THE POLITICS AND ECONOMICS OF GLOBALISATION
Globalisation is an ideological term. It encompasses the frenetic
international expansion of capital - an expansion which has had devastating
consequences for the majority of humanity. The debate around it, however,
has tended to obscure rather than clarify our understanding of the forces
at work. In his second article on this subject DAVID YAFFE looks at the
politics and economics of globalisation.[1]
Among those whose primary concern is for a more competitive and efficiently
functioning national capitalist economy, there are diametrically opposite
positions concerning the reality of globalisation. The neo-liberal right
strongly approves of globalisation and the limited effectiveness of national
government intervention. `A more globalised economy is in many ways a more
efficient one' forcing governments to be more careful in handling their
economies (The Economist 23 December 1995 - 5 January 1996). The removal of
market constraints - free trade and deregulated labour and capital markets
- is seen as the only way to increased growth, balanced trade and lower
unemployment. At the other pole, with the old social democratic Keynesian
strategy no longer viable, former social democrats, concerned to retain some
progressive role for a reforming capitalist government, have argued that much
talk about globalisation is exaggerated. The notion that there is `one global,
borderless, stateless market' is a myth. `This global economy needs
superintending and policing. Governments can and should co-ordinate their
policies to manage it' (Will Hutton The Guardian 17 June 1995).
This polarisation is mirrored on the socialist left. On the one side, we
are told that there has been an epochal shift in capitalism in which new
technology has substantially (irreversibly?) increased the power of
capital over labour, fragmenting and even destroying working class
organisations, and creating global market forces beyond national government
control. Not to recognise these developments `freezes us in modes and forms
of struggle which are effete and ineffectual'A Sivanandan). On the other
side, globalisation is seen as `an ideological mystification' which `serves
as an excuse for the most complete defeatism and for the abandonment of
any kind of anti-capitalist project.’ And that, while not denying the
impact of new technologies and the destructive effects of deregulation,
mass unemployment and growing poverty, we need to look elsewhere for an
explanation of the long-term structural crisis of capitalism than in
simplistic formulas about `globalisation' (Ellen Meiksins Wood).[2]
Globalisation and national governments
The policies of national governments in capitalist countries are mainly
determined by two important dynamics: the first is the state of the
national process of capital accumulation and its relative international
strength; the second is the balance of class forces both nationally and
internationally. It is of little surprise that the concept of
`globalisation' is being discussed; (1) during a period of stagnating
national capital accumulation as excess capital is aggressively exported
or deployed speculatively on the stock markets of the world to stave off
a profits collapse and (2) following a dramatic shift in the balance of
class forces nationally and internationally in favour of capital after
the successful counterattack against labour in the 1980s, an attack which
highlighted the weakness of working class and socialist forces world-wide.
Tony Blair, the new British Labour Prime Minister, was simply giving
expression to these realities when he told a conference of Rupert
Murdoch's News Corporation in 1995:
`What is called globalisation is changing the nature of the nation
state as power becomes more diffuse and borders more porous.
Technological change is reducing the power and capacity of
government to control its domestic economy free from external
influence' (Financial Times 20 March 1996).
In effect he is reassuring the dominant sections of British capital
with a very strong international presence, that, with domestic capital
accumulation stagnating, he will not stand in the way of British capital
even if this is at the expense of millions of people in Britain
confronting drastic cuts in state welfare and growing impoverishment.
On no other basis, given the balance of class forces, could he lead a
capitalist government in present day Britain.
The neo-liberal Financial Times journalist Martin Wolf reaches similar
conclusions about the limited role of national governments in a global
economy but plays down the impact of `globalisation':
`When people write off the end of national economic sovereignty, it is
an historically brief era that they lament. It ended not so much under
the assault of an external force, the global market, but of an internal
one, perceived failure. Governments were bad at much of what they
were doing...Globalisation reinforced the limits already imposed by
domestic constraints' (Financial Times 18 September 1995).
Wolf's attack on the economic role of government again gives ideological
expression to the changed needs of capital in today's circumstances. His
explanation differs from Blair - they speak to a different constituency
- but inevitably they reach the same class standpoint.
The `historically brief era' of state intervention in the capitalist
economy after 1945 was the product of unique historical circumstances.
First, inter-imperialist rivalry between the major capitalist powers
since the beginning of the century had ended, temporarily, with the
dominance of US imperialism over the capitalist world economy. This
allowed the US economy, facing limited competition, to develop at the
expense of other national capitals. Through Marshall Aid and export of
capital, the US laid the basis for increasing control of world markets
for US capital and a faster rate of capital accumulation at high rates
of profit. Britain, with its access to the markets and resources of the
British Empire and with little competition from its European rivals,
followed in its wake. Second, a change in the balance of class forces
in favour of the working class had occurred internationally after the
devastation of depression, fascism and two world wars, a change
reinforced by the standing of the Soviet Union and the spread of
socialist revolutions and independence movements after the war.
The restoration of capital accumulation after the war was achieved,
therefore, at a political cost to capital. The balance of class forces
necessitated this. But it was a cost that, initially in the victorious
nations and, later, in the rebuilt European economies, capital could
afford. State intervention in the capitalist economy, state welfare
and military spending, in these unique circumstances, underpinned the
most rapid accumulation of capital ever. But the fundamental
contradictions within the capital accumulation process remained. When
the rate of profit began to fall and inter-imperialist rivalries
re-emerged at beginning of the 1970s, capital accumulation began to
stagnate in most capitalist countries. The rising consumption
institutionalised in state welfare became a barrier to the further
accumulation of capital as high inflation accompanied stagnation in
the major capitalist nations. State spending and state welfare had to
be cut back. In Britain the first steps were taken by a Labour government
a few years before Thatcher came into power. Capital went on the offensive
and succeeded in changing the balance of class forces nationally and
internationally but the problems within the capital accumulation process
remained. State intervention was neither responsible for the post war
boom nor the cause of the later stagnation. It was the particular
circumstances of the capital accumulation process nationally and
internationally which underlay both. Keynesianism and neo-liberalism
are no more than ideological reflections of the changing requirements
of capital in the two periods.
The growing stagnation in the capital accumulation process and the
re-emergence of inter-imperialist rivalries were the result of an
overaccumulation of capital - insufficient surplus value to secure both
the normal profitable expansion of productive capital and to finance the
growing state sector together with a rapidly expanding unproductive
private sector. The huge increase in the export of capital, the growing
monopolisation of capital through mergers, acquisitions and privatisations,
the unprecedented autonomy of the financial system from real production
alongside the cuts in state welfare, downsizing and outsourcing, mass
unemployment and rapidly growing inequality, in short, globalisation,
was capital's response.
Globalisation, therefore only reinforces the limits imposed by domestic
constraints on national government intervention because both result
from a stagnating capital accumulation. This is the context in which we
can examine the differing class positions on globalisation.
Globalisation and class interest
Martin Wolf quite brazenly represents the dominant ruling class
interests. As a spokesperson for large capital, he is an unashamed
apologist for neo-liberalism. In a recent glowing tribute to globalisation,
dismissing all evidence to the contrary, he maintains it has been a force
for prosperity in much of the world. `Globalisation is the great economic
event of our era. It defines what governments can - and should do...
Technology makes globalisation feasible. Liberalisation is responsible for
it happening.' He celebrates its success. From 1970 to 1997 the number of
countries removing exchange controls on goods and services increased from
35 to 137. A year ago, more constrained, in an article `The global economy
myth' (Financial Times 13 February 1996)[3], he argued that much of the
talk about globalisation was exaggerated and governments on their own or
together could do a great deal. Today he has no such reservations. In his
latest article `Global opportunities' he tells us that governments have
learned the lessons of experience and have chosen or been forced to open
their economies. Running with the tide, he now argues that, on balance,
globalisation has gone further than ever before (Financial Times 6 May 1997).
New Labour stands for the same ruling class interests. In the run up to
the General Election Blair was forever stressing how Labour would
accommodate multinational business. Immediately after the election he
appointed Sir David Simon, chairman of British Petroleum, as a Minister
of Trade and European Competitiveness. BP is accused of collaborating with
military death squads in Columbia. Simon will be made a life peer. Almost
the first act of the new government was to hand over control of interest
rate policy to that bastion of neo-liberalism, the Bank of England.
Nevertheless Blair cannot, as Wolf is able to do, conflate the `can' and
`should' of government policy in relation to a global economy. For Blair is
reliant to some degree on the middle class constituency which elected him
to power. He will have to reassure the middle classes, as real economic
developments threaten their security, that he will do what he can within
the constraints imposed by the global economy (`external influence'). He is
acceptable to the ruling class because, unlike the discredited and divided
Tories, Labour is in a better position, as economic conditions deteriorate,
to prevent an alliance against capitalism developing between the poor
working class and sections of the middle classes threatened with
proletarianisation.
Hutton, generally regarded as ideologue for the New Labour Party,
deals with the question of globalisation from a different class
standpoint. He articulates the fear of the middle classes at what might
occur if the New Right (neo-liberal) agenda succeeds. `If there are no
real economic and political choices... the way is open for the return of
totalitarian parties of the right and left.' He fears the consequences of
social breakdown. Hence his concern to play down the impact of
globalisation, arguing that governments can co-ordinate their policies
to manage it, to prevent the extreme consequences of an unrestrained
market and to create a less degenerate capitalism.
The relative prosperity in Britain during the post-war boom gave rise to
new privileged sections of the working class - a new middle class. This
layer of predominantly educated, salaried, white collar workers grew
with the expansion of the state and services sector and, in the more
recent period, with the information technology revolution. Sustaining
its privileges is the key to social stability in all the major capitalist
nations and playing to its prejudices is the necessary condition for
political parties to be elected to power. As long as there were sufficient
profits from production at home and trade and investment abroad, both
to give an adequate return to capital, and to finance state welfare and
the growing unproductive private sector, then the social democratic
consensus of the post war years could be maintained. It was possible to
guarantee the relatively privileged conditions of higher paid workers
and the middle classes while sustaining adequate living standards for the
mass of the working class.
In the new conditions of capital stagnation and growing inter-imperialist
rivalries in the middle of the 1970s, this consensus began to break
down. The 1974-79 Labour government set monetary targets and cut
state spending. The low-paid state sector workers fought back and the
`winter of discontent', 1978/9, drove the higher paid skilled workers
and the middle classes into the arms of the Tory Party. Thatcher
embraced this new constituency and, as Hutton says, `the liberal
professions, affluent council house tenants, homeowners, all benefited
from her tax cuts, credit boom and privatisation programme.' The price
was growing inequality as state welfare was cut and millions of
working class people were driven into poverty to pay for Thatcher's
programme. The privileges of the middle classes could only be
preserved at the expense of ever increasing numbers of impoverished
working class people. In spite of the revenues from North Sea Oil,
productive investment stagnated in Britain, and record amounts of
capital were invested abroad. Britain was rapidly becoming a rentier
state.
With the failure of Thatcher's economic policies at the end of the 1980s
and with poverty and inequality rapidly accelerating, inroads began to
be made into the standard of living of sections of the middle classes. It
is the potentially explosive consequences of this development that drives
Hutton. He offers his alternative to `globalisation', to an unrestrained
and deregulated capitalism. First, he says, we must alter the way the
British financial system works - essentially from seeking high, liquid,
short-term gains, irrespective of location, to giving a long-term
commitment to regenerating the productive base of the British economy
- a process which, he says, requires a political revolution to take power
away from the entrenched `conservative hegemony'. Britain has to be
transformed into a high investment, high growth economy. Second, a
coalition supporting social welfare has to be rebuilt. For this to happen
the middle classes must opt in, rather than opt out into the privatised
provision of the neo-liberal agenda. The middle classes, he argues, can
be given `a vested interest in the entire system' by `incorporating
inequality into the public domain'. A core system for the mass of the
working class with the middle classes able to buy in the extra quality
services they require - in short `nationalising inequality' within the
state system.
However, if the degeneration of capitalism into a parasitic and rentier
form is now a necessary trend emerging in all the mature capitalist
nations, Hutton's response to globalisation - what I have called the
political economy of the new middle class - is both idealist and
reactionary.[4]
We can now understand the significance of Sivanandan's standpoint.
Living in a country where knowledge, culture and politics are
dominated by the concerns and prejudices of middle class people; in
which the poor and oppressed working class are outside the political
process and ignored by the official labour movement; and where social
relations seem frozen, repetitive and unchanging, it could appear that
an epochal shift has occurred in capitalism and that the socialist project,
at least as it is traditionally understood, has to be buried. We note
Sivanandan's warning not to underestimate the dangers posed by the
so-called `culture of postmodernism', in a society where `"knowledge
workers" who run the Information Society, who are in the engine room
of power, have become collaborators in power'. But we respond as
materialists. History has not ended. And globalisation, if it is anything,
is a sign of the crisis of capitalism, of increasing instability, of
rapidly changing circumstances in a world of obscene and growing
inequality. Social relations are not fixed. The conditions which spawned
a new middle class and turned it into a bedrock of social stability in the
imperialist nations after the war have ended. Today it is those
privileged conditions which are being threatened. Hutton, at least,
recognises this - hence his terrible fear of a return to the extremes of
class conflict that dominated the 1930s. Sivanandan is far too preoccupied
with the ideological posturing of a small elite of academics and opinion
formers caught up with globalisation and beneficiaries of it.
Ellen Meiksins Wood develops a number of crucial points in her reply
to Sivanandan. Firstly, more giant corporations with a global reach,
and more international organisations serving the interests of capital, in
no way imply a unified international capitalist class. The `global'
market ensures the `internationalisation of competition' - a
contradictory process. On the one hand it does mean new forms of
capitalist integration and co-operation across national boundaries but on
the other hand, it also means active competition between national and
regional capitalists. `So the "global" economy if anything may mean less
and not more capitalist unity.' The overall consequence of
`globalisation' far from integrating capital is at least as likely to
produce disintegration.
Secondly, the proposition that there is an inverse relation between the
internationalisation of the economy and the power of the state fails to
acknowledge that `globalisation' presupposes the state. `The nation-state
is the main conduit through which national (or indeed multinational)
capital is inserted into the global market.' Transnational capital may be
more effective than the old-style military imperialism in penetrating
every corner of the world but it accomplishes this, in the main, through
the medium of local capital and local states. It may well, ultimately,
rely on the military power of the last remaining `super-power' to
sustain the sovereignty of the market. Further, it depends on such local
political jurisdictions to maintain the conditions of economic stability
and labour discipline which are the conditions for profitable
investment. And finally, new kinds of inter-imperialist rivalry will
emerge in which the nation state is still the principal agent.
From this she advances her most important political point: the nation
state is still the terrain of (class) struggle. `If the state is the channel
through which capital moves in the "globalised" economy, then it is
equally the means by which an anti-capitalist force could sever capital’s
lifeline.'
These arguments go a great deal of the way to undermining
Sivanandan's position. But there is something lacking. It is perhaps best
highlighted in the undue weight Wood gives to the ideological impact
of the concept of globalisation as it is commonly understood. `It is the
heaviest albatross around the neck of the left today'. `In the current
conception of globalisation, left joins right in accepting that "There Is
No Alternative" - not just to capitalism, but... to a more or less (the
right goes for more, the left somewhat less) ruthlessly "flexible"
capitalism.' She goes on to say that if their conception of globalisation
were an accurate reflection of what was happening in the world today her
ideological objections wouldn’t count for much and we would have to
accept that the socialist project is dead.
This is all very true but something more is surely needed. Ideas only
become a material force when taken up by the masses. The ideological
struggle is of political importance when it falls on fertile ground. In
periods when the poor and impoverished working class are outside the
political process, the politics of the left, in the main, reflect their
class position in capitalist society - as part of the privileged working
class or educated white collar and professional workers who form the
backbone of the new middle class. The recomposition of the working class
as a fighting force against capitalism has to be the product of developments
within capitalism itself, it will not be the result of ideological combat
alone. This process is already taking place as capitalist governments
deregulate labour, attack state welfare, undermine the democratic right
to protest and workers’ rights to organise, attempt to divide the working
class through racism and sexism, and destroy the environment. The
ideological struggle has to be combined with the political organisation
and defence of those sections of the working class under attack and
fighting back. We need to show how developments within capitalism are
making this possible. That is why a great deal more is required from
the analysis of the latest stage of capitalism to finally lay to rest the
ghost of globalisation.
The reality of globalisation
It is important not to underestimate the significance of globalisation. It
might well be an ‘ideological mystification’ in the hands of a Martin
Wolf or some intellectuals and academics on the political left, but its
impact on the economic and political lives of the vast majority of
humanity is of great political consequence. To say, as I have argued in
my earlier article on globalisation, that ‘far from it being new it is a
return to those unstable features of capitalism which characterised
imperialism before the First World War’ is not to dismiss its importance
but, on the contrary, to highlight it. It is beginning to create the very
conditions which produced those dramatic shocks to the international
capitalist economy and which led to the revolutionary developments in the
first decades of the twentieth century. So what then are the crucial
components of globalisation which suggest these developments?
* Multinational companies (MNCs)are the principle vehicle of
imperialism's drive to redivide the world according to economic power.
In 1995 Foreign Direct Investment (FDI) outflows increased by a
massive 38 per cent to $317bn, with a record $100bn going to Third
World countries. That investment is concentrated in three competing
power blocs, the ‘Triad’ of the European Union, Japan and the United
States and their regional cluster of countries. 76 per cent of the
investment in Third World countries (1993-5) went to only 10 countries.
Five imperialist countries, United States, UK, Germany, Japan and
France were responsible for almost two-thirds of the total outflows
in 1995. The United States ($96bn), UK ($38bn) and Germany ($35bn)
all exported record amounts.[5]
* Most MNCs are nationally based, controlled by national shareholders,
and trade and invest multinationally with a large majority of sales
and assets in their home country. A recent study showed 70 - 75 per cent
value added by multinational companies was produced in the home country.
They are highly concentrated. Only 100 MNCs, 0.3 per cent of the total,
all from imperialist countries, own one-third ($1.4 trillion) of the
total FDI investment stock. The process of concentration continues
internationally through mergers and acquisitions. Cross border mergers
and acquisitions doubled between 1988 and 1995 to $225bn.
* Globalisation is devastating the lives of millions of people. Even
the World Bank admits that in the case of the ex-Soviet bloc ‘transition
has relegated an entire generation to economic idleness.’ Output in
Russia fell by 40 per cent between 1990 -1995 and between 16 and 30
per cent in the other countries. Growth has been falling over the last 15
years in about 100 countries, with almost a third of the world’s people,
dramatically reducing the incomes of 1.6bn people. The declines are
unprecedented, exceeding in duration and sometimes in depth the Great
Depression of the 1930s. One billion people, 30 per cent of the world’s
workforce, are either jobless or unemployed. Even in the imperialist
countries 100m people live below the poverty line, 30m are unemployed
and more than 5m are homeless.[6]
* The world is becoming more unstable. $1,230bn a day flows through
the foreign exchange markets. Third World Debt, at a record $1,940bn,
continues to increase despite massive debt repayment. A formidable
$55 trillion is gambled on the world’s derivatives market. All the major
banks are large players. Barclays, for example, has liabilities of £922bn,
more than 80 times its capital base. A crash in the stockmarket will leave
them facing huge losses. Growth in world trade halved last year because
of a sharp deterioration in the performance of the so-called Asian
‘tigers’. The conflict in Zaire has started a new scramble for Africa as
inter-imperialist rivalry intensifies. Finally, inequality between rich
and poor countries and between rich and poor in all countries has reached
unprecedented levels and is still growing.
These are not the conditions of an unchanging world. They are one’s
where the socialist message can once again take root. Throughout the
world, from workers in Korea to guerrillas in Mexico, from public
sector workers in France to landless peasants in Brazil, people are
fighting for change. In Britain new alliances are being built with
environmental campaigners taking to the streets to defend dockers in
Liverpool. Globalisation is a long-term structural crisis of capitalism.
It is laying the ground for turning what Ellen Meiksins Wood calls
‘various fragments of opposition’ to capitalism into conscious class
struggle. END
1. See `Globalisation: a redivision of the world by imperialism' in Fight
Racism! Fight Imperialism! 131 June/July 1996.
2. These positions appear in `Capitalism, globalisation, and epochal shifts:
an exchange' in Monthly Review Vol 48 No 9 pp19-32. That diametrically
opposed positions on the significance of globalisation are held by writers
throughout the political spectrum from `right' to `left' only adds to the
confusion.
3. This was a favourable review of a book by Paul Hirst and Grahame Thompson
Globalisation in Question Polity Press 1996. Material from this book is used
in my earlier article on globalisation. They hold a similar position to that
of Hutton above, arguing that `nation states, and forms of international
regulation created and sustained by nation states, still have a fundamental
role in providing governance of the economy (p185).'
4. Quotes from Hutton are from his book The State We're In Jonathan Cape 1995.
For my review of this book see `The political economy of the new middle class'
in Fight Racism! Fight Imperialism! 124 April/May 1995.
5. See World Investment Report (WIR) UN 1996 for information. Other figures
are taken from my earlier article or earlier WIR reports.
6. Figures from The World Development Report OUP 1996 and The Human
Development Report OUP 1996.
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geocities.com/capitolhill)