What is globalisation?

What exactly is globalisation? The problem with trying to pin it down is it's not so much a theory, more a buzzword. The general idea is that the whole world is being opened up to world capitalism. All the old barriers are coming down. Capital flows will bring a transfer of technology to the poor countries - which soon will be rich! Mick Brooks looks at the different meanings of globalisation and explains them from the standpoint of Lenin's theory of imperialism.

'Globalisation' is the latest hope embraced by capitalist commentators for the salvation of their system. They argue that a new era of unprecedented opportunity is opening up before the world capitalist class. As billionaire James Goldsmith put it, 'during the past few years four billion people have suddenly entered the world economy'.

But what exactly is globalisation? The problem with trying to pin it down is it's not so much a theory, more a buzzword. The general idea is that the whole world is being opened up to world capitalism. All the old barriers are coming down. Capital flows will bring a transfer of technology to the poor countries - which soon will be rich! Extreme versions suggest that all national cultural differences will disappear in a homogenised world of global brands. International capital flows are acting on the world like a giant blender. In this form, the theory is nothing but globaloney.

But if globalisation is really happening, the system has not passed its sell-by date and we socialists are all wrong. On the contrary capitalism's great days are only now beginning. The trouble is - it's not happening. There has been no convergence between rich and poor nations. The gap has actually widened, and global capitalism is the reason why.

Millions of anti-capitalist protestors have also made the connection between globalisation, capitalism and the impoverishment of the third world from an opposite point of view from the apologists. They argue that all protection from the looting of the world's poor by global capital is being dismantled. For this they are routinely denounced by government ministers. Jack Straw calls them the 'stop the world' movement. The establishment argues that trade is better than not trading. 'Do you want to be like North Korea?' is the constant refrain. These people are wilfully missing the point. As we pointed out last month, the institutions that regulate world trade are set up so that big business can systematically mug the world's poor. The anti-capitalist protestors want the mugging to stop - and they are right.

Globalisation and the 'demise of the nation state'

Proponents and enemies of globalisation alike suggest 'the nation state' has become irrelevant, helpless to deal with rootless international capital. On the contrary the decision-making of the 'enforcers' of global capitalism (the World Bank, the International Monetary Fund and the World Trade Organisation) is driven by the advanced capitalist countries, the muscle men of the multinationals. The domination of international capital is the domination of the strong nations over the weak. Nobel prize-winning economist Joseph Stiglitz puts it like this, "Countries find themselves in situations where they are having policies imposed on them. It is not unlike the 19th century opium wars when countries were told to open up their markets and this threat was backed up by military force."

Marxists understand that world trade is the way a world division of labour is established under capitalism. Potentially that division of labour can help every country to grow faster. We do not believe a socialist society of abundance can be built in a single country. We have to take advantage of that world division of labour to help the world's poor. But it is a fact that the division of labour imposed upon the less developed countries by the imperialist powers perpetuates them in the position of 'hewers of wood and drawers of water'.

And it's true that capitalism is a global system. It always has been. Who said so? "The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country...All old-established national industries have been destroyed or are daily being destroyed. They are destroyed by new industries, whose introduction becomes a life and death question for all civilised nations, by industries that work up raw materials drawn from the remotest zones; industries whose products are consumed in every quarter of the globe....The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication. draws all, even the most barbarous, nations into civilisation'." Thus said Marx and Engels in the 'Communist Manifesto', written over one hundred and fifty years ago.

They go on to draw the conclusion, "The communists are further reproached with desiring to abolish countries and nationality. The working class has no country...national differences between people are more and more vanishing owing to the development of the bourgeoisie, to freedom of commerce, to the world market". World capitalism begets a world wide enemy in the shape of the working class.

Does globalisation mean that living standards will rise throughout the less developed countries as capitalism spreads its blessings throughout the globe? The record of the recent past speaks otherwise. The overwhelming picture is of a massive impoverishment of the poor countries. According to the economic statistician Angus Maddison, from 1820 to 1997 National Income per head (the best indicator of the standard of living) rose nineteen times over in the advanced countries. In the less developed countries the increase was just 5.4 times over. No sign of 'convergence'! Throughout the capitalist era the gap between rich and poor nations grew ever wider. And it's getting worse. According to the World |Bank's 'World Development Report' average income in the richest twenty counties is 37 times as high as in the poorest 20 - and the gap has doubled in the past twenty years.

At present 1.3 billion humans subsist on $1 per day or less. Another 1.6 billion inhabitants of the planet make do on between $1 and $2 each day. These people are in absolute poverty, and there are nearly 100 million more of them than ten years ago. Together, this is half the world's population . Thus capitalism, even as it has developed the productive forces. at the same time has failed to eliminate poverty. Actually capitalism creates rich and poor, just like it creates McDonalds and Coca Cola.

Lenin's 'Imperialism'

And it is marxists who have explained why. Marxists regard the law of combined and uneven development as the motor of the historical process. Imperialism is the way that law of development manifests itself in the modern epoch. Lenin showed how the advanced capitalist countries drew the rest of the world into the capitalist orbit through the mechanism of imperialism. In doing so capitalism creates rich and poor nations just as it creates rich and poor within each nation.

The main planks of Lenin's theory were -

  • the increasing concentration of production and creation of monopolies in place of free competition 
  • the rise of finance capital the export of capital becomes more important, as against the export of goods 
  • the division of the world among associations of capitalist firms 
  • the division of the world between the great capitalist powers

Point for point, Lenin's theory of imperialism explains what is really happening in the modern world of 'globalisation'.

Concentration of capital 

First, take the concentration of capital into giant multinationals. According to the 'Economist' there were 35,000 in 1990. Between them these multinationals employ more than 65 million workers. In that year General Motors had three quarters of a million on its payroll. GM's sales were twice as high as the entire National Product of Venezuela.

Finance capital Globalisation means two things. First there is the globalisation of money capital summed up in the $25 trillion of 'derivatives' swilling around in the world economy. The arcane financial instruments of swaps, forwards and options are all a bit like betting on a dog. It is obvious that capitalists can make money if their dog wins. It is not obvious how the system gets any richer for running like a casino.

Movement of money used to be analysed in terms of trade. Just like you buy a pound of tomatoes - goods go one way and money the other. Now that's all old hat. The movements of foreign exchange are now no longer the handmaiden of trade. For every dollar that crosses the exchanges for trade, sixty go for pure speculation. Speculative capital capital movements now overwhelm trade in their importance for the balance of payments. Financial globalisation has simply become detatched from the real world of surplus value production. Capital strives after its ideal of a circuit of pure money without going to the trouble of being involved in the bother of production.

Actually, as Marx tirelessly explained, capital is not a thing - it's a social relation. It transmutes into different forms - from money in the hands of a capitalist - to the commodities, such as raw materials, he buys with it - to the process of production itself - to selling the produced commodities - to money once again. Neither money nor commodities nor production are necessarily capital unless they are linked to the extraction of a surplus from the working class. What is the significance of the circuit of capital? Money is infinitely flexible and can go anywhere. It can become a steel mill in Pennsylvania or a pineapple plantation in South Africa. But once it's taken a particular form, it's stuck like that. It's not really true that capital is footloose and fancy free.

The export of capital Since the 1980s the growth of Direct Foreign Investment (DFI) i.e. investment abroad by multinationals has been far more striking than the growth of trade, and may well be the real engine of growth. DFI grew by 30% a year while trade grew by less than 10%. By 1990 the world's total stock of DFI was reckoned to be $1.7 trillion. Multinationals now control 80% of world trade. In fact much of this to-ing and fro-ing is difficult to describe as trade at all, for two fifths of this multinationals' trade takes place between branches of the same firm. Multinationals have been around for quite a while. But the massive acceleration of DFI since the War and particularly over the past decade has only been made possible by the technological revolutions in communications (IT) and transport (containerisation). It is easier these days to shop around for the most favourable (profitable) places to locate. So globalisation is presented as a threat to the day to day working class struggle for better living standards in every country.

Globalisation as ideology 

Actually they're trying to scare us with the concept of globalisation. Capital can shop around. What is capital supposed to be shopping for? Cheap labour of course. Places like China where they're 'happy' to work a 14 hour day for 50p. And there are four billion new suckers out there to exploit. So that's where they'll be heading.

Exploitation doesn't always just mean cheap labour. According to an 'Economist' Survey (Oct 1st 1994) labour often only accounts for only 5-10% of costs in today's high tech products. German capitalists for instance pay $25 per hour for a worker (that doesn't mean the worker actually gets $25 - that includes National Insurance and all the indirect costs of employment). So Germany should be an industrial wasteland? Fat chance! German workers are worth $25 per hour of any capitalist's money because they're so productive. Investment always beats cheap labour. More generally what capitalists are interested in is what they pay you compared with what they get out of you and the high wage economies are usually the high productivity economies.

Yuppies looking at screens can move millions around in nano-seconds. This seems to pose a threat to even a mildly reformist government. What about controls to stop economic activity mucking up the environment? Don't even think about it - it's bad for business. Going to raise taxes on profits? We'll pull our money out before it happens, then. Wouldn't it be popular to raise the minimum wage? Not with capital it wouldn't - we're outa here. So governments bow the knee. The stark message is - financial markets won't wear reforms. The balance of forces has moved decisively against the nation state in favour of global capital. It's a race to the bottom.

The logic of the globalisation thesis is that the nation state is becoming powerless and irrelevant in relation to global capital flows. Actually small nations are only powerless because they are bullied by big nation states in the interests of big business. This shows how the concept of globalisation is really an ideological weapon against the aspirations of working people for a better world. Tony Blair told the1998 WTO meeting that 'globalisation is irreversible and irresistible'. That's a convenient excuse for him to do nothing to offend capital. But that's what he always wanted to do anyway.

Sure, multinationals can shop around. Other things being equal they'll always go for cheap wage locations - but other things seldom are equal. Multinationals need a technological infrastructure and an educated workforce - they don't want to pay for it, that's all. That's where the nation state comes in - as an enabling institution for global capitalism. Multinationals are not really rootless. Ford has been established in the UK since 1912 yet it remains the case that 80% of its assets are stashed away in the USA. This is also the case for more than half the assets of Pepsi and McDonalds, which should surely be regarded as symbols of global capital. And multinationals retain the habit of screaming for the help of their nation state whenever their profits are threatened.

Division of the world between associations of capitalist firms 

So where do the multinational firms fit into all this? The position is complex. On the one hand almost all of them have a regional, indeed a national, home base. On the other hand the tendency to global autarchy threatens their global profit-making. In addition the cost of innovation is soaring, threatening the capabilities of even the biggest firms to keep up. If they ever do get round to developing the global car, it's going to cost £2 billion. A new mainframe computer will set the innovators back £500 million. So they have to get together. Even IBM is not big enough. IBM is currently in bed with - Xerox, Siemens, GEC Plessey, NTT, Corning Glass, NEC, Mitsubishi, and Northern Telecom. The name of the game is strategic business alliances. The first thing about IBM's alliances is that it gives them a foot in each of the three camps. SBAs are part of the multinationals' response to regionalism.

Division of the world among the capitalist powers 

Not through conquest, but through the stranglehold of the world trade mechanism itself, the poor countries are subordinated to the rich. Clear cut 'spheres of interest' emerge in the world, a polite term for what is really humiliating colonial dependence, economic imperialism.

Other theorists have talked not of globalisation, but of 'regionalism'. It is now the case that 75% of trade and 80% of production is located within three great regional trade blocs. Western Europe lays claim to Eastern Europe and the Maghreb. Japan has taken the other East Asian economies under its wing. The USA has always regarded Latin America as its backyard. Nobody much wants Africa south of the Sahara - there's no money to be made there. So people have got absolutely poorer for the past twenty years. These three regional blocs are responsible for 80% of world trade. Trade alliances are cementing the relationships. Alongside the EU we now have NAFTA. What else are these regional trading blocs clustered around a regional hegemonic power but the division of the world pointed to by Lenin as a central feature of his theory of imperialism?

Most capital flows are between the advanced capitalist countries. Poor nations don't really get a sniff. What capital does flow to less developed countries heads for client states within these regions - for instance from Japan to Korea and other East Asian countries. In the 1990s 4/5ths of US investment abroad from the multinationals went to Canada, Japan or Western Europe. The poor countries got just 1%. No wonder the gap between rich and poor countries has continued to widen.

So what exactly is globalisation? Is it a trend or an ideological weapon in the locker of the ruling class? Globalisation is a tendency, not an accomplished fact. There are tendencies working the other way. Nor is regionalism the main trend of our time. The only way to understand the contradictory movements of our time is with the concept of imperialism. Imperialism is the way the law of combined and uneven development manifests itself under conditions of advanced capitalism.

Uneven development means a dog eat dog world of firms fighting each other and nation states at one another's throats. At the same time shifting alliances of big business try to subvert the intentions of national governments while states huddle together against the pressure of international capital. That is the real picture of the world economy. It's complicated and contradictory, but that's how capitalism is.

The concept of globalisation is an attempt to understand reality. It is also a way of influencing its development. It is the language of a ruling class assault on working class living standards worldwide.

Socialists are not the only critics of the globalisation myth. "The rising tide of the global economy will create many economic winners, but it will not lift all boats. [It will] span conflicts at home and abroad...[Its] evolution will be rocky, marked by chronic financial volatility and a widening economic divide. [Those] left behind will face deepening economic stagnation, political instability and cultural alienation. They will foster political, ethnic, ideological and religious extremism, along with the violence that often accompanies it." So its capitalism as usual, then. Who says so? The quote is from the CIA.

Mick Brooks
London, October 2001

See also: Imperialism the highest stage of capitalism (Lenin)