By Walden Bello*
Genoa is a name associated with the emergence of capitalism in Europe six centuries ago. Genoa may also now become a symbol of the crisis of corporate-driven globalisation.
The siege that thousands of protesters are planning to mount on the Group
of Eight's annual summit in that historic Italian city in the third week of
July has become emblematic of the global state of siege that now surrounds
the key institutions of the global economy and global politics.
The historical context of the coming meeting is that in a little over a decade,
the system of global capitalism has passed from triumph to crisis. As the
world stands on the brink of a deep recession, it would be useful to reflect
on some of the key dimensions of this historic transition-on the multiple
crises wracking the globalist project.
The last decade of the twentieth century began with the resounding collapse
of the socialist economies of Eastern Europe and a lot of triumphalist talk
about the genesis of a new market-driven global economy that rendered borders
obsolete and rode on the advances of information technology. The key agents
of the new global economy were the transnational corporations, which were
depicted as the supreme incarnation of market freedom owing to their superior
ability to bring about the most efficient mix of land, labour, capital, and
technology.
Midway in the decade was born the World Trade Organisation (WTO), which was
painted by partisans of globalisation as providing the legal and institutional
scaffolding for the new global economy. By creating a rules-based global system
grounded in the primordial principle of free trade, the WTO would serve as
the catalyst of an economic process that would bring about the greatest good
for the greatest number. It was the third pillar of a holy trinity that would
serve as the guardian of the new economic order, the other two being the International
Monetary Fund (IMF), which promoted ever freer global capital flows, and the
World Bank, which would supervise the transformation of developing countries
along free market lines and manage their integration into the new world economy.
MULTILATERALISM IN CRISIS
Yet even as the prophets of globalisation talked about the increasing obsolescence
of the nation-state and the growing irrelevance of national interests, the
main beneficiary of the new post-Cold War global order was the United States.
Though it was supposedly a mechanism for freer trade, the WTO's most important
agreements promoted monopoly for US firms: the Trade Related Intellectual
Property Rights Agreement (TRIPs) consolidated the hold over high-tech innovations
by US corporations such as Intel and Microsoft, while the Agreement on Agriculture
institutionalised a system of monopolistic competition for third-country markets
between the agribusiness interests of the United States and the European Union.
When the Asian financial crisis engulfed countries that had been seen by many
in the US business and political elites as America's most formidable competitors,
Washington did not try to save the Asian economies by promoting expansionary
policies, Instead, it used the IMF to dismantle the structures of state-assisted
Asian capitalism that had been regarded as formidable barriers to the entry
of goods and investments from US transnationals that had been clamouring vociferously
for years to get their piece of the "Asian miracle." It was less
the belief in spreading the alleged benefits of free trade than maximising
geo-economic and geo-strategic advantage that lay behind US support for the
policies of the IMF, the World Bank, and the WTO. As Chalmers Johnson has
noted, a good case can be made that Washington's opportunistic behaviour during
the Asian financial crisis reflected the fact that "having defeated the
fascists and the communists, the United States now sought to defeat its last
remaining rivals for global dominance: the nations of East Asia that had used
the conditions of the Cold War to enrich themselves."(1)
Acting to achieve its interests under multilateral cover was the preferred
US strategy for most of the post-war period, whether it was the Bretton Woods
institutions, United Nations, or the Group of Eight that provided the framework
for "hegemonic leadership." Yet when these institutions got in the
way of US interests, Washington did not hesitate to act unilaterally. This
was increasingly the case in the 1990s, with the removal of the incentives
for multilateral behaviour posed by Soviet competition.
The instrumental use of multilateral agencies was stark when it came to the
UN. While using the United Nations to provide cover for its policy of isolating
Iraq, Washington also refused to pay its dues to the UN for not kow-towing
wholeheartedly to US policy. Or it simply disregarded the UN when it could
not get a mandate and proceeded to work its will through more pliable institutions,
as it did when it resorted to NATO cover for the bombing of Yugoslavia during
the Kosovo conflict.
The G-8 (then G-7, without Russia) emerged in the 1970s to provide a mechanism
for more multilaterally-shared decision-making among the advanced capitalist
countries, especially in economic matters. Yet, especially under the administration
of George W. Bush, Washington has embarked on a unilateralist course that
has brought it to sharp conflict with other members on the burning issues
of climate change, missile defence, and reconciliation between the two Koreas.
The brusque junking of a painstakingly negotiated agreement, the Kyoto Protocol
on Climate Change, marks a new low in unilateralist behaviour, and its contribution
to eroding the European Union-United States alliance that has served as the
foundation of Western hegemony in the last 50 years cannot be underestimated.
LEGITIMACY CRISIS
Increasing resort to unilateralism and the brazen manipulation of multilateral
mechanisms to achieve hegemony by the United States was a key source of the
crisis of legitimacy that began to grip the global order in the late 1990s.
But equally important as the erosion of multilateralism as a source of de-legitimisation
was the spreading realisation that the system could not deliver on its promise.
That the system could not create prosperity for all but only the illusion
of it was something that many observers had known for sometime. However, the
realities of growing global poverty and inequality were neutralised by the
high growth rates and the prosperity of a few enclaves of the world economy,
like East Asia in the 1980s, which were (mistakenly) painted as paragons of
market-led development. However, when the Asian economies collapsed in 1997,
the follies of neoliberal economics were brought to the fore. All talk about
the Asian financial crisis being caused by crony capitalism could not obscure
the fact that it was the liberation of speculative capital from the constraints
of regulation, largely in response to pressure from the International Monetary
Fund (IMF), that brought about Asia's collapse. The IMF also came under severe
public scrutiny for imposing draconian programs on the Asian economies in
the wake of the crisis-policies that merely accelerated economic contraction,
saved foreign banks and speculative investors, and restructured economies
along "American lines."
The IMF's role in East Asia triggered a fresh re-examination of its role in
imposing structural adjustment programs in much of Africa, South Asia, and
Latin America in the 1980s, and the fact that these programs had, as they
did in Asia, exacerbated stagnation, widened inequalities, and deepened poverty
now became widely realised-so much so that the IMF, in a desperate effort
to exorcise its record, felt compelled to change the name of the extended
structural adjustment fund facility (ESAF) into the poverty reduction and
growth facility prior to the World Bank-IMF annual meeting in Washington in
September 1999.
The Asian financial crisis triggered the unravelling of the legitimacy of
the IMF. In the case of the WTO, the situation was even more dramatic. In
the last five years of the decade, growing numbers of people and communities
began to realise that in signing on to the WTO, they had signed on to a charter
for corporate rule that enshrined what consumer advocate Ralph Nader called
the principle of "trade uber alles," or corporate trade above equity,
justice, environment, and most everything else we hold dear. Many developing
countries discovered that in signing on to the WTO, they had signed away their
rights to development. The many streams of discontent and opposition converged
in the streets of Seattle and the meeting rooms of the Seattle Convention
Centre in December 1999 to bring down the third ministerial of the WTO and
trigger a severe institutional crisis from which the organisation has yet
to recover.
The World Bank, under the leadership of Australian-turned-American James Wolfensohn,
appeared to be charting a course that would allow it to escape the damage
inflicted on its sister institutions, until it was subjected to fire in early
2000 from an unexpected quarter: the Meltzer Commission. Ever since he took
over as chief of the institution in the mid-1990s Wolfensohn had managed to
defuse criticism through very skilled public relations work and co-option
of non-governmental organisations (NGOs). But when the same criticisms that
had been made by people from the left were made by a commission created by
the US Congress, the game was up. Headed by conservative academic, Alan Meltzer,
the commission concluded that the Bank's performance when it came to addressing
its avowed goal of eliminating global poverty was miserable and that it would
be better to devolve the task to regional bodies.
Not surprisingly, in the face of criticism coming from left to right, reform
of the multilateral system has been prominent in the rhetoric of the multilateral
agencies and the G-8 governments that are their most powerful backers. Debt
forgiveness, a new global financial architecture, and reform of the decision-making
structures of the WTO and Bretton Woods twins have been among the high-profile
issues on which expectations of change were promoted.
These initiatives have, for the most part, proved disappointing, with little
in the way of concrete action. The most prominent reform initiative, the G-8's
plan to lighten the servicing of the external debt of the 41 highly indebted
poor countries (HIPC), has actually delivered a debt reduction of only $1
billion since it began in 1996-or a reduction of their debt servicing by only
three percent in the past five years!
When it comes to the question of the international financial architecture,
serious discussion of controls on speculative capital like the Tobin tax has
been avoided. An unreformed IMF continues to be at the centre of the "firefighting
system." A pre-emptive, pre-crisis credit line at the Fund (which no
country wants to use) and a toothless Financial Stability Forum-where there
is little developing country participation-appear to be the only "innovations"
to emerge from the Asian, Russian, and Brazilian financial crises of the last
three years.
Reform of the decision-making structures of the multilateral institutions
that serve as the key rule-setting and global management institutions of contemporary
capitalism was also supposed to be spearheaded by the G-8. Yet, talk about
democratising the WTO has vanished, with Director General Mike Moore saying
that that the non-transparent "consensus" system that triggered
the developing country revolt in Seattle in December 1998 is "non-negotiable."(2)
And with respect to the IMF and the World Bank, there is no longer any discussion
about diluting the voting shares of the US and European Union in favour of
greater voting power for the developing countries, much less of doing away
with the feudal practices of always having a European head the Fund and an
American to lead the Bank.
THE CORPORATION UNDER SCRUTINY
By the end of the last decade of the twentieth century, in short, the triumphalism
that marked the beginning of the decade had evaporated and given way to a
deep crisis of legitimacy of the multilateral order. The crisis of the multilateral
system was, moreover, translating into a deepening unease globally with the
prime actor of globalisation: the corporation.
Several factors came together to focus public attention on the corporation
in the 1990s-the most egregious being the predatory practices of Microsoft,
the environmental depredations of Shell, the irresponsibility of Monsanto
and Novartis in promoting genetically modified organisms, Nike's systematic
exploitation of dirt-cheap labour, and Mitsubishi, Ford, and Firestone's concealment
from consumers of serious product defects. A sense of environmental emergency
was also spreading by the beginning of the 21st century, and to increasing
numbers of people, the rapid melting of the polar ice caps could be traced
to Big Oil and the automobile giants' continuing promotion of an environmentally
destabilising petroleum civilisation, and, more generally, to the process
of uncontrolled growth driven by the transnational corporations (TNCs).
Ironically, in the United States, it was during the apogee of the New Economy
that the distrust of the corporation was also at its highest in decades. According
to Business Week survey, "72 per cent of Americans say business has too
much power over their lives."(3) And the magazine warned: "Corporate
America, ignore these trends at your peril."(4)
Some of the more enlightened members of the global elite took such warnings
seriously, and their annual meeting in Davos, Switzerland, became the venue
to elaborate a response that would go beyond the bankrupt strategy of denying
that corporate-driven globalisation was creating tremendous problems to promote
a vision of "globalisation with compassion." Yet, the task was formidable,
for it became increasingly clear that in an unregulated global market, it
was even more difficult to reconcile the demands of social responsibility
with the demands of profitability. The best that "globalisation with
a conscience" could offer was, as C. Fred Bergsten, a noted pro-globalisation
advocate, admitted, a system of "transitional safety nets…to help
the adjustment to dislocation" and "enable people to take advantage
of the phenomenon [of globalisation] and roll with it rather than oppose it."(5)
THE STRATEGIC NEXUS
Corporate power is one dimension of global power. But there is, equally of
consequence, strategic power, and this, even more than corporate power, is
concentrated in the United States. Strategic power cannot be reduced, as in
orthodox Marxism, to simply being determined by the dynamics of corporate
control. The US state cannot be reduced simply to being a servant of US capital.
The Pentagon has its own dynamics, and one cannot understand the US role in
the Balkans or its changing posture towards China as simply determined by
the interests of US corporations. Indeed, in Asia, it has been strategic extension,
not corporate expansionism, that has been the mainspring of US policy, at
least until the mid-1980s. And, in the case of China, US capital's desire
to exploit the China market has increasingly found itself in opposition to
the Pentagon's definition of China as the Enemy, which must be headed off
at the pass instead of being assisted by western investment to become a full-blown
threat. In many instances, indeed, corporate power and state power may not
be in synch.
Having said this, a primordial aim of the US transnational garrison state
that is ensconced deeply in East Asia, the Middle East, and Europe and projects
power to the rest of the globe, is the maintenance of a global order that
secures the primacy of US economic interests. New York Times columnist Thomas
Friedman may be wrong about the benign impact of globalisation, but he is
definitely on target when he asserts that:
THE HIDDEN HAND OF THE MARKET WILL NEVER WORK WITHOUT A HIDDEN FIST.
McDonald's cannot flourish without McDonnell Douglas, the designer of the
US Air Force F-15. And the hidden fist that keeps the world safe for Silicon
Valley's technologies to flourish is called the US Army, Air Force, Navy,
and Marine Corps. (6)
With the growing illegitimacy of corporate-driven globalisation and the growing
divide between a prosperous minority and an increasingly marginalized majority,
military intervention to maintain the global status will become a constant
feature of international relations, whether this is justified in terms of
fighting drugs, fighting terrorism, containing "rogue states," opposing
"Islamic fundamentalism," or containing China.
One cannot say, however, that the military structure of US hegemony is suffering
as profound a crisis of legitimacy as that which has gripped the processes
and institutions of corporate globalisation. The US military structure remains
solidly rooted in both Europe and Asia, and the reason it remains so is to
be found at the level of the ideological: the deep-seated fear of both European
and Asian elites that without the US to serve as a "benevolent hegemon,"
they would not be able to create by themselves benign regional orders that
would ensure the peace among themselves.
Nonetheless, this sentiment is not as strong as before. The collapse of Soviet
power created the condition for a reassessment by Washington's allies of the
role of US power. Doubts have increased with the Pentagon's insistence on
building a missile defence system against potential rather than real enemies
while preparing the ground for a new Cold War crusade against China. Indeed,
these developments have indeed opened the eyes of many of Washington's allies
that the greatest threat to their security may now be Washington itself.
DEMOCRATIC DEGENERATION
It is not, however, corporate power or military power that is the US's strongest
asset but, following the thinking of Antonio Gramsci, its ideological power-its
"soft power."
The US is a Lockean democracy, and its ability to project its mission as the
extension of systems centred on free elections to choose governments devoted
to promoting liberal rights and freedoms continues to be a strong fountain
of legitimacy in many parts of the world. The trend away from authoritarian
regimes and toward formal democracies in the Third World happened in spite
of rather than because of the United States. Yet, especially under the Clinton
administration, Washington was able to skilfully jibe to catch the democratic
winds, in the process reconstructing its image from being a supporter of repressive
regimes to being an opponent of dictatorships.
In the last few years, however, Washington or Westminster-style democracies-or,
as William Robinson calls them, "polyarchies"(7)-- with their focus
on formal rights and formal elections and their bias against economic equality
achieved through such measures as asset and income redistribution -- have
degenerated into increasingly stagnant and polarised political systems, such
as those in the Philippines, Brazil, and Pakistan. The World Bank and the
Asian Development Bank continually talk about the plague of corruption in
developing countries. It is, however, the deeper corruption that is embedded
in economic and political structures that are superficially democratic but
perverted by the realities of economic inequality that is the greater concern
of the vast masses of people in the South.
This stagnation of Third World liberal democratic systems has been paralleled
by the realisation of increasing numbers of Americans that their liberal democracy
has been so thoroughly corrupted by corporate money politics that it deserves
being designated a plutocracy. Indeed, as William Pfaff notes, "nothing
on the scale of the American system of political expenditure and influence
exists anywhere."(8) The fact that the candidate most favoured by Big
Business lost the popular vote--and according to some studies, the electoral
vote as well-and still ended up president of the world's most powerful liberal
democracy has not helped in shoring up the legitimacy of the political system
in a country that has been described by many observers as already being in
a state of "cultural civil war."
There is also a growing crisis with democratic governance in Europe, brought
on partly by the increasing captivity of party politics to moneyed interests,
as the case of Helmut Kohl and the Christian Democratic Party illustrated.
But there is as well another, related cause of disaffection, and this is the
non-transparent process that technocratic elites allied to corporate elites
have, in the name of European integration and rationalisation, eroded the
principle of subsidiarity by funnelling effective decision-making power upwards
to technocratic structures, at the apex of which stands the European Commission,
that are largely unaccountable to electorates on the ground.
The Crisis of Overproduction
What makes the crisis of legitimacy of the key institutions of the global
economic and political system so volatile from the point of view of the elites
of the North is that is intersecting with a profound structural crisis of
the global economy.
The G-8 came into existence to co-ordinate the macroeconomic policies of
the rich countries in order to navigate between the Scylla of inflation and
the Charybdis of stagnation. However, in the last few years, efforts to synchronise
fiscal and monetary initiatives have proved elusive, and what modicum of co-operation
was achieved has failed to bring Japan out of a decade-long recession or prevent
the onset of a new global recession.
The reason that the economic slowdown seems to be immune to orthodox fiscal
and monetary mechanisms, even when co-ordinated across borders, is that structural
imbalances have been building up for some time. The boom of the early and
mid-nineties resulted in a burst of global investment activity that led to
tremendous overcapacity all around. (9) The indicators are stark. The US computer
industry's capacity has been rising at 40 per cent annually, far above projected
increases in demand. The world auto industry is now selling just 74 per cent
of the 70.1 million cars it builds each year. So much investment took place
in global telecommunications infrastructure that traffic carried over fibre-optic
networks is reported to be only 2.5 per cent of capacity. (10)
Seen in retrospect, profits stopped growing in the US corporate sector after
1997, (11) leading firms to a wave of mergers, the main purpose of which was
the elimination of competition. The most prominent of these were the Daimler
Benz-Chrysler-Mitsubishi union, the Renault take-over of Nissan, the Mobil-Exxon
merger, the BP-Amoco-Arco deal, and the blockbuster "Star Alliance"
in the airline industry.
Another avenue that was taken to avoid the crunch of profitability in industry
was to push investment to speculative activity, notably to the stock market
and the real estate sector, leading to the spectacular boom and bust in East
Asia in the 1990s. (12) It was this same hothouse speculation that underpinned
the Wall Street-Silicon Valley complex that drove the US economy and the global
economy in the nineties. This "New Economy" seemed for a time to
defy the laws of economics, with Internet stars such as Amazon.com registering
an explosive and seemingly permanent rise in stock values even as they continued
to operate at a loss.
But all talk about the emergence of a New Economy vanished when the law of gravity caught up with the speculative sector in late 1990s, resulting in the wiping out of $4.6 trillion in investor wealth in Wall Street, a sum that, as Business Week pointed out, was half of the US Gross Domestic Product and four times the wealth wiped out in the 1987 crash. (13)
Two things about this structural crisis, in short, are increasingly clear: it is no ordinary bust and it comes at an extraordinary time of great popular disaffection with the globalist project and its key institutions.
THE GLOBAL PROTEST MOVEMENT
In retrospect, with the deepening crisis of legitimacy of the prime institutions
of the global system in the latter half of the 1990s, Seattle was a cataclysm
that was waiting to happen. The force of pent up global rage went on to manifest
itself in Washington during the World Bank-IMF spring meeting in April 2000,
in Chiang Mai, Thailand, during the Asian Development Bank annual meeting
in May 2000, in Melbourne during the World Economic Forum gathering in early
September 2000, and in Prague during the World Bank-IMF annual meeting in
late September 2000.
While the global elite assembled in Davos in late January 2001 to ponder the
meaning of the burgeoning "anti-globalisation movement," some 12,000
representatives of civil society organisations and political movements met
in Porto Alegre, Brazil, to declare that "another world is possible."
The World Economic Forum had found its political and ideological nemesis in
the World Social Forum. Celebration of the power of the movement was one aspect
of Porto Alegre; the other was the gathering of energies for the next move.
That move was directed at the Summit of the Americas in Quebec City in late
April 2001, which had been called to push forward a key project of the US
corporate elite, the Free Trade Area of the Americas (FTAA). Despite the effort
of some of the established media to portray the protesters as either uninformed
or anarchists, the confrontation in Quebec, like Seattle, was a major setback,
in terms of legitimacy, for the system of corporate-driven globalisation.
So was the clash with 20,000 protesters that grabbed the centre stage during
the European Union summit in Gothenburg three weeks ago.
GENOA: NEXT STOP IN THE ANTI-GLOBALIZATION EXPRESS.
To contain the anti-globalisation shock troops that are now on the road headed
for Genoa, nervous Italian authorities are deploying 20,000 police and troops,
backed up by 15 helicopters, four aircraft, and seven naval boats. In a sign
of panic, the government has announced that it will close Genoa's airport
between July 18 and 22 and seal off a "red zone" in the inner city
that will be kept free of demonstrators.
Undaunted, protest organisers say they will bring 200,000 people to Genoa and that they will definitely breach the red zone. They may yet make Genoa the most dramatic example of the mass "withdrawal of consent" that is shaking the system of global capitalism to the core.
One must not, of course, overestimate the impact of these protests so far, nor gloss over their weaknesses in terms of shared agenda or decision-making. However, neither must one underestimate their consequences. As C. Fred Bergsten, one of the most ardent promoters of the Washington Consensus, now admits, "the anti-globalisation forces are now in the ascendancy."(14) Bergsten is haunted by a "Gramscian" fear: the structures of the system may appear to still be solid, but when legitimacy or consensus goes, it may only be a matter of time before the structures themselves begin to unravel, especially when one factors in the crisis of overproduction noted above, with the recession, unemployment, and increases in poverty and inequality that will come with it.
THE FUTURE IN THE BALANCE
Yet the crisis of the system will not necessarily result in its replacement
by a more benign system of international relations. As Rosa Luxemburg so presciently
pointed out before the rise of fascism in crisis-ridden Europe in the early
part of the 20th century, the outcome may be "barbarism," where
the ideals and themes of the progressive opposition are hijacked and perverted
by demagogic forces that are hostile to freedom, equality, and democracy.
Which is why the articulation of the alternative or the alternatives is so
critical. Creating these alternative visions and programs centred on a participatory
process to create the institutions that would once again subordinate the market
to society, promote genuine equality across gender and colour lines and within
and among countries, and establish a benign relationship between human community
and the biosphere remains the great challenge of the opponents of corporate-driven
globalisation.
On the success of this enterprise depends a future that now hangs in the balance.
* Dr. Walden Bello is executive director of Focus on the Global South, a research and advocacy program of the Chulalongkorn University Social Research Institute. He is also professor of sociology and public administration at the University of the Philippines and the chairperson of the Akbayan, the Citizens' Action Party of the Philippines. His latest book is The Future in the Balance: Essays in Globalisation and Resistance (Oakland: Food First, 2001).
1. Chalmers Johnson, Blowback: The Costs and Consequences of American Empire
(New York: Henry Holt and Company, 2000), p. 206.
2. Michael Moore, speech at UNCTAD X, Bangkok, Feb. 15, 2000.
3. "Too Much Corporate Power," Business Week, Sept. 11, 2000, p.
53.
4. "New Economy, New Social Contract," Business Week, Sept. 11,
2000, p. 80.
5. C. Fred Bergsten, "The Backlash against Globalization," speech
delivered at 2000 meeting of the Trilateral Commission, Tokyo, April 2000
(downloaded from Internet).
6. Thomas Friedman, The Lexus and the Olive Tree (New York: Farrar, Straus
Giroux, 1999), p. 50.
7. See William Robinson, Promoting Polyarchy: Globalization, US Intervention,
and Hegemony (Cambridge: Cambridge University Press, 1996).
8. William Pfaff, "Money Politics is Winning the American Election,"
International Herald Tribune, March 11-12, 2000, p. 8.
9. See, among other analyses, Robert Brenner, "The Economics of Global
Turbulence," New Left Review 229 (May-June 1998) and A. Gary Shilling,
Deflation (Short Hills, NJ: Lakeview Publishing Co., 1998).
10. "Too Much of Everything," Business Week, April 9, 2001, pp.
74-76.
11. John Plender, "Falling from Grace," Financial Times, March 27,
2001, p. 14.
12. Ravi Arvind Palat, "Miracles of the Day Before?: The Great Asian
Meltdown and the Changing World-Economy," Development and Society, Vol.
28, No. 1 (June 1999), p. 40.
13. "When the Wealth is Blown Away," Business World, March 26, 2001,
p. 33.
14. Bergsten, "The Backlash against Globalization…".