People's Democracy

On Some Contradictions In Imperialist Globalisation

JUST consider for a moment an isolated national capitalist economy. If such an economy is afflicted by the problem of the coexistence of unemployment and unutilized productive capacity, then its State can undertake Keynesian demand management measures; it can increase government expenditure and thereby boost aggregate demand, if necessary by running a fiscal deficit, until this state of affairs, of simultaneous existence of unemployment and unutilized capacity, is eliminated.

There is of course one qualification. Before the complete elimination of this state of affairs inflation may begin to accelerate, either because the approach of full capacity use is accompanied by increases in profit-margins which the workers resist by demanding higher money wages, or because with the reduction in the reserve army of labour the bargaining power of the workers improves, giving rise to higher money wage claims which the capitalists "pass on" in the form of higher prices. The elimination of a state of unemployment-cum-unutilized capacity through State intervention then must be interpreted to mean the elimination of all such "slack" until the shadow of accelerating inflation looms on the horizon.

If we look at the world capitalist economy today we find however that there is both pervasive unemployment, pervasive presence of unutilized productive capacity (i.e. the coexistence of excess labour with excess capital), even when there is not a shadow of accelerating inflation anywhere on the horizon. In other words what is possible for the State to do in an isolated capitalist national economy, is not possible in the world capitalist economy as a whole. The question is: why is this so?

The obvious answer is that there exists no world capitalist State to stabilize world capitalism. But this answer needs elaboration. Even though a world State does not exist, there are three obvious possible ways in which demand management can be effected in the capitalist world as a whole. The first is if individual capitalist States undertook demand management within their respective national economies, each overcoming the crisis of demand deficiency within its own economy, and thereby bringing about a situation as if the world State had stabilized world capitalism. In other words, identical actions of existing nation-States can achieve what a world State would have achieved, had it existed. This however is not possible since the present world capitalist crisis is occurring in the context of the emergence of highly fluid international finance capital. As any particular nation-nation-State undertakes demand management, speculative finance capital would swiftly fly out of it, anticipating a decline its currency relative to those of other capitalist economies. This would put pressure on the State to cut back on its demand management plans in order to prevent a collapse of its currency. In short, individual nation-States cannot undertake demand management in a world characterized by the internationalization of finance capital. There is an obvious contradiction between the capacity of the nation-State to stabilize its economy in a world where finance capital is extremely fluid internationally, where it has acquired the character of international finance capital.

The second way is if all advanced capitalist countries simultaneously and in a concerted manner increased their level of aggregate demand through State intervention. This however would run into the following obvious problem. Different capitalist economies are afflicted by differing degrees of demand deficiency. Whichever one of them overcomes the problem of demand deficiency first would then have no further need for boosting its aggregate demand, since this would only benefit others by enlarging their sales into this country without this country deriving any further benefit, since it has no further "slack". Consequently a concerted move as such would not eliminate demand deficiency from the world capitalist economy.

The third way is if there exists one country which is willing to act a surrogate world State, in the sense that no matter whether it has any further "slack" or not it presses ahead with boosting its aggregate demand in order to help the system as a whole. Such a country obviously would have to be one whose currency is so strong that even though it runs a trade deficit, in order to boost demand in the rest of the capitalist world, there is no capital flight from this country, since all wealth-holders wish to hold either this currency or assets denominated in terms of it. But if no such strong currency exists, or if the State of a country with an apparently strong currency is unwilling to play this leadership role, of acting as a surrogate world State, then this avenue too remains closed to world capitalism. In the contemporary capitalist world, it is only the US that can possibly play this role since its currency, the dollar, constitutes the strongest currency in the capitalist world, and is treated by most wealth-holders de facto, though no longer de jure, as being " as good as gold". But the US does not appear willing to run trade (or current account) deficits on the balance of payments to boost aggregate demand in the capitalist world as a whole. The result is a world recession which cannot be overcome.

This last statement however needs further examination. Of course if capital is international it would need the protection of a supra-national State. When finance capital flows from the metropolis to all the corners of the world, it needs protection to operate in these corners; and institutional protection is provided to it by imperialist agencies like the IMF which constitute components as it were of a world imperialist State. The abrogation of sovereignty of third world States owing to the dictates of the IMF can therefore be seen alternatively as the theft of the sovereignty of the multiplicity of national States in the third world by an emerging overarching world imperialist State.

The continuation of NATO, the arrogation of the right to attack the so-called "rogue States" by imperialist powers, the coming into being of a WTO which takes upon itself the sovereign right of nation States to fix their tariff and other policies, the control over national macroeconomic policies by the Bretton Woods institutions, and the setting up of late of the so-called War Crimes Tribunal that is trying the former Head of a State which was only recently resisting imperialist aggrandizement, are all symptoms of the emergence of a world imperialist State. But the contradiction we are talking about consists in this: while the imperialist countries are willing to come together in certain ways to set up the rudiments of a world imperialist State, they are not willing to come together in other ways. In other words what we called earlier the contradiction between the international character of finance capital on the one hand and the absence of a world capitalist State on the other, can be alternatively seen as the contradiction afflicting the process of emergence of a world imperialist State.

An implication of this deserves attention, namely the fact that globalization has aroused hostility among the people everywhere. Recession and unemployment are rampant everywhere. But the perceptions of the causes behind it are often shaped by false consciousness. In the advanced capitalist world for instance there is a feeling that cheap products from the third world are taking away the workers' jobs. But if that was the case then the workers in the third world should be doing very well in terms of employment. But this is palpably not the case. Their misery under the impact of globalization is even greater. Clearly therefore the crux of the problem is not that one group of workers is taking away jobs from another but that the contradictions of world capitalism in the era of globalization are perpetrating recession everywhere, i.e. taking away jobs from all workers. If there could be demand management on a world scale, then world aggregate demand could be boosted to a level where the size of the reserve army would be large enough to prevent accelerating inflation but not necessarily larger. Workers in one country then would not perceive workers of some other country as being responsible for their job loss. But this perception persists because such demand management is not possible on the world scale.

But no matter what the perception, the fact remains that the era of globalization is bringing in its train a crisis of global recession. This crisis is already upon us, though it is getting aggravated over time. The enormous protest demonstrations we find at international capitalist meets, whether in Genoa or Prague, are popular responses to this crisis. They represent a revival of militancy that marks a new phase in the career of capitalism.

Votaries of globalization, invariably the apologists of imperialism, present the process in a manner that is fundamentally incorrect. They present it as a globalization of capital-in-production, which has become footloose enough to move from its metropolitan home bases to countries of low wages where it can locate itself to service the global market. If this were indeed the case then not only would globalization be beneficial for the third world which could now industrialize on the basis of huge inflows of direct foreign investment for meeting the global market, but the complaints of job loss in the metropolis on account of low third world wages would indeed be justified. In other words the views of the "liberal" votaries of globalization and of the right-wing critics of it in the advanced capitalist countries are in fact identical.

But both are wrong. It is not capital-in-production that has become mobile in the era of globalization but capital-as-finance. And herein lies the specificity of the process. It is not a zero-sum game where one segment's loss is another segment's gain. It inflicts losses everywhere, though advanced country workers may not see this fact immediately on account of the propaganda of the right-wing ideologues. The task before the revolutionary forces is to bring home to the working people everywhere the suffering unleashed by globalization upon all of them.