Robin Clapp: Global Myths

[Socialism Today, No 7, April 1996, p. 15-18]

‚Globalisation‘ is the buzzword of the 1990s. But is the international economy really ‚globalised‘? Have the vast daily movements of capital across national borders swept all before them? Can national governments and the world labour movement do anything to resist the relentless forward march of transnational corporations? Robin Clapp investigates.

The early 1990s saw Western capitalist leaders in confident mood. The collapse of the Soviet Union enabled them to write countless crowing obituaries to the perceived ‚failure‘ of socialism, while the formation of a US-led taskforce to despatch the Iraqi army from oil-rich Kuwait provided apparent justification for the view that henceforth the New Word Order would be dictated by the big global powers.

This confidence was expressed by Francis Fukuyama, of the Rand Corporation and the US State Department, who stated: ‚What is emerging victorious is not so much liberal practice but the liberal idea … for a very large part of the world there is now no ideology with pretensions to universality that is in a position to challenge liberal democracy‘.¹ From now on, with the ‚communist‘ countries removed, there would be only global capitalism, a single world economy tied to the alter of profit with capital able to move anywhere at will, and a global culture – all topped off with universal ‚liberal democracy‘.

Globalisation theories which have emerged in the last ten years are an attempt to grasp international reality after the fall of the Soviet Union, and the deregulation of the world’s finance markets in the 1980s. These theories have important political implications. The most important is the claim that no national government or economy can ‚buck the markets‘, that attempts to counter the neo-liberal austerity policies of the IMF and the World Bank will result in massive retaliation by investors and lenders – in effect that no national economy today can defy the multinational corporations and financial speculators. If this is true, then it has important implications. Attempts to defend the welfare state are futile. The fight for socialism is made much more difficult. James Carville, an election advisor to Bill Clinton, has commented, “I used to think that if there were reincarnation I wanted to come back as the President or the Pope. But now I want to be the bond market: you can intimidate anybody”.

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There are many different aspects of globalisation theories, but they revolve around three planks: a) the globalisation of the world economy; b) globalisation of world politics through the destruction of any viable opposition to capitalism and the Western powers; and c) globalisation of world culture, especially through quantum leaps in information technology and communications like the Internet and satellite television.

The basis of all three claims is really developments in the world economy, especially the financial markets. The structure of the global finance markets is now so complicated that it surpasses many people’s understanding. The boundaries between distinctive functions like banking, brokerage, financial services, housing finance, consumer credit and the like have become increasingly porous, at the same time as new markets in commodity, stock, currency or debt futures, have sprung up. The trade in finance is now truly astonishing: in 1973 daily foreign exchange trading amounted to just $10-20 billion. Now it towers at $1.3 trillion (that’s $1.3 with 15 noughts after it!). New technology is held up as the factor which caused this gigantic expansion in world finance. In fact the opposite is the case. Although it can be argued that computer technology helped to speed up the stock market crash of November 1987, as computers automatically sold shares, in fact the technology was designed to service an already rapidly expanding financial system.

It is also true that new technology enables instantaneous financial flows, and through the ‚elimination‘ of time and space, creates ‚real time‘ world financial prices and markets. But the technology is just a lubricant and cannot in itself explain the tremendous expansion of world finance. In fact, the expansion of the finance markets since the late 1970s reflects the huge increase of the weight of finance capital in the capitalist economy. And this, far from being a sign of progress, is a reflection of long-term trends towards crisis and recession. The rise of finance capital in the 1980s was a product of the long wave of recession started in all the major capitalist countries in the early 1970s.

As profits in industry tumble capital turns increasingly to speculative outlets, at one stage removed from production. In the 1980s this was fuelled by the turn of the United States under Reagan to expansion of the economy by borrowing and spending on defence – so-called ‚military Keynesianism‘. It also led to a frenzy of bank lending to reactionary third world regimes, which has now turned into the world ‚debt crisis‘. The rise of finance capital was linked to neo-liberal policies like privatisation and deregulation. World finance markets are increasingly a wild gamble as the search for huge short-term profits turns ‚respectable‘ financial institutions into drunken risk-takers. Nick Leeson’s loss of £800m and the subsequent crash of Barings bank shows the price of losing the gamble. World finance has become truly globalised, but does this add up to a globalised world economy? Is production and trade really dominated by ‚multinational companies‘ which are no longer based in a single country?

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An international capitalist economy, and the export of capital from the advanced capitalist – imperialist – countries is nothing new. In the 1848 Communist Manifesto Marx showed how capitalism is compelled to seek new markets for its commodities in order ta overcome its periodic and inevitable crises of overproduction. In doing so it attempted to create a world market, and in breaking down the barriers of closed societies imposed a brutal unifying world culture, complete with Christianity. Lenin, in Imperialism – the highest stage of capitalism, explained how ‚as long as capitalism remains what it is, surplus capital will be utilised not for the purpose of raising the living standards of the masses in a given country, for this would mean a decline in profits … but for the purpose of increasing profits by exporting capital abroad‘.

Globalisation theorists say that this process has reached a qualitatively new level. Bestriding the globe like giants are the transnational enterprises, the largest 300 of which now account for some 70% of FDI (foreign direct investment) and 25% of the world’s capital. The most important fields in which these transnational companies organise are petrochemicals, cars, consumer electronics and pharmaceuticals.

But recent research casts doubt on the notion of a really ‚globalised‘ economy and corporations which are really ‚multinational‘. Paul Hirst and Graham Thompson, in their book Globalisation in Question², show that:

* The overwhelming majority of big corporations have the majority of their owners located in one country. They may be ‚transnational‘ in their operations, but they are not ‚multinational‘ in ownership. There are only a tiny handful of companies which are truly ‚multinational‘ – whose ownership cannot be located mainly in a single country.

* Most big corporations have a high percentage of their capital and sales located in the country where they are headquartered. This is true even of classic ‚transnational‘ operations like McDonalds and Coca Cola, which still have more than 50% of their sales value (as opposed to their outlets) in the United States. Notable exceptions are a few Japanese electronics manufacturers.

* Over 70% of FDI goes between countries in the ‚big three‘ industrial areas – the US, Japan and the European Community. When China and the ‚tiger‘ economies are factored in, this figure is more than 90%. In other words, countries containing more than two thirds of humanity get a tiny amount – or no – foreign investment. For example, sub-Saharan Africa is just ignored. Figures for international trade are less dramatic, but show the same trend.

These basic facts throw into question the idea of a completely open and ‚globalised economy. In addition despite the rhetoric about open markets, there is no real movement of labour even within Europe, while the gates are securely bolted to would-be immigrants from eastern European ‚partner‘ states or North Africans.

There is some truth in the idea that transnational corporations did, in the 1980s, relocate some production to areas where labour was cheaper. The harsh exploitation of third world labour – in countries like Mexico, Indonesia and the ’special economic zones‘ of China, are well-known examples, But Hirst and Thompson in the book mentioned above, question the extent oft his. Relocation is not an option favoured by many corporations, since labour is on average a total of about only 20% of total costs, and there are often advantages in a skilled labour force, availability of supplies, transport and regulatory framework in not relocating.

The idea of a truly globalised economy is a myth. Production is still based on national units, with many nationally-based but internationally operative, companies. After a century of imperialism, capitalism is incapable of really integrating the international economy. The establishment of regional trading blocs like NAFTA, the Asian Yen group, the ASEAN countries and the European Union are attempts to overcome this situation. They are largely doomed. Even within these blocs, the interests of different nations – of different nationally-based groups of capitalists – continually come into conflict.

These clashes were sharply shown in the last round of the GATT trade talks, only leading to a compromise at a minute to midnight. Lying behind all this is the increased rivalry as a result of a depressed world economy Marxists have always pointed out that the integration of the world economy, freeing the productive forces from the fetters of national boundaries, is the way forward to massive economic progress. Capitalism is incapable of achieving this. There is no way out of this contradiction, short of a world socialist federation.

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What of the idea of a globalised culture? In some ways the idea is so vague, that it is difficult to give definite answers. What is meant by ‚culture‘ exactly? Urban lifestyles have converged in many places, especially the advanced capitalist countries. Hollywood movies and international pop stars do convey the bankrupt values of capitalism worldwide. The world’s youth all wear Levis. eat at McDonalds and drink Coca Cola. But this is far from a totally globalised ‚culture‘; it is not proof of shared values, or an inability to resist oppression. Youth in Taiwan, El Salvador and the Palestinian refugee camps may all wear the same kind of baseball hats and trainers, Bur you would be hard put to show the identity of economic circumstances, or political and social outlook between them. In terms of culture more narrowly defined – music, books, films – production and distribution

is much more globalised than 50 years ago. However, it is far from proved that all this is producing an irresistible pro-capitalist consensus worldwide. The idea that the world’s population is an homogenised, pro-capitalist consumerist mass is absurd – if only because a vast section of the world’s population, in the third world, is excluded from any form of consumerism, ‚The idea of a globalised culture is driven by the advances in communications technology. But there are material limits to this. Two thirds of the world’s population are more than two hour’s walk away from the nearest telephone, let alone linked up to the Internet. They are excluded in advance from the ‚information superhighway‘. A powerful multi-media cannot stop the spread of socialist ideas. either. If Murdoch’s evil empire possessed every television screen on the planet, workers‘ experience of the harshness of life would ultimately shatter the propaganda.

Key political issues arising from the globalisation debate relate to whether governments have any scope for national action, and whether labour can any longer resist employers who can relocate internationally. Extreme theories of globalisation – those which say resistance lo international capitalism are impossible – are untrue. If even most ‚transnational‘ corporations are nationally-based, they can be regulated – and nationalised! – in their country of origin. National governments do have the power to maintain welfare systems, vary taxes and interest rates and set economic priorities. The problem today is that capitalist governments don’t want to resist international capital. nor that they are incapable of it.

However, it is true that national economic and political action is subject to the sanction of the international financial markets more rapidly than was ever the case before. That was shown on ‚Black Wednesday‘ in 1992, when the foreign exchange markets dictated the collapse of the pound. It was shown over the collapse of the Mexican peso in 1994. No wonder president Chirac calls the foreign exchange markets ‚the Aids of the world economy‘! This shows two things. To resist international financial blackmail, it would be necessary lo take sweeping anti-capitalist measures, for example nationalising the banks and financial institutions and controlling international trade and exchange rates. Secondly, any country which took such measures would need to rapidly internationalise its struggle, against a hostile international capitalism. However that does not prove resistance is impossible.

The operations of transnational corporations, and their ability if necessary to relocate production, do show the need for stepped-up links and co-ordination between workers internationally – both during particular struggles and on a semi-permanent basis. Workers on strike, like the Liverpool dockers today, will often face the need to extend their fight globally, forging links in struggle with other groups of workers facing the same employer, But struggle at a national level is often the spark for international solidarity,

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A key function of globalisation myths is to tell us that world capitalism is stable and all powerful – and that fighting it is pointless and impossible. The French workers whose mass strikes in November-December 1995 forced the Chirac-Juppe government to back down on many of its welfare cuts policies, showed that resistance is eminently possible. Moreover, capitalism in the post-Soviet world is unstable at a deeper level. Economically. it cannot shake off the long period of economic decline. Politically, there is hardly a major government in the world which looks forward to elections with confidence. and there is a world-wide process of the crisis and decay of the capitalist parties – the most spectacular being the utter collapse of Christian Democracy in Italy which, after all, was the ruling party for much of the post-war period. The growing number of territorial disputes, and ethnic and national wars, reflects this political and economic instability; as does the growth of nationalist and Islamic fundamentalist movements, which can give expression to the aspirations of the masses in circumstances where socialist movements are weak or where self-proclaimed ’socialist‘ movements, especially the Stalinist parties, have been discredited.

If real economic globalisation is a myth then the stepped up internationalisation of communications can aid the fight for socialism. Workers‘ knowledge of struggles in other countries has never been greater. Instantaneous television pictures showing workers stopping Russian tanks, or French workers marching in their millions can inspire worldwide. The possibilities for international cooperation, in trade union action and socialist organisation, have never been greater. This is the challenge to the socialist movement, to counterpose in practice socialist internationalism to the international action of the capitalists.

Capitalism cannot ‚globalise‘ because it is based on the mutually-antagonistic competition of nationally-based capital. International capitalism is beset by one central contradiction: while millions are unemployed in the advanced capitalist countries, and productive capital stands idle or is closed down, vast markets in the ‚third world‘ cannot be opened because the lack the wealth to buy the goods. Only a real internationalisation of the economy, a world socialist federation, could finally ‚globalise‘ the health, education and living standards which the world’s people need.

  Francis Fukuyama, The End of History and the Last Man, Hamish Hamilton, 1991.

 Paul Hirst and Graham Thompson, Globalisation in Question, Polity Press, 1996.