Following Rakesh and Gil, I would like to add some thoughts on the putting-out system discussion and to stress the contribution of Lenin's early economic writings to the subject.
So long as the artisan or the farmer could sell his commodities to different merchants he/she could retain the economic status of an independent commodity producer. However, the diversification of demand and consequently of production, along with the need to produce not for a local but for various distant markets, historically made the producer increasingly dependent on one merchant in particular, who would supply him with raw materials and become thus BUYER-UP of the producer's total output. Since the buyer-up is now the economic agent who places the product on the different markets, he determines the type of product, and the quantity of products, that each artisan or farmer working for him is to produce. He places advance orders for the wares he requires, and in many cases begins to supply the direct producer with raw materials.
In this way the buyer-up in effect acquires control over the production process of the individual producers, I.E. OF THEIR MEANS OF PRODUCTION. It is he who decides the extent of output and its degree of diversification as well as establishing the division of labor among the separate producers who are under his control, according to productivity criteria which he sets and changes in demand which he follows. The buyer-up can now lower the prices of the commodities he purchases (buys up) from direct producers to a level which yields for the producer an income not higher than a worker's wage.
There thus emerges what Rubin in his HISTORY OF ECONOMIC THOUGHT (1989) calls "the cottage or domestic or decentralized system of large-scale industry" which "paved the way for the complete reorganization of industry on a capitalist basis" (p. 155).
It was Lenin who clearly comprehended and pointed out firstly the capitalist character of an economy based on the buyer-up:
"Nothing could be more absurd than the opinion that working for buyers-up is merely the result of some abuse, of some accident, of some 'capitalization of the process of exchange' and not of production. (.) In the scientific classification of forms of industry in their successive development, work for the buyers-up belongs to a considerable extent to capitalist manufacture, since 1) it is based on hand production and on the existence of many small establishments; 2) it introduces division of labor between these establishments and develops it also within the workshop; 3) it places the merchant at the head of production, as is always the case in manufacture, which presupposes production on an extensive scale, and the wholesale purchase of raw material and marketing of the product; 4) it reduces those who work to the status of wage-workers engaged either in a master's workshop or in their own homes (.) This form of industry, then, already implies the deep-going rule of capitalism, being the direct predecessor of its last and highest form - large scale machine industry. Work for the buyer-up is consequently a backward form of capitalism, and in contemporary society this backwardness has the effect of seriously worsening the conditions of the working people, who are exploited by a host of middlemen (the sweating system), are disunited, are compelled to content themselves with the lowest wages and to work under the most insanitary conditions and for extremely long hours, and -what is most important- under conditions which render public control of production extremely difficult" (LCW Vol. 2, pp. 434-35).
Lenin considers the social relations created when the merchant takes control of the craftsmen's production to be already capitalist relations of production, i.e. a preliminary form of piece-wage labor, a preliminary form of surplus-value extraction. According to his approach, by taking control over the craftsmen's production process, merchant capital takes control over their means of production, albeit in an informal or indirect way. Consequently, Lenin conceives industrialization as a transition from one (the underdeveloped) capitalist form to another (the developed).
I believe that Marxist development economics has much to gain if it takes seriously into consideration this theoretical interpretation of the producer-merchant class relations: the enormous spread of cottage industries and sub-contracting relations in most LDCs (but also the rise in facon-production and sub-contracting in the developed capitalist countries, as on the one hand "labor flexibility" rises, while on the other an increasing number of enterprises engage primarily in marketing commodities produced for them by sub-contractors) can in many cases comprehended as alternative (to formal wage-labor relations) forms of capitalist exploitation.
John
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