Walden Bello on Globalization in Retreat

Globalization in Retreat
Walden Bello*
(This column appeared in Foreign Policy in Focus on Dec. 27, 2006:
http://www.fpif.org/fpiftxt/3826.)

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.
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. This can only be
worsened by the recent finding of an official high-level expert panel
headed by former IMF chief economist Kenneth Rogoff that the Bank has
been systematically manipulating its data to advance its
pro-globalization position and conceal globalization’s adverse effects.

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 derives from 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—amazingly--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 an 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 Feb. 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 things not moving 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 and the corporations. Doctrinaire neoliberals are being eased out
of key positions, giving way to pragmatic technocrats that 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
advocacy 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 number of Third World Quarterly (Vol. 27, No. 8, 2006).