In a little over a decade, the system of global
capitalism has passed from triumph to crisis
Genoa is a name associated with the emergence of
capitalism in Europe six centuries ago. Genoa may also now become
a symbol of the crisis of corporate-driven globalisation.
The siege that thousands of protesters are planning
to mount on the Group of Eight's annual summit in that historic
Italian city in the third week of July has become emblematic of
the global state of siege that now surrounds the key institutions
of the global economy and global politics.
The historical context of the coming meeting is
that in a little over a decade, the system of global capitalism
has passed from triumph to crisis. As the world stands on the
brink of a deep recession, it would be useful to reflect on some
of the key dimensions of this historic transition-on the multiple
crises wracking the globalist project.
The last decade of the twentieth century began with
the resounding collapse of the socialist economies of Eastern
Europe and a lot of triumphalist talk about the genesis of a new
market-driven global economy that rendered borders obsolete and
rode on the advances of information technology. The key agents
of the new global economy were the transnational corporations,
which were depicted as the supreme incarnation of market freedom
owing to their superior ability to bring about the most efficient
mix of land, labour, capital, and technology.
Midway in the decade was born the World Trade Organisation
(WTO), which was painted by partisans of globalisation as providing
the legal and institutional scaffolding for the new global economy.
By creating a rules-based global system grounded in the primordial
principle of free trade, the WTO would serve as the catalyst of
an economic process that would bring about the greatest good for
the greatest number. It was the third pillar of a holy trinity
that would serve as the guardian of the new economic order, the
other two being the International Monetary Fund (IMF), which promoted
ever freer global capital flows, and the World Bank, which would
supervise the transformation of developing countries along free
market lines and manage their integration into the new world economy.
Multilateralism in crisis
Yet even as the prophets of globalisation talked
about the increasing obsolescence of the nation-state and the
growing irrelevance of national interests, the main beneficiary
of the new post-Cold War global order was the United States. Though
it was supposedly a mechanism for freer trade, the WTO's most
important agreements promoted monopoly for US firms: the Trade
Related Intellectual Property Rights Agreement (TRIPs) consolidated
the hold over high-tech innovations by US corporations such as
Intel and Microsoft, while the Agreement on Agriculture institutionalised
a system of monopolistic competition for third-country markets
between the agribusiness interests of the United States and the
European Union.
When the Asian financial crisis engulfed countries
that had been seen by many in the US business and political elites
as America's most formidable competitors, Washington did not try
to save the Asian economies by promoting expansionary policies,
Instead, it used the IMF to dismantle the structures of state-assisted
Asian capitalism that had been regarded as formidable barriers
to the entry of goods and investments from US transnationals that
had been clamouring vociferously for years to get their piece
of the "Asian miracle." It was less the belief in spreading
the alleged benefits of free trade than maximising geo-economic
and geo-strategic advantage that lay behind US support for the
policies of the IMF, the World Bank, and the WTO. As Chalmers
Johnson has noted, a good case can be made that Washington's opportunistic
behaviour during the Asian financial crisis reflected the fact
that "having defeated the fascists and the communists, the
United States now sought to defeat its last remaining rivals for
global dominance: the nations of East Asia that had used the conditions
of the Cold War to enrich themselves."
Acting to achieve its interests under multilateral
cover was the preferred US strategy for most of the post-war period,
whether it was the Bretton Woods institutions, United Nations,
or the Group of Eight that provided the framework for "hegemonic
leadership." Yet when these institutions got in the way of
US interests, Washington did not hesitate to act unilaterally.
This was increasingly the case in the 1990s, with the removal
of the incentives for multilateral behaviour posed by Soviet competition.
The instrumental use of multilateral agencies was
stark when it came to the UN. While using the United Nations to
provide cover for its policy of isolating Iraq, Washington also
refused to pay its dues to the UN for not kow-towing wholeheartedly
to US policy. Or it simply disregarded the UN when it could not
get a mandate and proceeded to work its will through more pliable
institutions, as it did when it resorted to NATO cover for the
bombing of Yugoslavia during the Kosovo conflict.
The G-8 (then G-7, without Russia) emerged in the
1970s to provide a mechanism for more multilaterally-shared decision-making
among the advanced capitalist countries, especially in economic
matters. Yet, especially under the administration of George W.
Bush, Washington has embarked on a unilateralist course that has
brought it to sharp conflict with other members on the burning
issues of climate change, missile defence, and reconciliation
between the two Koreas. The brusque junking of a painstakingly
negotiated agreement, the Kyoto Protocol on Climate Change, marks
a new low in unilateralist behaviour, and its contribution to
eroding the European Union-United States alliance that has served
as the foundation of Western hegemony in the last 50 years cannot
be underestimated.
Legitimacy crisis
Increasing resort to unilateralism and the brazen
manipulation of multilateral mechanisms to achieve hegemony by
the United States was a key source of the crisis of legitimacy
that began to grip the global order in the late 1990s. But equally
important as the erosion of multilateralism as a source of de-legitimisation
was the spreading realisation that the system could not deliver
on its promise. That the system could not create prosperity for
all but only the illusion of it was something that many observers
had known for sometime. However, the realities of growing global
poverty and inequality were neutralised by the high growth rates
and the prosperity of a few enclaves of the world economy, like
East Asia in the 1980s, which were (mistakenly) painted as paragons
of market-led development. However, when the Asian economies collapsed
in 1997, the follies of neoliberal economics were brought to the
fore. All talk about the Asian financial crisis being caused by
crony capitalism could not obscure the fact that it was the liberation
of speculative capital from the constraints of regulation, largely
in response to pressure from the International Monetary Fund (IMF),
that brought about Asia's collapse. The IMF also came under severe
public scrutiny for imposing draconian programs on the Asian economies
in the wake of the crisis-policies that merely accelerated economic
contraction, saved foreign banks and speculative investors, and
restructured economies along "American lines."
The IMF's role in East Asia triggered a fresh re-examination
of its role in imposing structural adjustment programs in much
of Africa, South Asia, and Latin America in the 1980s, and the
fact that these programs had, as they did in Asia, exacerbated
stagnation, widened inequalities, and deepened poverty now became
widely realised-so much so that the IMF, in a desperate effort
to exorcise its record, felt compelled to change the name of the
extended structural adjustment fund facility (ESAF) into the poverty
reduction and growth facility prior to the World Bank-IMF annual
meeting in Washington in September 1999.
The Asian financial crisis triggered the unravelling
of the legitimacy of the IMF. In the case of the WTO, the situation
was even more dramatic. In the last five years of the decade,
growing numbers of people and communities began to realise that
in signing on to the WTO, they had signed on to a charter for
corporate rule that enshrined what consumer advocate Ralph Nader
called the principle of "trade uber alles," or corporate
trade above equity, justice, environment, and most everything
else we hold dear. Many developing countries discovered that in
signing on to the WTO, they had signed away their rights to development.
The many streams of discontent and opposition converged in the
streets of Seattle and the meeting rooms of the Seattle Convention
Centre in December 1999 to bring down the third ministerial of
the WTO and trigger a severe institutional crisis from which the
organisation has yet to recover.
The World Bank, under the leadership of Australian-turned-American
James Wolfensohn, appeared to be charting a course that would
allow it to escape the damage inflicted on its sister institutions,
until it was subjected to fire in early 2000 from an unexpected
quarter: the Meltzer Commission. Ever since he took over as chief
of the institution in the mid-1990s Wolfensohn had managed to
defuse criticism through very skilled public relations work and
co-option of non-governmental organisations (NGOs). But when the
same criticisms that had been made by people from the left were
made by a commission created by the US Congress, the game was
up. Headed by conservative academic, Alan Meltzer, the commission
concluded that the Bank's performance when it came to addressing
its avowed goal of eliminating global poverty was miserable and
that it would be better to devolve the task to regional bodies.
Not surprisingly, in the face of criticism coming
from left to right, reform of the multilateral system has been
prominent in the rhetoric of the multilateral agencies and the
G-8 governments that are their most powerful backers. Debt forgiveness,
a new global financial architecture, and reform of the decision-making
structures of the WTO and Bretton Woods twins have been among
the high-profile issues on which expectations of change were promoted.
These initiatives have, for the most part, proved
disappointing, with little in the way of concrete action. The
most prominent reform initiative, the G-8's plan to lighten the
servicing of the external debt of the 41 highly indebted poor
countries (HIPC), has actually delivered a debt reduction of only
$1 billion since it began in 1996-or a reduction of their debt
servicing by only three percent in the past five years!
When it comes to the question of the international
financial architecture, serious discussion of controls on speculative
capital like the Tobin tax has been avoided. An unreformed IMF
continues to be at the centre of the "firefighting system."
A pre-emptive, pre-crisis credit line at the Fund (which no country
wants to use) and a toothless Financial Stability Forum-where
there is little developing country participation-appear to be
the only "innovations" to emerge from the Asian, Russian,
and Brazilian financial crises of the last three years.
Reform of the decision-making structures of the multilateral institutions
that serve as the key rule-setting and global management institutions
of contemporary capitalism was also supposed to be spearheaded
by the G-8. Yet, talk about democratising the WTO has vanished,
with Director General Mike Moore saying that that the non-transparent
"consensus" system that triggered the developing country
revolt in Seattle in December 1998 is "non-negotiable."(2)
And with respect to the IMF and the World Bank, there is no longer
any discussion about diluting the voting shares of the US and
European Union in favour of greater voting power for the developing
countries, much less of doing away with the feudal practices of
always having a European head the Fund and an American to lead
the Bank.
The corporation under scrutiny
By the end of the last decade of the twentieth century,
in short, the triumphalism that marked the beginning of the decade
had evaporated and given way to a deep crisis of legitimacy of
the multilateral order. The crisis of the multilateral system
was, moreover, translating into a deepening unease globally with
the prime actor of globalisation: the corporation.
Several factors came together to focus public attention
on the corporation in the 1990s-the most egregious being the predatory
practices of Microsoft, the environmental depredations of Shell,
the irresponsibility of Monsanto and Novartis in promoting genetically
modified organisms, Nike's systematic exploitation of dirt-cheap
labour, and Mitsubishi, Ford, and Firestone's concealment from
consumers of serious product defects. A sense of environmental
emergency was also spreading by the beginning of the 21st century,
and to increasing numbers of people, the rapid melting of the
polar ice caps could be traced to Big Oil and the automobile giants'
continuing promotion of an environmentally destabilising petroleum
civilisation, and, more generally, to the process of uncontrolled
growth driven by the transnational corporations (TNCs).
Ironically, in the United States, it was during the apogee of
the New Economy that the distrust of the corporation was also
at its highest in decades. According to Business Week survey,
"72 per cent of Americans say business has too much power
over their lives."And the magazine warned: "Corporate
America, ignore these trends at your peril."
Some of the more enlightened members of the global
elite took such warnings seriously, and their annual meeting in
Davos, Switzerland, became the venue to elaborate a response that
would go beyond the bankrupt strategy of denying that corporate-driven
globalisation was creating tremendous problems to promote a vision
of "globalisation with compassion." Yet, the task was
formidable, for it became increasingly clear that in an unregulated
global market, it was even more difficult to reconcile the demands
of social responsibility with the demands of profitability. The
best that "globalisation with a conscience" could offer
was, as C. Fred Bergsten, a noted pro-globalisation advocate,
admitted, a system of "transitional safety nets
to help
the adjustment to dislocation" and "enable people to
take advantage of the phenomenon [of globalisation] and roll with
it rather than oppose it."
The strategic nexu
Corporate power is one dimension of global power.
But there is, equally of consequence, strategic power, and this,
even more than corporate power, is concentrated in the United
States. Strategic power cannot be reduced, as in orthodox Marxism,
to simply being determined by the dynamics of corporate control.
The US state cannot be reduced simply to being a servant of US
capital. The Pentagon has its own dynamics, and one cannot understand
the US role in the Balkans or its changing posture towards China
as simply determined by the interests of US corporations. Indeed,
in Asia, it has been strategic extension, not corporate expansionism,
that has been the mainspring of US policy, at least until the
mid-1980s. And, in the case of China, US capital's desire to exploit
the China market has increasingly found itself in opposition to
the Pentagon's definition of China as the Enemy, which must be
headed off at the pass instead of being assisted by western investment
to become a full-blown threat. In many instances, indeed, corporate
power and state power may not be in synch.
Having said this, a primordial aim of the US transnational
garrison state that is ensconced deeply in East Asia, the Middle
East, and Europe and projects power to the rest of the globe,
is the maintenance of a global order that secures the primacy
of US economic interests. New York Times columnist Thomas Friedman
may be wrong about the benign impact of globalisation, but he
is definitely on target when he asserts that:
The hidden hand of the market will never work without a hidden
fist
McDonald's cannot flourish without McDonnell Douglas, the designer
of the US Air Force F-15. And the hidden fist that keeps the world
safe for Silicon Valley's technologies to flourish is called the
US Army, Air Force, Navy, and Marine Corps.
With the growing illegitimacy of corporate-driven globalisation
and the growing divide between a prosperous minority and an increasingly
marginalized majority, military intervention to maintain the global
status will become a constant feature of international relations,
whether this is justified in terms of fighting drugs, fighting
terrorism, containing "rogue states," opposing "Islamic
fundamentalism," or containing China.
One cannot say, however, that the military structure of US hegemony
is suffering as profound a crisis of legitimacy as that which
has gripped the processes and institutions of corporate globalisation.
The US military structure remains solidly rooted in both Europe
and Asia, and the reason it remains so is to be found at the level
of the ideological: the deep-seated fear of both European and
Asian elites that without the US to serve as a "benevolent
hegemon," they would not be able to create by themselves
benign regional orders that would ensure the peace among themselves.
Nonetheless, this sentiment is not as strong as before. The collapse
of Soviet power created the condition for a reassessment by Washington's
allies of the role of US power. Doubts have increased with the
Pentagon's insistence on building a missile defence system against
potential rather than real enemies while preparing the ground
for a new Cold War crusade against China. Indeed, these developments
have indeed opened the eyes of many of Washington's allies that
the greatest threat to their security may now be Washington itself.
Democratic degeneration
It is not, however, corporate power or military power that is
the US's strongest asset but, following the thinking of Antonio
Gramsci, its ideological power-its "soft power."
The US is a Lockean democracy, and its ability to project its
mission as the extension of systems centred on free elections
to choose governments devoted to promoting liberal rights and
freedoms continues to be a strong fountain of legitimacy in many
parts of the world. The trend away from authoritarian regimes
and toward formal democracies in the Third World happened in spite
of rather than because of the United States. Yet, especially under
the Clinton administration, Washington was able to skilfully jibe
to catch the democratic winds, in the process reconstructing its
image from being a supporter of repressive regimes to being an
opponent of dictatorships.
In the last few years, however, Washington or Westminster-style
democracies-or, as William Robinson calls them, "polyarchies"--
with their focus on formal rights and formal elections and their
bias against economic equality achieved through such measures
as asset and income redistribution -- have degenerated into increasingly
stagnant and polarised political systems, such as those in the
Philippines, Brazil, and Pakistan. The World Bank and the Asian
Development Bank continually talk about the plague of corruption
in developing countries. It is, however, the deeper corruption
that is embedded in economic and political structures that are
superficially democratic but perverted by the realities of economic
inequality that is the greater concern of the vast masses of people
in the South.
This stagnation of Third World liberal democratic systems has
been paralleled by the realisation of increasing numbers of Americans
that their liberal democracy has been so thoroughly corrupted
by corporate money politics that it deserves being designated
a plutocracy. Indeed, as William Pfaff notes, "nothing on
the scale of the American system of political expenditure and
influence exists anywhere."(8) The fact that the candidate
most favoured by Big Business lost the popular vote--and according
to some studies, the electoral vote as well-and still ended up
president of the world's most powerful liberal democracy has not
helped in shoring up the legitimacy of the political system in
a country that has been described by many observers as already
being in a state of "cultural civil war."
There is also a growing crisis with democratic governance in
Europe, brought on partly by the increasing captivity of party
politics to moneyed interests, as the case of Helmut Kohl and
the Christian Democratic Party illustrated. But there is as well
another, related cause of disaffection, and this is the non-transparent
process that technocratic elites allied to corporate elites have,
in the name of European integration and rationalisation, eroded
the principle of subsidiarity by funnelling effective decision-making
power upwards to technocratic structures, at the apex of which
stands the European Commission, that are largely unaccountable
to electorates on the ground.
The Crisis of overproduction
What makes the crisis of legitimacy of the key institutions of
the global economic and political system so volatile from the
point of view of the elites of the North is that is intersecting
with a profound structural crisis of the global economy.
The G-8 came into existence to co-ordinate the macroeconomic
policies of the rich countries in order to navigate between the
Scylla of inflation and the Charybdis of stagnation. However,
in the last few years, efforts to synchronise fiscal and monetary
initiatives have proved elusive, and what modicum of co-operation
was achieved has failed to bring Japan out of a decade-long recession
or prevent the onset of a new global recession.
The reason that the economic slowdown seems to be immune to orthodox
fiscal and monetary mechanisms, even when co-ordinated across
borders, is that structural imbalances have been building up for
some time. The boom of the early and mid-nineties resulted in
a burst of global investment activity that led to tremendous overcapacity
all around. (9) The indicators are stark. The US computer industry's
capacity has been rising at 40 per cent annually, far above projected
increases in demand. The world auto industry is now selling just
74 per cent of the 70.1 million cars it builds each year. So much
investment took place in global telecommunications infrastructure
that traffic carried over fibre-optic networks is reported to
be only 2.5 per cent of capacity.
Seen in retrospect, profits stopped growing in the US corporate
sector after 1997, (11) leading firms to a wave of mergers, the
main purpose of which was the elimination of competition. The
most prominent of these were the Daimler Benz-Chrysler-Mitsubishi
union, the Renault take-over of Nissan, the Mobil-Exxon merger,
the BP-Amoco-Arco deal, and the blockbuster "Star Alliance"
in the airline industry.
Another avenue that was taken to avoid the crunch of profitability
in industry was to push investment to speculative activity, notably
to the stock market and the real estate sector, leading to the
spectacular boom and bust in East Asia in the 1990s. (12) It was
this same hothouse speculation that underpinned the Wall Street-Silicon
Valley complex that drove the US economy and the global economy
in the nineties. This "New Economy" seemed for a time
to defy the laws of economics, with Internet stars such as Amazon.com
registering an explosive and seemingly permanent rise in stock
values even as they continued to operate at a loss. But all talk
about the emergence of a New Economy vanished when the law of
gravity caught up with the speculative sector in late 1990s, resulting
in the wiping out of $4.6 trillion in investor wealth in Wall
Street, a sum that, as Business Week pointed out, was half of
the US Gross Domestic Product and four times the wealth wiped
out in the 1987 crash. (13) Two things about this structural crisis,
in short, are increasingly clear: it is no ordinary bust and it
comes at an extraordinary time of great popular disaffection with
the globalist project and its key institutions.
The global protest movement
In retrospect, with the deepening crisis of legitimacy of the
prime institutions of the global system in the latter half of
the 1990s, Seattle was a cataclysm that was waiting to happen.
The force of pent up global rage went on to manifest itself in
Washington during the World Bank-IMF spring meeting in April 2000,
in Chiang Mai, Thailand, during the Asian Development Bank annual
meeting in May 2000, in Melbourne during the World Economic Forum
gathering in early September 2000, and in Prague during the World
Bank-IMF annual meeting in late September 2000.
While the global elite assembled in Davos in late January 2001
to ponder the meaning of the burgeoning "anti-globalisation
movement," some 12,000 representatives of civil society organisations
and political movements met in Porto Alegre, Brazil, to declare
that "another world is possible." The World Economic
Forum had found its political and ideological nemesis in the World
Social Forum. Celebration of the power of the movement was one
aspect of Porto Alegre; the other was the gathering of energies
for the next move. That move was directed at the Summit of the
Americas in Quebec City in late April 2001, which had been called
to push forward a key project of the US corporate elite, the Free
Trade Area of the Americas (FTAA). Despite the effort of some
of the established media to portray the protesters as either uninformed
or anarchists, the confrontation in Quebec, like Seattle, was
a major setback, in terms of legitimacy, for the system of corporate-driven
globalisation. So was the clash with 20,000 protesters that grabbed
the centre stage during the European Union summit in Gothenburg
three weeks ago.
Genoa: Next stop in the anti-globalization express
To contain the anti-globalisation shock troops that are now on
the road headed for Genoa, nervous Italian authorities are deploying
20,000 police and troops, backed up by 15 helicopters, four aircraft,
and seven naval boats. In a sign of panic, the government has
announced that it will close Genoa's airport between July 18 and
22 and seal off a "red zone" in the inner city that
will be kept free of demonstrators. Undaunted, protest organisers
say they will bring 200,000 people to Genoa and that they will
definitely breach the red zone. They may yet make Genoa the most
dramatic example of the mass "withdrawal of consent"
that is shaking the system of global capitalism to the core.
One must not, of course, overestimate the impact of these protests
so far, nor gloss over their weaknesses in terms of shared agenda
or decision-making. However, neither must one underestimate their
consequences. As C. Fred Bergsten, one of the most ardent promoters
of the Washington Consensus, now admits, "the anti-globalisation
forces are now in the ascendancy."(14) Bergsten is haunted
by a "Gramscian" fear: the structures of the system
may appear to still be solid, but when legitimacy or consensus
goes, it may only be a matter of time before the structures themselves
begin to unravel, especially when one factors in the crisis of
overproduction noted above, with the recession, unemployment,
and increases in poverty and inequality that will come with it.
The future in the balance
Yet the crisis of the system will not necessarily result in its
replacement by a more benign system of international relations.
As Rosa Luxemburg so presciently pointed out before the rise of
fascism in crisis-ridden Europe in the early part of the 20th
century, the outcome may be "barbarism," where the ideals
and themes of the progressive opposition are hijacked and perverted
by demagogic forces that are hostile to freedom, equality, and
democracy. Which is why the articulation of the alternative or
the alternatives is so critical. Creating these alternative visions
and programs centred on a participatory process to create the
institutions that would once again subordinate the market to society,
promote genuine equality across gender and colour lines and within
and among countries, and establish a benign relationship between
human community and the biosphere remains the great challenge
of the opponents of corporate-driven globalisation.
On the success of this enterprise depends a future that now hangs
in the balance.
Walden Bello, Focus on the Global South
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