Harbinger of further disasters for the working class and people of our country
The phone manufacturing unit of Nokia located at Sriperumbudur near Chennai finally closed down its operations with effect from 1st November 2014 leaving over 33,000 workers jobless – 8,000 direct and 25,000 indirect.
Harbinger of further disasters for the working class and people of our country
The phone manufacturing unit of Nokia located at Sriperumbudur near Chennai finally closed down its operations with effect from 1st November 2014 leaving over 33,000 workers jobless – 8,000 direct and 25,000 indirect. It had been set up just 8 years ago on a massive 210 acre site following persistent wooing by the central and state governments.
The working class and all those who have the interest of the country at heart need to understand the case and draw important lessons from it.
What did Nokia get when it was wooed to “Make in India”?
Nokia got a vast array of benefits ranging from cheap land to waivers of stamp duty VAT, CST, customs duty and other taxes. These benefits, amounting to over Rs 45,000 crore, have been given from public funds, in other words, monies which rightfully belong to the Indian people. The plant was declared to be a “public utility” to prevent industrial action. The management was allowed to employ an overwhelming number of contract workers at even lower wages and thus exploit workers to the bone.
In the eight years of its operations, the Sriperumbudur plant’s cumulative production was 800 million handsets. It was the most productive plant for Nokia globally. It has been making phones worth about Rs 30,000 crores a year. At its peak, it was the world’s largest mobile phone plant, with 8,000 permanent employees working three shifts, producing more than 15 million phones a month. It was exporting phones worth more than US$ 2 billion a year. Nokia India’s overall turnover totalled Rs.151, 000 crore between 2005-06 and 2011-12. It transferred Rs. 25,000 crore to the parent company as payment for software. In 2011-12 alone, it paid a dividend of Rs. 3,500 crore to Nokia, Finland. Profits generated here were particularly enormous due to the ruthless exploitation of the youthful work force as well as the waivers of taxes and many concessions provided to Nokia by the central and state governments.
But what did the workers of Nokia get in return? After getting employment for a few years at very low wages during which period they helped to generate the enormous profits for the owners, they have been rendered jobless. Thousands of families have been devastated.
Ruthless exploitation of Indian workers in a global supply chain system
The Nokia case shows just what aspects of “making in India” are attractive to big international capitalist monopolies.
- Workers in Nokia received just around Rs 5,000/- to Rs 8,000/- wages per month including overtime payments etc. This is far below the living wages in that region. The average wages of workers in Sriperumbudur were one-forty fifth of the wages of Nokia workers in other countries.
- The average age of this entire work force (72 % women) was just 25 years! The demography of India means that capitalists can enjoy the fruits of labour of a young and energetic work force, ready to put in several hours of overtime every day
The Nokia plant was essentially using cheap Indian labour to assemble handsets using components mass produced in its other factories. Cell phone components – the jijits and widgets, display, process, and memory chips etc came from Shenzhen and Dongguan in China. The only components actually made in India were the outer casing and the cardboard packaging, items that constituted less than 5 percent of unit cost. Even the simplest components, the keypad and the charger, all low tech items, could not be manufactured to scale at Sriperumbudur. The capitalists of Nokia took advantage of what was most attractive to them – the possibility of exploiting cheap youthful labour together with massive concessions and subsidies.
The capitalist parties and the government scuttled the workers’ struggle for justice
By declaring the Nokia SEZ to be a “Public Utility”, the machinery of the state was used to ruthlessly suppress any resistance and united actions of the workers when the plant was running. They were ably supported by goons of the management and gangsters willingly supplied by the ruling class political parties. But their treachery was not limited to this period.
Workers of Nokia – Sriperumbudur vehemently opposed the closure move. They took up various forms of agitations – hunger strike and protest agitations. Representations to the MLA’s and MP’s, the Tamilnadu Chief Minister, the Union Labour & Finance ministers and the Prime Minister went unheeded. None of the arms of the Indian state – legislature, executive or judiciary – came forward to stop the closure of the Sriperumbudur plant. In other words, the closure of Nokia has the full support of the ruling class and the Indian state.
Takeover of Nokia by Microsoft
Nokia was one of the strongest mobile handset brands just a few years ago with a massive market share worldwide. The Symbian operating system then used by Nokia (it bought the system from its’ erstwhile owners in 2008) had a dominating 62.5% market share in 2007 – compared to its rivals Microsoft’s Windows Mobile (11.9%) and RIM (Blackberry) (10.9%). However, with the launch of the iPhone 3G in 2008, Apple’s market share doubled. In the last quarter of 2008, Nokia retained a 40.8% share but there was a decline of over 10% from the corresponding quarter in 2007, replaced by Apple’s increasing share. Despite various efforts by the Nokia management, they could not stop Nokia’s smartphone market share slide.
Samsung and Sony Ericsson, who earlier used Symbian, chose to make Android powered smartphones instead. In February 2011, Nokia unveiled a new strategic alliance with Microsoft. Despite this, Nokia’s smartphone sales soon collapsed – from the beginning of 2011 until 2013, Nokia fell from number 1 to number 10 in smartphone sales.
Nokia was wooed to come and “Make in India” at a time when it reigned as the market leader, but a few short years later it has come a cropper. What has happened with Nokia has happened earlier with other companies too. Capitalist corporations and monopolies that dominate the market at one time get edged out by other capitalist corporations and taken over – a feature of capitalism at its highest stage of imperialism.
To retain its profits, Nokia has been implementing mass layoffs and factory closures worldwide. Since 2012, some 10,000 people in various other countries have lost their jobs. The Salo factory in Finland, which was established in 1979 and produced the first Nokia phone, is also to be closed.
The US$ / Indian Rupee rate changed from about 45 to in 2006, when the Sriperumbudur plant started, to about 60 in 2012. This increased the landed cost of the imported constituent of the cell phone’s cost structure. The near-total reliance on imports meant that the change in exchange rate significantly reduced the benefits of cheap labour from the plant; especially because the plant as we saw was essentially an assembly operation. It cut into the profits and made “Making in India” less attractive for Nokia.
In April 2014, Nokia opened its Vietnam factory in Hanoi City. Lower labour costs, combined with the close proximity to an existing cluster, made this a valuable location for Nokia. The ramp up from 275 workers to over 10,000 took place by mid-2014.
Thus Nokia has opened a plant in Vietnam at the same time that it was shutting down plants in Sriperumbudur and elsewhere. The drive for maximum profits has dictated the move from Sriperumbudur to Vietnam!
Lessons for the working class
The ruling class of India tosses around the slogan “Make in India” – an invitation to the capitalists of the world to carry out manufacturing activities in India – as one which will bring prosperity to the people and country. However capitalist production is not organised for fulfilling the material and other needs of the people. It’s organised for maximising the profit of a handful of capitalists. Big capitalist corporations will be wooed to “make in India” by giving them a number of concessions just as Nokia was. They will be allowed to pay pittances as wages just like Nokia was and allowed to make super profits by ruthlessly exploiting Indian workers.
Global capitalists would be interested in taking advantage of only the most attractive aspects of the “Make in India” proposition – of exploiting cheap labour supported by massive concessions and subsidies. And international capitalists wooed so assiduously to Make in India will do so only as long as they can maximise their profits.
Capitalist corporations that dominate the market at one time – like Nokia did in the first few years of this century – will be wooed to “make in India”. But market dominance is often transitory and there is no guarantee that large companies will not shut shop and render tens of thousands jobless like Nokia did in India and elsewhere in the world. When they do so – for whatever reason – the Indian state will neither stop them nor come to the rescue of workers left in the lurch. This is because this is a state of the bourgeoisie, and the orientation of the economy is to ensure maximum profits for the Indian and foreign monopolies by ruthless exploitation of the land, labour and natural resources of our people.
Over a hundred and sixty years ago, Marx and Engels showed that capitalism, a system driven by the profit motive of a handful of owners of the means of production, has outlived its usefulness to mankind. Elaborating on their teachings, Lenin and Stalin organised the first proletarian revolution in Russia following which the big capitalists were expropriated and the principle means of production and exchange were taken over so as to organise production specifically to serve the needs of the toiling people. It is for the workers of India to carry forward this glorious saga – by leading the peasantry and all the exploited and oppressed in carrying out the proletarian revolution, overthrowing capitalism, and building the new socialist society. Only this will ensure that “making in India” actually benefits India and its toiling people.