 1998)
When an American buys a Pontiac Le Mans from General Motors, for example, he or
she engages unwittingly in an international transaction. Of the $10,000 paid to GM,
about $3000 goes to South Korea for routine labor and assembly operations, $1750 to
Japan for advanced components(engines, transaxles, and electronics), $750 to West
Germany for styling and design engineering, $400 to Taiwan, Singapore, and Japan
for small components, $250 to Britain for advertising and marketing services, and
about $50 to Ireland and Barbados for data processing. The rest less than $4000
goes to strategists in Detroit, lawyers and bankers in New York, lobbyists in
Washington, insurance and health-care workers all over the country, and General
Motors shareholders most of whom are foreign nationals. ( The Work Of Nations,
Robert B.Reich)

SOCIAL PRODUCTION IN 21st CENTURY

Made in the WorldToday, companies divide their operations across the

world,fromthe design of the product and manufacturing of components to assembly and marketing,
creating international production chains. More and more products are Made in the World rather than
Made in the UK or Made in France.