Understanding Apec: The making of global value chains

By Matthew Phillips and Rory Ainsworthx

Understanding our current political conjuncture requires an understanding of the neoliberalist trajectory that nurtured global value chains and how it triggered the current backlash culminating in US President Donald Trump’s tariff extortion.

Contrary to the claims of its proponents, neoliberal globalisation was never about free markets. It always involved state intervention on behalf of corporations and investors.

Through the International Monetary Fund (IMF), World Trade Organization and World Bank, the US-led Global North empowered multinational companies to exploit workers and resources in the Global South by shielding them from democratic control, while dismantling the post-World War Two social welfare gains within its own borders.

The economic stagnation of the 1970s – set off by the decline in profitability of mass production, rising energy costs from the oil policies of the Organization of the Petroleum Exporting Countries (Opec), and the end of fixed exchange rates (after then-US President Richard Nixon terminated the dollar’s gold-convertibility) – propelled and freed companies to spread their production across global value chains.

As debt hollowed out its national liberation projects, the Global South would supply the cheap labour. Apec itself emerged amid the backdrop of a Japan massively increasing foreign direct investment to build regional value chains, first exploiting cheap labour in East Asia, then Southeast Asia, and finally China after the appreciation of its yen following the 1985 Plaza Accord.

When Paul Volcker raised interest rates in 1979 to stave off US inflation (brought on by US military spending in the Vietnam War), he increased ‘Third World’ debt to “catastrophic levels”.

As the US exported its economic crises to Third World countries, it provided leverage for multinational companies to pry open the labour and consumer markets of the Global South.

More specifically, the IMF and World Bank restructured these economies as a condition for their crisis-of-payment and development loans. The IMF imposed structural adjustment programmes to pry open Global South economies to foreign direct investment, while the World Bank created infrastructure to incorporate them into “global value chains”.

Furthermore, technological and economic factors primed the conditions for neoliberal globalisation, such as the rapid advances in telecoms, computerisation and container shipping, which cheapened transport and coordination.

iPhone’s unequal profit distribution

Apple’s iPhone serves as a paradigmatic case study of how global value chains enable unprecedented efficiency and scale while reinforcing inequalities in profit distribution. While physically assembled by hundreds of thousands of Chinese workers, the vast majority of profits flow back to US-based Apple, leaving suppliers and labourers with minimal compensation.

This imbalance reflects the core logic of neoliberal capitalism, where intellectual property and brand power extract maximum value from globalised, low-wage labour pools.

By controlling product design, software development, branding and services – Apple made 58.5% of profit on the sale of each iPhone 4.

The second tier of profit allocation goes to high-tech component manufacturers, primarily based in Taiwan and South Korea. These firms engage in capital-intensive, technologically advanced production yet earn significantly less than Apple. South Korea’s Samsung and LG, which supply OLED displays and memory chips, earned only 14% on the sale of an iPhone 4. Foxconn employs hundreds of thousands of workers to assemble iPhones but only receives 1.8% of the profit per device.

At the base of this profit hierarchy are the Chinese assembly workers who physically construct iPhones. Often, Apple’s pursuit of maximum profits passes on the variability of production to its producers, forcing the latter’s employees to work long and intense hours to meet increased demand within a short timeframe.

Some 250,000 workers assembled the iPhone 4. Despite the increasing wages in China, as of 2023, a Foxconn worker still made less than $3 per hour. Thus, China serves as the world’s factory floor but captures minimal value from the final products.

The lion’s share of profits flows to Apple, followed by East Asian suppliers, with only a trickle reaching the Chinese workers who bear the human costs of production.

Stable investor environments and coups

Global value chains were not simply built upon trade treaties and bank loans. They were erected through US imperialist interventions that propped up countless authoritarian regimes to ensure ‘stability’ for corporate profits and geopolitical dominance.

From Latin America to the Middle East and Southeast Asia, Washington backed brutal dictators to maintain low wages, weak regulations and open markets for U.S. capital.

In 1965, the US backed the brutal killing of at least 500,000 members of the Indonesian Communist Party, ensuring that US oil companies would not be nationalised.

Using Jakarta as a template, the US backed Gen Augusto Pinochet in 1973 to overthrow a democratically elected socialist government in Chile to protect American copper interests.

After the Cold War, the logic shifted to ‘investor confidence’. The US supported Hosni Mubarak in Egypt ($1.3bn annually in military aid) and the monarchy in Saudi Arabia (where arms sales are worth billions to American defence companies) to secure oil flows and suppress labour movements.

In the 2009 coup in Honduras – endorsed by Hillary Clinton – the target was land grabs from agribusiness.

These regimes repressed unions, privatised public assets and brutally suppressed dissent to create ‘favourable’ conditions for foreign capital. The result: expanding inequality, entrenched corruption and anti-American blowback (eg the 9/11 hijackers from US-allied Saudi Arabia).

Today, Washington still trades democracy for profit, backing Egypt’s Abdel Fattah el-Sisi and Saudi’s Mohammed bin Salman while touting ‘free markets’. The lesson is clear: US-enforced ‘stability’ means stability for investors – not for the people living under US-backed despots.

Deindustrialisation, union decline, and rise of far right

The shift of US production from domestic to global value chains led to deindustrialisation starting in the 1970s.

The ensuing factory closures, offshoring and decline of manufacturing jobs in industrial hubs like the Rust Belt reshaped the nation’s economy and politics.

This economic upheaval was exacerbated by the repression of labour unions, which had secured living wages and benefits for workers.

As manufacturing jobs vanished, so did the social safety nets that cushioned economic blows.

The resulting despair created fertile ground for the far right, which weaponised economic anxiety by scapegoating immigrants and ethnic minorities while leaving corporate greed and the bipartisan consensus that enabled it.

Politicians like Trump channel working-class disillusionment into nationalist, anti-labour agendas that further enrich billionaires while offering hollow promises of revival.

Despite giving the lion’s share of wealth generated from the global value chains to the Global North, the mouse’s portion has steadily accumulated in the Global South, which is now asserting itself on the global stage.

China’s rise as a multipolar power in the world, its Belt and Road Initiative, and Brics stand up against the US’s unipolar hegemony. The rise of China presents a multipolar global order, which the US views as a threat to its global hegemony.

Our next article will explore the rise of this multipolar order and the ensuing new cold war. – Globetrotter/International Strategy Centre (Seoul).

Matthew Phillips is part of the International Strategy Center and has lived and worked in South Korea for over 20 years. He is iinterested in advocating for workers and immigrants worldwide.

Rory Ainsworth is a US-born university student in South Korea and a member of the International Strategy Center and the Student Coalition for Palestine.

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