PHA-Exchange> Globalization in Retreat

Mon Jan 8 13:58:04 PST 2007

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  Globalization in Retreat
  Walden Bello | December 27, 2006

  When it first became part of the English vocabulary in the early 1990s,
globalization was supposed to be the wave of the future. Fifteen years ago,
the writings of globalist thinkers such as Kenichi Ohmae and Robert Reich
celebrated the advent of the emergence of the so-called borderless world.
The process by which relatively autonomous national economies become
functionally integrated into one global economy was touted as "irreversible.
" And the people who opposed globalization were disdainfully dismissed as
modern day incarnations of the Luddites that destroyed machines during the
Industrial Revolution.

  Fifteen years later, despite runaway shops and outsourcing, what passes
for an international economy remains a collection of national economies.
These economies are interdependent no doubt, but domestic factors still
largely determine their dynamics.

  Globalization, in fact, has reached its high water mark and is receding.

  Bright Predictions, Dismal Outcomes

  During globalization's heyday, we were told that state policies no longer
mattered and that corporations would soon dwarf states. In fact, states
still do matter. The European Union, the U.S. government, and the Chinese
state are stronger economic actors today than they were a decade ago. In
China, for instance, transnational corporations (TNCs) march to the tune of
the state rather than the other way around.

  Moreover, state policies that interfere with the market in order to build
up industrial structures or protect employment still make a difference.
Indeed, over the last ten years, interventionist government policies have
spelled the difference between development and underdevelopment, prosperity
and poverty. Malaysia's imposition of capital controls during the Asian
financial crisis in 1997-98 prevented it from unraveling like Thailand or
Indonesia. Strict capital controls also insulated China from the economic
collapse engulfing its neighbors.

  Fifteen years ago, we were told to expect the emergence of a transnational
capitalist elite that would manage the world economy. Indeed, globalization
became the "grand strategy" of the Clinton administration, which envisioned
the U.S. elite being the primus inter pares -- first among equals -- of a
global coalition leading the way to the new, benign world order. Today, this
project lies in shambles. During the reign of George W. Bush, the
nationalist faction has overwhelmed the transnational faction of the
economic elite. These nationalism-inflected states are now competing sharply
with one another, seeking to beggar one another's economies.

  A decade ago, the World Trade Organization (WTO) was born, joining the
World Bank and the International Monetary Fund (IMF) as the pillars of the
system of international economic governance in the era of globalization.
With a triumphalist air, officials of the three organizations meeting in
Singapore during the first ministerial gathering of the WTO in December 1996
saw the remaining task of "global governance" as the achievement of
"coherence," that is, the coordination of the neoliberal policies of the
three institutions in order to ensure the smooth, technocratic integration
of the global economy.

  But now Sebastian Mallaby, the influential pro-globalization commentator
of the Washington Post, complains that "trade liberalization has stalled,
aid is less coherent than it should be, and the next financial conflagration
will be managed by an injured fireman." In fact, the situation is worse than
he describes. The IMF is practically defunct. Knowing how the Fund
precipitated and worsened the Asian financial crisis, more and more of the
advanced developing countries are refusing to borrow from it or are paying
ahead of schedule, with some declaring their intention never to borrow
again. These include Thailand, Indonesia, Brazil, and Argentina. Since the
Fund's budget greatly depends on debt repayments from these big borrowers,
this boycott is translating into what one expert describes as "a huge
squeeze on the budget of the organization."

  The World Bank may seem to be in better health than the Fund. But having
been central to the debacle of structural adjustment policies that left most
developing and transitional economies that implemented them in greater
poverty, with greater inequality, and in a state of stagnation, the Bank is
also suffering a crisis of legitimacy.

  But the crisis of multilateralism is perhaps most acute at the WTO. Last
July, the Doha Round of global negotiations for more trade liberalization
unraveled abruptly when talks among the so-called Group of Six broke down in
acrimony over the U.S. refusal to budge on its enormous subsidies for
agriculture. The pro-free trade American economist Fred Bergsten once
compared trade liberalization and the WTO to a bicycle: they collapse when
they are not moving forward. The collapse of an organization that one of its
director generals once described as the "jewel in the crown of
multilateralism" may be nearer than it seems.

  Why Globalization Stalled
  Why did globalization run aground? First of all, the case for
globalization was oversold. The bulk of the production and sales of most
TNCs continues to take place within the country or region of origin. There
are only a handful of truly global corporations whose production and sales
are dispersed relatively equally across regions.

  Second, rather than forge a common, cooperative response to the global
crises of overproduction, stagnation, and environmental ruin, national
capitalist elites have competed with each other to shift the burden of
adjustment. The Bush administration, for instance, has pushed a weak-dollar
policy to promote U.S. economic recovery and growth at the expense of Europe
and Japan. It has also refused to sign the Kyoto Protocol in order to push
Europe and Japan to absorb most of the costs of global environmental
adjustment and thus make U.S. industry comparatively more competitive. While
cooperation may be the rational strategic choice from the point of view of
the global capitalist system, national capitalist interests are mainly
concerned with not losing out to their rivals in the short term.

  A third factor has been the corrosive effect of the double standards
brazenly displayed by the hegemonic power, the United States. While the
Clinton administration did try to move the United States toward free trade,
the Bush administration has hypocritically preached free trade while
practicing protectionism. Indeed, the trade policy of the Bush
administration seems to be free trade for the rest of the world and
protectionism for the United States.

  Fourth, there has been too much dissonance between the promise of
globalization and free trade and the actual results of neoliberal policies,
which have been more poverty, inequality, and stagnation. One of the very
few places where poverty diminished over the last 15 years is China. But
interventionist state policies that managed market forces, not neoliberal
prescriptions, were responsible for lifting 120 million Chinese out of
poverty. Moreover, the advocates of eliminating capital controls have had to
face the actual collapse of the economies that took this policy to heart.
The globalization of finance proceeded much faster than the globalization of
production. But it proved to be the cutting edge not of prosperity but of
chaos. The Asian financial crisis and the collapse of the economy of
Argentina, which had been among the most doctrinaire practitioners of
capital account liberalization, were two decisive moments in reality's
revolt against theory.

  Another factor unraveling the globalist project is its obsession with
economic growth. Indeed, unending growth is the centerpiece of
globalization, the mainspring of its legitimacy. While a recent World Bank
report continues to extol rapid growth as the key to expanding the global
middle class, global warming, peak oil, and other environmental events are
making it clear to people that the rates and patterns of growth that come
with globalization are a surefire prescription for ecological Armageddon.

  The final factor, not to be underestimated, has been popular resistance to
globalization. The battles of Seattle in 1999, Prague in 2000, and Genoa in
2001; the massive global anti-war march on February 15, 2003, when the
anti-globalization movement morphed into the global anti-war movement; the
collapse of the WTO ministerial meeting in Cancun in 2003 and its near
collapse in Hong Kong in 2005; the French and Dutch peoples' rejection of
the neoliberal, pro-globalization European Constitution in 2005 -- these
were all critical junctures in a decade-long global struggle that has rolled
back the neoliberal project. But these high-profile events were merely the
tip of the iceberg, the summation of thousands of anti-neoliberal,
anti-globalization struggles in thousands of communities throughout the
world involving millions of peasants, workers, students, indigenous people,
and many sectors of the middle class.

  Down but not out
  While corporate-driven globalization may be down, it is not out. Though
discredited, many pro-globalization neoliberal policies remain in place in
many economies, for lack of credible alternative policies in the eyes of
technocrats. With talks dead-ended at the WTO, the big trading powers are
emphasizing free trade agreements (FTAs) and economic partnership agreements
(EPAs) with developing countries. These agreements are in many ways more
dangerous than the multilateral negotiations at the WTO since they often
require greater concessions in terms of market access and tighter
enforcement of intellectual property rights.

  However, things are no longer that easy for the corporations and trading
powers. Doctrinaire neoliberals are being eased out of key positions, giving
way to pragmatic technocrats who often subvert neoliberal policies in
practice owing to popular pressure. When it comes to FTAs, the global south
is becoming aware of the dangers and is beginning to resist. Key South
American governments under pressure from their citizenries derailed the Free
Trade of the Americas (FTAA) -- the grand plan of George W. Bush for the
Western hemisphere -- during the Mar del Plata conference in November 2005.

  Also, one of the reasons many people resisted Prime Minister Thaksin
Shinawatra in the months before the recent coup in Thailand was his rush to
conclude a free trade agreement with the United States. Indeed, in January
this year, some 10,000 protesters tried to storm the building in Chiang Mai,
Thailand, where U.S. and Thai officials were negotiating. The government
that succeeded Thaksin's has put the U.S.-Thai FTA on hold, and movements
seeking to stop FTAs elsewhere have been inspired by the success of the Thai
efforts.

  The retreat from neoliberal globalization is most marked in Latin America.
Long exploited by foreign energy giants, Bolivia under President Evo Morales
has nationalized its energy resources. Nestor Kirchner of Argentina gave an
example of how developing country governments can face down finance capital
when he forced northern bondholders to accept only 25 cents of every dollar
Argentina owed them. Hugo Chavez has launched an ambitious plan for regional
integration, the Bolivarian Alternative for the Americas (ALBA), based on
genuine economic cooperation instead of free trade, with little or no
participation by northern TNCs, and driven by what Chavez himself describes
as a "logic beyond capitalism."

  Globalization in Perspective
  From today's vantage point, globalization appears to have been not a new,
higher phase in the development of capitalism but a response to the
underlying structural crisis of this system of production. Fifteen years
since it was trumpeted as the wave of the future, globalization seems to
have been less a "brave new phase" of the capitalist adventure than a
desperate effort by global capital to escape the stagnation and
disequilibria overtaking the global economy in the 1970s and 1980s. The
collapse of the centralized socialist regimes in Central and Eastern Europe
deflected people's attention from this reality in the early 1990s.

  Many in progressive circles still think that the task at hand is to
"humanize" globalization. Globalization, however, is a spent force. Today's
multiplying economic and political conflicts resemble, if anything, the
period following the end of what historians refer to as the first era of
globalization, which extended from 1815 to the eruption of World War I in
1914. The urgent task is not to steer corporate-driven globalization in a
"social democratic" direction but to manage its retreat so that it does not
bring about the same chaos and runaway conflicts that marked its demise in
that earlier era.

>  Walden Bello is professor of sociology at the University of the
Philippines and executive director of the Bangkok-based research and
advocvacy institute Focus on the Global South. An extended version of this
piece titled "The Capitalist Conjuncture: Overaccumulation, Financial
Crises, and the Retreat from Globalization," appears in the latest issue of
Third World Quarterly (Vol. 27, No. 8, 2006).

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