25 - 31 January 2001
Issue No.518
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Al-Ahram Weekly On-line 25 - 31 January 2001 Issue No.518 |
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Progressing towards the abyss
After World War II, integration of the international economy ("globalisation") has been increasing. By the late 20th century, it had reversed the decline of the inter-war period, reaching the level prior to World War I by gross measures - for example, volume of trade relative to the size of the global economy. But the picture is considerably more complex.
Post-war integration passed through two phases: (1) the Bretton Woods period until the early 1970s; (2) the period since, after the dismantling of the Bretton Woods system of regulated exchange rates and controls on movement of capital. It is phase two that is usually called "globalisation." Phase two is associated with so-called "neoliberal policies": structural adjustment and "reform" along the lines of the "Washington consensus" for much of the Third World, and since 1990, others such as India and the "transition economies" of Eastern Europe; and a version of the same policies in the more advanced industrial societies themselves, most notably the US and UK.
The two phases have been strikingly different. For good reasons, many economists refer to phase one as the "golden age" of industrial state capitalism, and phase two -- the "globalisation period" -- as the "leaden age," with significant deterioration of standard macroeconomic measures worldwide (rate of growth, productivity, capital investment, and so on), and increasing inequality. In the world's richest country, where most of the workforce wages have stagnated or declined, working hours have dramatically increased, and benefits and support systems have been reduced. Through the "golden age," social indicators closely tracked GDP; since the mid-1970s, they have steadily declined to the same level as 40 years ago, according to the most recent detailed academic study.
Contemporary globalisation is described as expansion of "free trade," but that is misleading. A large part of "trade" is in fact centrally-managed, through intra-firm transfers, outsourcing and other means. Furthermore, there is a strong tendency towards oligopoly and strategic alliances among firms throughout the economy, along with extensive reliance on the state sector to socialise risk and cost, a key feature of the US economy throughout this period. The international "free trade" agreements involve an intricate combination of liberalisation and protectionism, in many crucial cases (particularly pharmaceuticals) allowing megacorporations to gain huge profits by monopolistic pricing of drugs that were developed with substantial contribution of the public sector.
The enormous explosion of short-term speculative capital transfers in phase two sharply restricts planning options for governments, and so restricts popular sovereignty insofar as the political system is democratic. The constitution of "trade" is far different from the pre-World War I period. A large part now consists of manufacturing flows to the rich countries, much of it intra-firm.
These options, along with the mere threat to transfer production, are another powerful weapon against working people and functioning democracy. The emerging system is one of "corporate mercantilism," with decisions over social, economic and political life increasingly in the hands of unaccountable private concentrations of power, which are "the tools and tyrants of government," in James Madison's memorable phrase, warning of the threats to democracy he perceived two centuries ago.
Not surprisingly, the phase two effects have led to substantial protests and public opposition, which have taken many forms throughout the world. The World Social Forum offers opportunities of unparalleled importance to bring together popular forces from many varied constituencies, from the richer and poor countries alike, to develop constructive alternatives that will defend the overwhelming majority of the world's population from the attack on their fundamental human rights, and to move on to break down illegitimate power concentrations and extend the domains of justice and freedom.
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