Notes on Capitalist Globalization

Note One: Why Globalization?

The tendency to globalization results from the historical conditions within which the reproduction and valorization of capital takes place. Since the end of the 1970s (beginning with the formation of the Thatcher government in the UK and the Reagan administration in the US), the economically most powerful states have reacted to increasing economic stagnation and generalized crisis – then signified by astronomically mounting public debt rates – by dismantling the ‘Keynesian’ ‘welfare state’, and pushing what has become known as the ‘neo-liberal’ agenda. The combination of recession and high inflation from 1980 to ’82 only strengthened the hand of the ‘neo-liberals’ (although they were then usually referred to as ‘neo-conservatives’) in more or less all of the advanced countries of Western Europe, North America, Japan, and Australia.

By the end of the ‘80s, every economically most developed capital, and many of those furthest along on the ‘developing’ path, had adopted and begun to put into practice this agenda. The agenda involves a complete restructuring of the national capital, a generalized liberalization of the restrictions imposed by the state on the functioning of the capital of its nation – restrictions which were originally imposed, mostly during the ‘Keynesian’ years, from the ‘30s to the ‘70s, in order to ‘protect’ the rights or well-being of workers, the environment, animals, historic communities, neighbourhoods, etc.(1) In other words, the state itself scales back its own direct control over the day-to-day functioning and operation of the nation’s capital units. The policies involved include: the cutting of taxes, especially corporate and capital-gains taxes, deregulation, privatization, reduction of government spending on the ‘welfare state’ (i.e., social service benefits, subsidized public housing, healthcare, education, support for non-competitive ‘cultural industries’), reduction of the power and rights of trade unions, and reduction of public sector deficit spending and debt (although this latter was only realized later on, after several years of cutbacks to the ‘social wage’ the working class had struggled through the ‘70s to achieve). Thereby, the state reduces the massive burden it had become on the profitability, and thus, the very viability of the nation’s entire capital. Of course, this tendency towards a reduction of direct control by the state is resisted by those forces in the state and the ruling class which benefit from such control, and many bitter power struggles were fought in ruling circles throughout the ‘80s and ‘90s. However, by the beginning of the ‘90s, the neo-liberals had gained the upper hand within virtually all economically significant countries and their ideology, pushed heavily by the mass media, had apparently conquered ‘public opinion’.

These neo-liberal policies permitted the economically most powerful countries (organized today in the ‘Group of Seven’) to strengthen their competitive position – already dominant relative to all the others – on the world markets. Once these policies were in place, and their capitals had the room to expand unhindered by a domineering state apparatus, these self-same economically most powerful states began pushing the ‘Free Trade’ agenda, first amongst the countries of their geographic region (e.g., Western Europe, North America, and South East Asia), then, in the last decade, on a global scale. International multi-state organizations were set up to facilitate the orderly liberalization of trade and capital movement (e.g., the EEC, NAFTA, ASEAN, APEC, FTAA, etc.); finally, in 1996, the old (rather toothless) General Agreement on Tariffs and Trade (GATT), set up at the end of WWII along with the International Monetary Fund (IMF) and the World Bank (WB), was disbanded, and replaced with the far more ambitious, potentially far more powerful, World Trade Organization (WTO).

The WTO crystallizes the ambitions of the neo-liberals and their agenda on a global scale. It opens up markets, primarily amongst the ‘lesser developed’ and ‘developing’ countries, whose lesser developed and thus lesser competitive capitals required more state protection (in the form of tariffs and duties) on domestic markets from domination by the world’s most advanced capital units. This is a process most lesser developed nations feel forced to set into motion, since a few amongst them had already done it on their own – in an attempt to gain a competitive advantage for their own country over other lesser developed nations – and since it is seen by most of those in power in these countries as the only way to attract the foreign investment of capital necessary for further economic growth. But this whole tendency is fraught with contradictions, since many different factions within the ruling classes of the many lesser developed countries oppose neo-liberalism, in favour of maintaining a relatively sizable public sector, state regulations, higher taxes, and protective tariffs and duties to prevent cheaper imports from taking over their markets from their own capitals, state subsidies for exports, and entering into modest trade agreements with other similarly developed nations in their region.

Globalization, via the WTO, thus opens up and expands international markets, permitting the most competitive capitals – the most developed, generally also the largest, most concentrated ones – to dominate more and more, raising their profit and growth rates. Once the course towards global integration has been embraced by most, the lesser developed countries can only hope to benefit from this process by attracting more foreign investment of capital (by offering things such as prime geographic location, possession of raw material resources, minimal regulations of corporate activity, low wage workforce, low tax structure, etc.), leading to increased employment, consumer spending, and tax revenues. Their own lesser developed capital is no match for the more developed capitals, leaving them with the only option of somehow servicing or facilitating the operation of foreign capital invested in their country.

There was never really much choice in the matter of this course towards international neo-liberalism and globalization. It was only ever really just a matter of how much time it would take to get enough states on board necessary to implement the agenda. Ever since new technological developments in fibre optics, telecommunications, and computer software combined with the willingness of certain ‘rogue’ states to allow the fully unfettered operation of capital in and through their countries, globalization of capital to a limited extent has been a de facto reality. Failure to follow the course, or undue delay in taking it up, would only leave the enormous burden of bureaucratic state control over the nation’s capital, preventing that economic growth necessary to stave off stagnation and eventual recession, and ultimately, depression.

The so-called ‘Fair Trade’ agenda pushed by moderate pro-capitalist opponents of globalization (such as the trade unions, the mainstream environmental groups, and most of the various religious activist groups, peasant organizations, and other ‘civil society’ organizations), which aims to retain or re-impose bureaucratic state control over the movement and functioning of capital, would only work against any tendencies towards international economic growth and lead us back to stagnation and towards global depression It is no coincidence that, of all of the political parties which defend this agenda in almost every country today, only a handful are in power. To think that the ruling capitalist classes of the world’s various countries, foremost among them the most powerful ones, would opt for such a course is completely UTOPIAN.

At this crucial moment in human history, there are really only two options left open for humankind: either further on towards globalization and the removal of all restrictions on capital OR the global elimination of capital and the capitalist system (mode of production) itself, by the autonomous global working class.

March 18, 2001

NOTES

(1) While the trade unions and left-wing political parties – claiming to represent the interests of the working class – pointed to these ‘protections’ as ‘gains’ of the class struggle, the reason the then-dominant factions of the ruling capitalist class, entrenched in the state, instituted these measures was to stimulate demand for commodities which were otherwise too abundant in supply for markets to realize the surplus-value necessary for the continued reproduction and accumulation of the national capital. See “The Roots of the Capitalist Crisis, part 3”, in Internationalist Perspective #32-33, for further details.

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Note Two: What's the Big Deal About Globalization?

The apparent aim of “globalization” is to enlarge world markets so that existing capitals can sell more commodities and thereby realize more surplus-value, more profit. This has been an inherent tendency in capitalist development from the beginning, and has been pursued concretely since markets first began to saturate and crises of overproduction (as Marx called them) occurred.

But “free trade” (as the central aspect of globalization has traditionally been called) has only been taken up in small increments and only usually bilaterally, until fairly recently. Nation-states have since the early days of capitalism been protective of the capitals of their nation by way of quotas, tariffs and duties (and even outright bans) imposed on foreign imports. All that has ever happened in the course of developments towards “free trade” is selective incremental reductions of such quotas and tariffs. Such is the weight of nationalism for even the most developed, most competitive capitals, historically.

In each national ruling class there are factions, and one of the key divisions between factions – throughout the 20th century atleast – is that between “laissez faire”, liberal/neo-liberal “Free Traders”, and the protectionists, the Keynesians (atleast since the ‘30s), the defenders of increased state control and regulation. Usually the former are representative of the interests of big capital, of the major exporters and those capitals looking to expand their operations beyond the confines of “their” nation-state; while the latter are more representative of the medium to smaller capitals, the lesser developed ones, thus espousing a more or less “petty bourgeois” ideology. The matter is not that simple, however. Since the onset of the permanent crisis of capital in the early years of the 20th century, the state bureaucracy has (atleast up until the end of the ‘70s) increased its control over the national capital as a whole, and has formed the core of the “Keynesian”, protectionist faction of each nation’s ruling class.

In fact, since the end of WWII, these protectionist, “petty bourgeois” factions (in most of the most developed countries) have adopted an essentially Social Democratic ideology, and the major trade union federations and the political parties they fund and support have been central to these factions. These are the Keynesians, the defenders of the “Welfare State” and a seemingly limitless extension of the “state sector”, and bureaucratic regulation of capital.

These “leftist” factions (composed of the trade unions, their political parties, the state bureaucracy, as well as the medium to small capitals of the country) were largely dominant or hegemonic throughout the “developed”, “Western” world from 1945 to 1980 or so. During those years, their ideology was essentially capitalist orthodoxy. For the past 20 years or so, however, the tide has shifted severely “to the right”, that is, towards “Neo-liberalism (which was previously called “Neo-conservativism” in some quarters); and thus, we have witnessed significant moves towards the privatization and de-regulation of capital, and towards “free trade”, globalization, and the dismantling of the Welfare State. There has been a forceful concrete cause for these developments on an international scale, and that is: the intense deepening of the historic crisis of capital on a global scale, which manifested itself first in “stagflation” (high inflation combined with low growth), and then in alarming levels of public debt.

The crisis is a crisis of profitability, of course, but central to the playing out of this crisis is the occurrence of saturated markets and thus “overproduction” relative to effective “productive demand”. (See “The Roots of the Capitalist Crisis: Part 3: From decline to collapse”, by Sander, in Internationalist Perspective #32-33, for the theoretical foundation of this perspective.) Once markets become saturated, growth is blocked and profit rates begin to fall significantly. The 1980s was the decade of major power struggles between the “Keynesian left” and the “Neo-liberal right”. While the latter factions won those struggles and began the process of privatization, de-regulation, and the dismantling of the Welfare State, with the mid to long term aim of reducing the “burden of the state” on the profitability of capital, in the short term, the need was for economic stimulation in order to escape from low rates of growth and profit.

Against their own ideological prescriptions, right-wing regimes throughout the West (Reagan in the US, Thatcher in the UK, Chirac in France, Kohl in W. Germany, Mulroney in Canada), engaged in an orgy of public deficit spending, focused largely on the military and the arms race. On the ideological level, the Cold War against the USSR provided the rationale for this course, while the economic stimulus for rates of growth and profit was the real motive. The stimulation worked, stagnation was overcome, but there was a huge price to pay, as public debt rates reached crushing levels by the end of the ‘80s. Such was the increasing ideological hegemony of the neo-liberal right that they were able to shift responsibility for the unprecedented rise in public debt through the ‘80s (which they largely responsible for) onto the defenders of the “big state”, that is, the Keynesian left. This only increased the pressure for further pushing the neo-liberal agenda of privatization, de-regulation, dismantling the Welfare State, and, most importantly, globalization.

Since then (1990 or so), neo-liberalism has steadily risen to become the new orthodoxy everywhere, while Social Democracy has either virtually collapsed or else accommodated itself to neo-liberalism by adopting the so-called “Third Way” espoused by the (Tony Blair led) British Labour Party and others.

What has been referred to above, however, is inadequate as an explanation of why Globalization has become the new mantra of the capitalist class nearly everywhere today. To adequately explain this development, reference must be made to the actual changes in the mode of operation of capital on a world scale over the past 10-20 years.

The globalization process being undertaken by the WTO and various regional multi-lateral trade agreements is actually the response of the strongest nation-states to the emergence of increasingly autonomous trans-national capitals. This development results in part from new technologies in communications and transportation, and from whole new fields of economic activity (the so-called “new economy” based on information as commodity, and the various services that can be provided with it, the “IT” sector, software, etc., and the increased usage of computers and other electronic devices capable of digitally transferring information), which has facilitated an increased mobility of capital world-wide. It also results in part from the global competitive struggle to maximize profits and expand markets, and the willingness of some nation-states to grant tans-national capitals unprecedented freedom to operate however it sees fit (by reducing or eliminating corporate taxes, regulations, labour standards, environmental regulations, etc.), not to mention various subsidies, provision of infrastructure, and other “inducements”, within their borders. This has given rise to a certain autonomy of such capital from any nation-state, as it is capable of shifting its operations and investments from one country to another where conditions are more beneficial for it. Mention must also be made of the crisis-fuelled tendency towards bankruptcy and failure of all but the strongest, most technologically advanced capital units, which through the ‘90s led to a steep rise in the latter buying up their debt-ridden competitors (at significantly less than real market value, of course) and the “merger mania” between even the strongest capitals across national boundaries in a tendency towards “multi-national monopolies”, especially pronounced in the past five years.

All of these developments within global capital over the last 15 or so years have facilitated a major increase in global integration, with protectionist tendencies being scaled back significantly (primarily focused on agriculture and “cultural industries”). These developments have accelerated because they have achieved a measure of success. They have indeed permitted an increase in profitability and an expansion of world markets. Global public debts, atleast for the strongest, most advanced countries, have been significantly curtailed, even if they do remain a serious burden on global profitability.

GLOBALIZATION AND IMPERIALISM

Thus the neo-liberal/globalization strategy appears to ruling classes everywhere to be working as a “solution” to the global crisis. They see it as worth pursuing, and thus protectionist tendencies have been seriously restrained. As we know, protectionist tendencies helped spur on the push towards the Second World War; and were such tendencies to be pronounced today, there is little doubt that inter-imperialist politico-military antagonism would be far more intensive (and extensive) than it in fact is now. But instead of the development of militarist imperialist blocs (as occurred in the ‘30s), we see the development of continental and hemispheric trade blocs and increasing global economic integration.

Rather than a “course” towards imperialist (world) war – as orthodox dogma would have us expect as the preferred “solution” to the crisis – what we see today is more like a “course” towards globalization and international neo-liberalism as the now preferred “solution” to the crisis.

Globalization is in essence the “new face” of imperialism today. It is the means by which the world’s dominant capitals and dominant countries are increasing their domination over all others. World markets and access to them are indeed expanding, but not for all capitals. It is primarily the markets of the weaker, less developed countries which are being opened up, so that the more advanced capitals can capture them. Even if some markets of the advanced countries are opened up for the relatively backward capitals of the lesser developed countries, the latter have only their low labour costs (and, in some cases, their natural resources) to their advantage, so that the only markets they can capture are those whose products require the most labour-intensive production methods and for which start-up costs and overhead are the lowest. The capitals of the less developed countries are thus forced to find their own particular “niche market” in the global economy, to focus primarily on that, and give up on all else. Overall, this leads to a huge transfer of wealth from the poorer to the richer countries; and all without resorting to open warfare or violent coercion.

Of course, imperialist wars still occur around the globe. But they are mostly a matter of the economic “losers” – the lesser developed countries, and the political factions without “legitimate” power – resorting to militaristic means in order to attain the power, wealth and resources which they cannot acquire in any other way. Beyond that, the military operations of the U.S. and its allies are primarily concerned with disciplining recalcitrant tyrants, and keeping every country “in its place” in the New World Order hierarchy.

While protectionist tendencies may be presently on the wane, there is no reason to think that this will remain the case indefinitely. The initial benefits of the globalization process for all but the most powerful capitals will eventually disappear and opposition to wide open markets will return (or arise). Protectionist tendencies and “anti-imperialist” resistance movements will then strengthen, and globalization will be imperilled. This will result in an intensifying of inter-imperialist politico-military antagonisms, atleast amongst the increasing numbers of “losers” of the globalization process.

GLOBALIZATION AND CLASS STRUGGLE

Globalization and neo-liberalism are strategies for “solving” the crisis which depend primarily on lowering the costs of production for capital by reducing the value of labour-power; thus permitting an increase in the extraction of surplus-value from the working class, which allows for increased investments in productivity enhancing technology, necessary to remain competitive on world markets. This process is cyclical, involving a continuous expansion of the value of constant capital and a simultaneous reduction in the value of variable capital (i.e. labour-power). While capital accumulates, the living conditions of the working class decline. This is a realization of the fundamental law of motion of capitalism – the law of value – as articulated by Marx nearly a century and a half ago. Globalization and neo-liberalism merely accelerate this process.

It might be asked: how does expanding world markets and global trade involve lowering the value of labour-power? In fact, globalization is more than a mere expansion of “trade”. The globalization process is really about freeing up all restrictions on the movement and functioning of capital on a global scale. And that is not merely a matter of increasing international trade of finished products. It is just as much about easing the mobility, and extending the reach of investment and finance capital; including the opening up all sorts of “public services” and natural resources, previously the exclusive preserve of states (whether at the national, regional or local level), for the benefit of transnational capital. The “free market” is extended to virtually every sphere of economic activity; more and more “things” and services are effectively commodified. Everything is up for bidding, and no buyers are excluded. “Competition on the free market” – the fundamental thesis of neo-liberalism – becomes the operating principle everywhere. It is what is supposed solve global capitalism’s chronic crisis.

It must be remembered that labour-power is a commodity in its own right, and that one of the most important markets being globalized today is the international labour market. “International competitiveness” in this market means workers willing to sell their labour-power for less, willing to engage in more dangerous work with fewer safety measures, willing to be more “flexible”, that is, put up with worse working conditions. Opening international labour markets gives developed capital – used to exploiting “developed”, i.e. relatively “expensive”, labour-power – greater and easier access to cheaper labour in lesser developed countries. We are all familiar with manufacturing plants in developed countries moving their operations to lesser developed countries primarily to take advantage of the much lower price of labour-power there. The result is a never-ending downward pressure on the value of labour-power everywhere, because there is always somewhere else where the price is lower.

In the new context of “global competitiveness”, transnational finance capital is flowing to those places where the prospects for high rates of profit are the greatest. National (domestic) capitals thus find themselves in international bidding wars to attract the investments they require to maintain their own growth rates. In the course of this process, they are – and have been for a number of years now – restructuring their operations, and such restructuring is primarily a matter of reducing labour costs, of reducing labour standards, “downsizing” and “flexibilization” of the workforce (including increased part-time work, which usually eliminates various benefits, more overtime work but at regular rates of pay, fractured shifts, etc.), tying any wage raises to increases in productivity, and implementing work speed-ups through the introduction of new productive technologies. Layoffs resulting from “downsizing” create further downward pressure on wages and further pressure towards work “flexibility”. Further, the jobs “downsized” are almost always significantly better paying and with better benefits than any new ones “created” by capital.

As noted above, part of the neo-liberal offensive involves dismantling the “welfare state”. The elimination of the various benefits which previously constituted the “social safety net” are reductions of the “social wage” of the working class. The result is an overall reduction in the living conditions of the working class as a whole. This is something the working class has a real interest in resisting, even though defending the “welfare state” easily translates into support for social democracy, and illusions in attempting to return to the “golden age” of the ‘60s and ‘70s.

Thus, the neo-liberal/globalization agenda for solving the crisis depends primarily on a continuous lowering of the value of labour-power, that is, an unrelenting assault on the living and working conditions of the working class. And resistance to these attacks is a matter of the class struggle. More and more workers are becoming aware of the connections between these attacks and the neo-liberal push to globalization. They see that the frenzy for global competitiveness can only result in a global “race to the bottom” (as the saying goes) for the conditions of life and work for the working class in all countries involved in this competition. It is the comprehension of this connection which furnishes the basis on which increasing numbers of working class militants are becoming active in the “anti-globalization movement”.

If these tendencies continue, we are likely to see the working class resist the neo-liberal globalization offensive on a massive scale. Whether such resistance develops into widespread proletarian class autonomy is presently an open question. However, we can safely assert that as long as the ruling class pursues this strategy for solving the crisis that the “historic course” – if indeed we really can talk of such a thing today – is not towards global war, but rather towards increased class confrontations.

June 7, 2001