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(PART-B)
The Committees of
Correspondence for Democracy and Socialism
SOCIALIST EDUCATION PROJECT
“On Neoliberal Globalization and its Impacts”
PART-A
Table of Contents
Introduction
Primary Readings
1. International Labor Organization, “Globalization
Failing to Create New, Quality Jobs or Reduce Poverty”
2. Edward S. Herman, “The Threat of Globalization”
3. Manning Marable, “Globalization and Racialization”
4. Ralph Blumenthal, “Levi’s Last US Workers Mourn Loss
of Good Jobs”
5. Celia W. Dugger, “Guatemala: Supermarket Giants Crush
Farmers”
Further Readings
6. William K. Tabb, “Progressive Globalism: Challenging
the Audacity of Capital”
7. Raul Zibechi, “Privatizations: The End of a Cycle of Plundering”
8.
Harry Targ and David
Cormier, “Globalization, Neoliberalism and
Workers”
9. William I. Robinson and Jerry Harris, “Towards a
Global Ruling Class? Globalization and the Transnational Capitalist Class”
Monthly Review
February 1, 1999
I will address some aspects of globalization in our time and what they mean for working people. I will start with some general definitions and suggest that the most significant features of what is called globalization have always been part of capitalist development, even if the forms are different in different periods (including our own). I will then discuss the arrogance of capital as it tries to remake our world in its preferred image. In this regard, I will contrast U.S. initiatives in the area of labor standards with worker demands for labor rights. I will then consider the institutions of an internationalized capitalist regime, which seeks to impose itself using vehicles such as the International Monetary Fund and the proposed Multilateral Agreement on Investment. Finally, I will talk about resistance.
Globalization refers to the process of reducing barriers between countries and encouraging closer economic, political, and social interaction. Globalization could vastly increase the ability of people everywhere to improve their living standards by sharing knowledge and the fruits of human labor across those barriers. This, of course, does not happen. The point, and it is one too easily glided over and too often ignored, is that, as Richard Walker has written, "Accumulation is the main driving force of the world economy, along with its correlates, capital-capital competition and capital-labor exploitation. This is why it makes sense to speak of 'the capitalist system' rather than 'the global market.' The greatest economic myth of all is that the market has as its principal purpose the service of human needs rather than the aggrandizement of capitalists and their corporations."
So when we hear that "Nothing can be done, the global market is just too powerful, and governments are helpless," it is important to ask whose government we are talking about. The state in a capitalist society is the capitalist state. The government is not a neutral arbitrator with weak powers against market forces, but a structural part of the capitalist system in which we live. Globalization is not a steamroller against which the U.S. government is helpless; the state is an active participant in the structuring of globalization. If the United States has lost power to the international market, the loss has been largely self-inflicted. As British political scientist Susan Strange argues, "In order to make the rest of the world safe and welcoming to American capitalism, successive U.S. governments have broken down barriers to foreign investment and promoted capital mobility." These changes may be increasing the asymmetries of power between states to the advantage of the more market-oriented. Opting out of the world market economy is no longer an option. That, as Strange argues, "is what dependency means today." The state is forced to become, as the Canadian theorist Robert Cox writes, "a transmission belt from the global to the national economy, where hithertofore it had acted as the bulwark defending the domestic welfare from external disturbances." Since opting out is not possible, the questions are about what kind of relationship state formations will have to global capital, and how they will use the power they have, individually and collectively, to shape their own and global institutions. The present is threatened by the strength of hyper-liberal globalization. The assertion of social control and pursuance of a leveling-up and, in sum, a more balanced and positive development, could change the nature of the globalization process. Surely it is our task to push things in that direction as much as we can. The idea that this is impossible, the sense of inevitability, is an ideological construct and the product of political forces acting through powerful mechanisms in the realms of government and media.
Globalization is not simply a technologically driven force. The spin put on globalization and the politics of the period combine to misrepresent much of what has happened and why it has been able to take place. For example, the relationship between globalization and jobs and income in the United States is not a simple one. Most U.S. trade is with countries that pay higher wages than we do. Traditionally imports from low-wage countries have been in products we cannot produce here, easily or at all - bananas, coffee, bauxite. The recent rise of the East Asian manufacturing exporters and NAFTA raise questions about whether this is changing. Because of innovations in transportation and communication, many industrial goods are being produced outside the core. As a result, there has been much talk about unfair competition and the need to protect workers' rights. I would like to discuss some aspects of the way these issues are being presented.
Capital's Reformism
Whatever else Soviet communism was or was not, it supported national liberation struggles and could protect Marxist governments from the full force of American imperialism (as in the case of Cuba and others). With the end of the Cold War and the demise of the Soviet Union, transnational capital has revised its state theory and practice. In the new climate, the brutal dictatorships that characterized the free world regimes of the periphery, with their naked repression, mass murders, torture, and extortionist attitudes toward business activity within their territories, are no longer required. They are costly, inefficient from a business point of view, and tend to crystallize mass opposition. Such opposition can be repressed only at significant cost and at the risk of promoting mass movements which adopt anticapitalist ideologies, because repression and foreign capitalist control are widely understood as linked. Better to have democratic governments, managed by local elites who are committed to transnational capital's globalist vision. In this way, well-meaning, democratically elected governments enforce IMF austerity, arguing that there is no alternative to market-oriented globalism. Once the threat of revolution recedes, a local business class is a better partner for transnational capital than a rent-seeking military regime.
Interestingly, the major industrial countries, and especially the United States, want to write international labor standards into the World Trade Organization's mandate. They would include rights already recognized by the International Labor Organization: freedom of association, the right to organize and bargain collectively, non-discrimination, minimum age requirements, and a ban on compulsory labor. There are proposals in Congress and the European Parliament to restrict imports which do not meet stipulated labor standards. Such an approach is part era larger agenda that stresses democracy and elections and is critical of the old-style dictatorial regimes which the United States did so much to encourage in the Cold War years.
The classical liberalism of Bill Clinton and Tony Blair is ready to intervene and tell third-world governments what is good for their people: free trade, free competition, open economies which do not discriminate among market participants, and free elections (in which the power of money holds sway). This is not to say that, in countries where popular movements threaten the power of elites favored by the imperial powers, force is not a necessary remedy. Rather, formal freedom with strong markets is favored over rule by officials who seek to shake down not only their own businessmen but foreign capitalists as well. They are no longer a necessary evil in a period where few, if any, local elites would prefer to opt out rather than compete to attract foreign investment.
So we can advocate for better labor standards and formal democracy, provided that elections are consistently won by friends of free market policies. By breaking the connection between non-democratic governance and economic repression, such democratization, with its formally free elections won by bourgeois and free market parties, changes the political balance and makes it harder for popular movements to organize against neoliberalism. Granting even abstract and formal labor rights, and ending autocratic and military, rule, are important steps forward and make a big difference in the lives of working people. But the condition of this development is the restriction on working-class power in the economic arena, just as the condition of regularly scheduled elections and freedom of speech is that control of the state remains in the hands of neoliberalism, however unpopular its policies may be.
Labor Standards/Labor Rights
To help us understand what is going on, consider the distinction between labor standards and labor rights. Labor standards are externally determined yardsticks which are used to exclude the products of particular countries from other markets. Labor rights are about the responsibilities of employers and governments to respect workers and their organizations, and above all, about the power of the working class to organize itself.
It is also important that the working class has the power to redefine the rules governing the relations between capital and labor. Labor standards are granted. Labor rights are won. Labor's friends are important contributors to the achievement of both, but the emphasis is different. Even where labor standards are formally accepted, terrible practices are left untouched in sectors where production is not for export but for domestic consumption, which in some economies is the largest sector. There are no international sanctions proposed to help these workers. They can only be helped by winning labor rights. Labor standards are typically enforced by governments or self-policing trade groups and not by independent union monitoring. External agencies focus on symbolic standards. What is crucial is the ability of the workers to organize themselves and strengthen their independent organizations.
The United Nations Declaration of Human Rights recognized the universal rights of people as workers as framed in the ILO conventions, which banned child labor and asserted the right of association and the right to organize. But the ILO depends on voluntary compliance. It has no enforcement powers. The World Trade Organization does. It could compel and enforce labor standards as it does intellectual property rights. But it chooses not to because ... well, because these issues fall within the jurisdiction of the ILO! It is useful to remember that the ILO was formed in 1919 to prevent the spread of Bolshevik influence among the workers of the world, especially those of Europe, where the appeal of the Revolution at that time threatened to become more than substantial.
The WTO Secretariat Report on Trade and Investment argues "that a lack of rule, policy and coherence [poses a] danger to security. and stability, which are basic goals of trade and investment agreements." While such coherence extends to a very broad variety of investment-related policies, from trademark enforcement to protecting the rights of foreign producers in a host of specific ways, the protection of workers' property in their ability to determine the conditions under which they labor is not trade-related. This is not the business of the WTO, which could do something about it, but of the ILO, which has been able to accomplish very little since it was created, by capital, as a cooling-out device during the Bolshevik scare.
The advanced countries are already in compliance with the ILO labor standards. Some, most prominently the British and the Americans, have been most effectively (but of course legally) undercutting labor rights, however. In fact, labor standards can be a stick with which the advanced countries can threaten and discipline East Asian and other newly-industrializing economies. But the developing countries that strongly object to labor standards by no means do so because they are concerned with labor rights. They share with the advanced economies' governments the goal of maximizing capital accumulation, but for their own capitalists. Among the official voices of developing market economies, one will not find advocates of livable wages and better working conditions, or indeed any rights for workers.
The basic problem for workers in both the developed and the developing countries is not foreign competition but the power of capital. Jobs need protection because capital creates and maintains coercive pressure on labor, and uses state power and the so-called freedom of the marketplace to escape social control, to the maximum degree possible. Capital keeps workers competing as best it can and attempts to erode class consciousness and working-class power.
If concern for the social conditions of workers were driving government policies, we would be seeing something very different from the subsidies that favor capital, tax write-offs for machinery, and favorable tax treatment for industry when plants are closed (but nothing for the stranded workers), and the reduction of already inadequate spending on job creation, health and education for working-class families. A socially conscious government would focus on the taxation and regulation of capital, not immigration and allegedly unfair labor advantages of other countries.
These remarks are not made to suggest that the struggle for labor standards cannot be an important way to place some limits on capital in industrializing countries, and to raise consciousness concerning the extent of exploitation and oppression, but to underline that the struggle must be for working-class power. This requires workers' rights achieved in struggle by workers themselves, with as much support as possible from other progressive movements, and not simply the adoption of standards rendered ineffectual by the absence of enforcement mechanisms.
Progressive forces recently pulled out of negotiations with producers over a code of conduct that would address problems in third-world sweatshops. They did so precisely because industry-dominated and carefully limited inspection was being crafted not as a tool for advancing labor rights, but as a public relations vehicle for large transnationals, embarrassed by unflattering publicity, who wished to escape more meaningful scrutiny. I shall return to this issue, but first it is necessary to underscore the following point.
We do not and cannot expect the needs of working people to be uppermost in the minds of governments that serve capital, and will continue to permit and encourage systematic violation of worker rights in the name of competitiveness. Trade unionists, perhaps more than others, grasp the distinction between the interests of the state and the interests of the exploited millions around the world. Additionally, the ILO now has a new director who seems committed to more activism, and there is some hope that perhaps the ILO can become a more powerful vehicle for the pursuance of working-class interests. But its structure - unlike the World Trade Organization, which has power to enforce the demands of transnational capital and excludes labor from decision-making - is tripartite. Capital is an equal partner along with labor and governments. Decision-making is consensual, and compliance is voluntary. The real action is elsewhere, in the same way that the United Nations General Assembly is allowed to debate while economic issues are decided in other fora, such as the World Bank and the IMF, where it is not one nation, one vote, but one dollar, one vote, and the United States alone has sufficient votes for veto power.
Globalization from the Top/Resistance from the Bottom
There is no great interest, on the part of those international organizations that have real power, to struggle for the emancipation of labor and protection of the environment. At the same time, some agencies of corporate globalism are very much involved in pursuing the emancipation of capital from popular control. The Multilateral Agreement on Investment (MAI) was negotiated in secret for years and, earlier this year, Business Week called it "The Explosive Trade Deal You've Never Heard Of," noting that until Public Citizen Global Trade Watch put a draft of the agreement on the Web, few lawmakers in Washington had ever heard of it. Renato Ruggiero, the Director General of the WTO, describes the MAI proposal as the constitution for a single global economy. It takes the principles enshrined in the North American Free Trade Agreement and the World Trade Organization to a higher level, and prohibits governments from making new laws which interfere with the right of capital to free investment where and when it likes, and rolls back existing restrictions on capital. The rules also require a five year period before any country can withdraw from the agreement, and no protections and privileges for corporations can be undone for another fifteen years. Nations would lose control over their economies and could be sued for interfering with transnationals. Penalties would have to be paid if national policies caused the companies to forego profit.
Today the MAI is off the immediate agenda, not least because the left was able to expose its aims and act as part of a broader movement of opposition (with national capitals and cultural nationalists). But it is important to realize how many of its provisions are already enshrined in the World Trade Organization, and are being imposed in the proposed charter revision that would further the IMF's effort to transform nation-state level practices.
It is surely clear that capital is attempting to create an international regime with powers unaccountable to elected governments. This regime would obey only the rule of the marketplace, as defined by transnational capital and its bureaucratic allies, and be empowered by the political elites of states which, having attempted to carry out such policies, would dread facing re-election. By saying "It is out of our hands, and globalization is beyond what we can do anything about," they surrender sovereignty to capital. Only organized opposition by a working class aware of what is at stake can reverse these developments.
It will be a long and hard fight. But awareness of the real issues is spreading fairly rapidly. The high tide of neoliberalism has probably passed in the core advanced countries. The problem now is not Thatcher-Reagan attacks on the working class and its organizations. The appeal of harsh anti-working-class governments has passed, as the cost of their policies has become widely experienced and understood. The Blair-Clinton approach is to feel worker's pain, to preach democracy, and to convince us that there is no choice but neo-liberalism with a smiley face. The problem is not that we are part of a globalized society, but a capitalist society. This is increasingly clear to popular movements mobilizing to challenge the world's most powerful corporations.
Popular Resistance and Progressive Globalism
Opinion polls show that four out of five Americans would avoid shopping in a store that sells garments made with sweatshop labor, and would pay a dollar more on a $ 20 item for a guarantee that the product came from a worker-friendly supplier. Companies know that their exploitative policies are unpopular and that they are vulnerable when capitalism's business-as-usual can be dramatized in the mind of the public. The in-their-face militancy of grassroots labor, environmental, and human rights groups has been able to do just this: dramatically and powerfully putting forth evidence that companies like Wal-Mart and Disney are greedy exploiters, and urging people to stand up for workers' rights.
The fact that Disney pays six cents in Haiti for garments it sells for $ 19.99 in the United States, and other similar statistics, are being made widely known by groups like the National Labor Committee and the People of Faith Network. Militant marches, demonstrations, leaflets, press conferences, and other consciousness-spreading tools: have begun to produce widespread awareness of how capitalism operates in our time. The Global Sweatshop Coalition of solidarity, justice groups, and trade unions has informed many who were previously unaware, by bringing workers from El Salvador, Haiti and Nicaragua to U.S. audiences. A People's Right to Know Campaign is calling for corporate disclosure about who makes products, where, and under what living and working conditions. Often, companies refuse to release such detailed information to consumers.
A number of developments suggest that a powerful movement is emerging. Schools are being challenged to be sweatshop-free in their purchasing. As big corporations themselves, many schools are resisting such pressures. Jim Keady, former soccer star, assistant coach at St. John's University, and theology, student, was forced to resign for protesting the unethical relationship his school had entered into with Nike, in which the company gave the school money and equipment, turning the coaches and players into moving billboards for products made in sweatshops. Keady continues to speak out and challenge the morality of his school's deal with Nike. Nike has similar arrangements with over 200 schools. Leo Johnson, a youth worker at the Edenwald-Gunhill Neighborhood Center in the Bronx, has inspired kids to refuse Nike sneakers (and to return their old pairs to the company) in protest, until Nike starts to pay all of its workers a living wage. A growing coalition of settlement houses and youth organizations is asking young people to face not only what Nike has done to its workers abroad but what Nike is doing to them, through advertising that mercilessly pushes $ 150 shoes without which some refuse to go to school (and for which others steal). This advertising is, in Johnson's words, "sucking the brains out of their heads."
At a gut level, people understand that the fetishism of commodities is powerfully destructive to human potential. The anti-sweatshop coalition holding candlelight marches on New York's Fifth Avenue, from Niketown to the Disney store, makes the connections as well. Disney's relentless, upbeat, tirelessly promoted image of harmless consumerist family values does not sit well with the reality of a greedy, exploitative company, whose abuses range from employing sweatshops in Haiti to busting a technical workers' union at its ABC-TV network.
Companies like Nike are scrambling for cover. They are negotiating with church and labor groups, human rights and workers' rights coalitions. But these meetings have not produced much substance. They have recently broken down because the companies insist on a code of conduct that, for example, allows them to employ 14-year-old children for up to sixty hours a week at the local "legal" minimum wage, a less-than-living wage set by repressive governments to meet the requirements of these same corporations. The industry's offer of independent monitors (auditors in fact beholden to the companies, with no role for the movement groups) and of inspections (limited to five percent of a company's contractors in any given year) seemed so obviously a whitewash that all groups agreed it was better to have no agreement than to let these companies use a "No Sweat" label in their garments and deceive consumers into thinking that they were treating workers fairly.
Campaigns like the ones mentioned here are, of course, only a beginning. Capitalism will not be overcome or transformed by consumer boycotts. But these consumer rebellions may indicate a change in the wind. Together with popular struggles in some third-world countries, where people have taken to the streets to oppose exploitation by globalized capital, these movements suggest that people are beginning to challenge the idea that there is no alternative.
The conditions that have made globalization possible are the very conditions that now threaten it. The communication breakthroughs that enable global sweatshop production for core markets can also expose its horrors. The tools that make possible overnight wealth for a handful of global speculators also make possible overnight global financial panic. Even tightly controlled media and the alternation of competing neoliberal parties, which seemed to offer free elections without risk to the rich or transnational corporations, did not prevent the great majority of Venezuelans from seeking to reject the whole system this past December. In France, the MAI, negotiated in extreme secrecy, has nevertheless been exposed and rejected under severe popular pressure. The same technology that is supposed to be the cause of neoliberalism is making it clearer every day throughout the world that neoliberal globalization is not the inevitable product of technological progress, but the result of a political struggle that is far from over.
William K. Tabb is professor of Economics at Queens College and of Political Science at the Graduate Center of the City University of New York. His book, Reconstructing Political Economy: The Great Divide in Economic Thought, will be published by Routledge in late Spring of 1999. This talk was prepared for the November 20, 1998 Monthly Labor Leadership Breakfast, sponsored by the Queens College Labor Studies Center. It was then revised for the Seminar on Labor and Popular Struggles in the Global Political Economy at the School of International and Public Affairs at Columbia University on February 15, 1999.
Americas Program
November 1, 2004
One of the cornerstones of the neo-liberal policies adopted by most Latin American governments in the 1990s was the privatization of state-owned enterprises. This process of passing national wealth on to the private sector has been so injurious that it could soon render entire countries unviable. On occasion, citizen organization has succeeded in halting privatizations through public demonstrations that at times have turned into outright insurrections.
The public has almost always viewed state-owned enterprises as “its own,” and to a certain extent these companies have served public or national interests. Many state-owned enterprises were created following the economic crisis of 1929 and especially during and after World War II. During those years, the decline of Great Britain as the hegemonic power in Latin America and its replacement by the United States encouraged tentative development based on a more active role for nation-states in economic management through import-substitution industrialization.
State-owned enterprises--generally services, transport providers, or manufacturers--were part of the national wealth, although they were known to be mismanaged and to primarily benefit the political elite. Though state-owned companies were necessary for countries attempting to industrialize, many governments used them to perpetuate their power by doling out favors and privileges. These practices, along with inefficient management, undermined state enterprises by unnecessarily bloating employee rosters, thereby reducing efficiency and raising costs.
Consequently, in varying degrees from one country to the next services provided by state-owned enterprises deteriorated for three decades following the end of WWII. Many had fallen into serious financial crisis. This state of affairs greatly facilitated the work of the privatizers of the eighties. Promising efficiency to consumers fed up with shoddy goods and second-rate services, this first wave of privatization encountered little effective resistance.
The Debt Crisis
Broadly speaking, “the privatization of state enterprises is always linked to the renegotiation of a country’s foreign debt,” notes Belgian economist Eric Toussaint, president of the Committee for the Abolition of Third World Debt.1 The roots of privatization policy can therefore be traced back to the so-called “debt crisis” ignited by Mexico’s payment moratorium in August 1982.
At that time, Washington was facing a crisis in its global hegemony caused by the United States ' military defeat in Vietnam, domestic antiwar protests allied with the black civil rights movement, and the demands of Third World countries. This erosion of power culminated when the Iranian Revolution of 1979 sparked the hostage crisis the following year.
The convergence of these multiple challenges laid bare the declining hegemony of the world’s most powerful nation and ushered in a long-term shift: “Domestic and global New Deals were abandoned, and the United States tried to restore its military prestige. To pay for increased military expenses for the Second Cold War, it raised interest rates and began to compete actively for international capital in search of investment. During the 1980s, it attracted the global surplus and precipitated the ‘debt crisis,’ signaling the abandonment of the promise of ‘development.’”2 As the U.S. Federal Reserve hiked interest rates, loans to poor countries were drastically curtailed, preventing them from obtaining new loans to repay their debts. As a result, Third World debt became unpayable.
Until the 1980s, Third World indebtedness had several objectives: to create an outlet for Eurodollars accumulated in financial markets, to encourage arms purchases, and to lubricate the corruption mechanisms of pro-U.S. governments. By design, Third World debt did not affect the balance of payments of the lending countries. To give just one example, two-thirds of all debt assumed by the Argentine military dictatorship (1976-83) was deposited in bank accounts in the North.3 Needless to say, the money lent--largely as “aid” to poor countries--often never arrived or arrived piecemeal to the economies of the recipient countries and their constituencies.
The Brady Plan, devised in the 1980s, required bilateral accords between Latin American countries and U.S. authorities on the reduction or staggering of debt payments.4 One of the linchpins of the Brady Plan was the privatization of state-owned enterprises. In 1985, after a conference on foreign debt in Berne, Henry Kissinger was characteristically blunt: “There is no painless solution to their critical situation, but we must promote some corrections to the IMF’s adjustment program. The solution will entail sacrifice; I prefer that debtor nations ensure their external obligations vis-à-vis their creditors rather than receive aid in the form of real assets, by surrendering the assets of state companies.”5
To ensure their ability to repay their debts, countries adopted structural adjustment policies promoted by the International Monetary Fund (IMF) and the World Bank (WB). As far back as the early 1980s, those two bodies became the debt crisis managers and were put in charge of implementing adjustment policies and collecting debt payments. IMF- and WB-promoted adjustments touted macroeconomic stabilization (devaluation, lifting of price controls, and fiscal austerity) as a first step on the path to structural reforms based on trade opening, deregulation of banks and financial activities, greater labor-market flexibility, and privatization.
This set of policies clearly entails a loss of economic sovereignty for countries applying them. In addition, debtor nations had to forfeit their political sovereignty, either beforehand or simultaneously. As dictatorships and corrupt democracies did the “dirty work” of applying the reforms, foreign debt in Latin America multiplied eightfold between 1971 and 1980. In nearly every Latin American country, state-owned companies were already heavily indebted, since governments used them to contract debt as a way of obtaining loans from private banks. In 1976, at the beginning of military rule, Argentina’s state-owned petroleum company, YPF, had a debt of only $372 million. Seven years later it owed $6 billion, and nearly all of the money borrowed remained in the hands of the dictatorship without entering the coffers of the company. YPF was forced to send its petroleum to private refineries, since it was not permitted to acquire its own refinery. In 1982, when the dictatorship ended, nearly all of the company’s assets had been collateralized for debts.6 As a result, when the company was privatized the sale price did not even cover outstanding debts. The debt merely served to enrich those in charge of implementing the policies of dependence and subordination.
A Gangster Style of Operating
Joseph Stiglitz, 2001 Nobel Prize winner in economics, former chairman of the Council of Economic Advisers for the Clinton administration, and former vice president of the World Bank, argues that one of the main problems with the IMF- and WB-promoted privatization policy was that it “had to be carried out quickly.” Thus countries that “privatized more quickly received the highest scores.”7 Stiglitz, a proponent of privatization, complains that the privatizations were carried out without the proper controls, that they replaced public monopolies with private monopolies so burdening consumers, and that they were shrouded in corruption and bribes.
In Latin America, privatization has not only decimated countries such as Argentina and Peru, but has also exacted a high human cost. Consider, for example, the October 2003 massacre during the “gas war,” in which Bolivians attempted to recover control of their main natural resource that a succession of neoliberal governments had surrendered to Repsol-YPF, Shell, Enron, and Petrobras.
Several significant cases reveal the modus operandi employed in the rush to privatize. In Argentina, a privatizer’s paradise, the first company to be put on the auction block was ENTEL, a telecommunications firm. Although its appraised value was $3.1 billion, the government set the minimum bid at $214 million. The sale needed the approval of the company’s creditors. After several delays and numerous irregularities, ENTEL was sold to a joint bid by the Spanish firm Telefónica and France Telecom. The companies paid a total of only $214 million in cash; the remainder consisted of the acquisition of foreign debt. At the time of privatization, ENTEL’s debt totaled $1.9 billion--$1.4 billion to foreign creditors and $500 million to Argentine contractors.
Although the government had promised to invest the privatization proceeds in health and education, 60% was used for foreign debt payments, and the remaining 40%, according to researcher Daniel Muchnik, “was lost in the back alleys of public administration accounting.”8
Carlos Menem’s government merely continued the corrupt ways of the Argentine military dictatorship. Between 1990 and 1992 the Menem government privatized much of the nation’s wealth, precipitating $60 billion in losses. In the privatization of YPF, U.S.-based Merrill Lynch was given the task of assessing the company’s value. But Merrill Lynch deliberately underestimated the company’s oil reserves by 30% to reduce YPF’s appraised value. Once the privatization had concluded, the hidden reserves reappeared on the books, and the purchasers thus reaped fabulous profits, thanks to the immediate increase in the stock market valuation of YPF shares.
In what might seem like a bad joke, “Argentina’s Central Bank stated that because it had no record of public foreign debt, the Argentine authorities that succeeded the dictatorship had to rely on declarations from foreign creditors and contracts signed by the members of the dictatorship, without these contracts having been verified by the Central Bank.”9 Moreover, the military government nationalized private debt contracted by the affiliates of Renault, Mercedes-Benz, Ford, IBM, Citibank, Chase Manhattan Bank, and Bank of America, among others. In 1981 and 1982, exchange risk insurance regimes were established--the state ensured a preferential exchange rate for these companies--through which a large part of the debts of those economic groups was transferred to the state.
In Brazil, in 1997 Fernando Henrique Cardoso’s government hired Merrill Lynch to appraise the leading public company, the mining concern Vale do Río Doce. Numerous Brazilian congressmen accused Merrill Lynch of underestimating the company’s mineral reserves by 75%. During the Cardoso period, in addition to the state mining company, the state-owned telephone company (Telebras) and government-owned gas and coastal shipping businesses were also privatized.
In Peru, the task of privatizing much of the nation’s wealth fell to Alberto Fujimori’s government, amidst notorious cases of corruption. Fujimori applied a neoliberal program of brutally and completely eliminating all controls on financial capital, reducing the country’s tariff protection, eradicating the entire regulatory framework governing wage labor, and dismantling state-owned manufacturing and services. Peru was thus relegated to the status of producing raw materials. The number in poverty rose from 7 to 12 million, between 1990 and 2000.
In recent years, since the failure of the neoliberal model has become obvious, privatizations have grown increasingly thorny and have encountered strong opposition. President Alejandro Toledo took office in Peru on July 28, 2001, after championing the social movement opposed to Fujimori’s policies. During his campaign, which focused on poverty and unemployment, he promised not to privatize state-owned enterprises in the southeastern city of Arequipa. But once in office, Toledo aligned with big money. To win the bankers’ confidence and tame the fiscal deficit, he continued with his predecessor’s privatization policy. Toledo’s privatization targets included two state electricity companies (EGASA and EGESUR) in the southern departments of Arequipa, Moquegua, and Tacna. Even though the sale violated a court order to bring the privatization process to a halt, on June 14, 2002, the two firms were awarded to a Belgian firm accused of paying kickbacks to Fujimori.10
In Bolivia, the October 20, 1999, passage of Law 2029 privatizing drinking water services took place with no public consultation whatsoever. To avoid a debate on water resources, Bolivia’s ruling coalition entered into a temporary alliance with its main political opponent, the MNR. The MNR is the party of former president Gonzalo Sánchez de Lozada, under whose administration the current economic model was designed. Law 2029 enacted regulations regarding the provision of drinking water and access to water sources for any use, granting exclusive rights to the licensee without taking into account the practices and customs of communities and social organizations, which were to become mere consumers of the services provided by the concession holder. The law pegged rate increases to the U.S. Consumer Price Index and gave legal status to contracts held by companies such as Aguas del Tunari, a subsidiary of the London-based International Water Limited, owned by Bechtel Enterprises of San Francisco, California, and Edison of Milan, Italy.
Both in Peru and Bolivia (as well as in Paraguay and Uruguay ), the privatizations sparked strong social opposition, leading to popular uprisings in several cases.
A Shocking Failure
Not only did the privatizations take place against a backdrop of rampant corruption and plundering of national resources; they were also a commercial failure, and the population of the countries involved ended up footing the bill. Meanwhile, poorer-quality services, higher rates, and a deterioration in infrastructure due to a lack of investment resulted in fabulous profits for multinational corporations.
A recent book by the American geographer David Harvey explains the logic of privatization.11 Given the growing difficulty of obtaining profits, due to an overabundance of capital and a dearth of opportunities to profitably invest it, global elites developed what Harvey calls “accumulation by dispossession.” This term refers to the fencing of communal land in Victorian England, which served as the catalyst for capitalist expansion.
But unlike the expropriation of communal lands--and the entire process of plunder, war, and colonial conquest through which capitalism established its ascendancy--the accumulation by dispossession currently under way combines brutal forms with more subtle “legal” types of dispossession: biopiracy, intellectual property rights, the pillaging of humanity’s genetic resources by a half dozen pharmaceutical companies, and privatization. Indeed, in capitalism’s current phase, neoliberalism “internalizes cannibalistic, predatory, and fraudulent practices” that once seemed eradicated.12 Most importantly, Harvey’s analysis shows that in the current economic era, corruption is the system’s “habitual” way of operating.
In response to the large number of irregularities in Argentina’s privatized companies, Néstor Kirchner’s minister of economy, Roberto Lavagna, requested a report from the General Auditing Office of the Nation. The agency compiled 40 studies on privatizations conducted since 1993, and found that companies do not comply with investment commitments, modify work plans, amounts and time schedules without authorization; do not comply with minimum asset requirements set forth in contracts to ensure solvency; resort to borrowing to finance operations; owe payments to the pension system; modify stock-options packages, despite contract prohibitions against this practice; and fail to protect assets.
Moreover, privatized companies fail to take out insurance or allow their policies to expire, adjust rates in violation of their contracts, neglect to pay fines imposed by regulators, lack complaint-reception procedures, and fail to submit government-required documentation. Several of the studies recommend that many privatization contracts be rescinded.13
A recent report by FLASCO (Latin American Faculty of Social Sciences) asserts that privatized companies in Argentina reap profits unparalleled anywhere else in the world. From 1993 to 1999, the country’s 200 largest businesses generated 25.9 billion dollars in profits; 54% of these profits accrued to 26 companies, which grossed $2 billion a year. The study concludes that in the 1990s, “the average profitability of privatized companies was between seven and eight times higher than the rest of the country’s largest firms.” The study also notes that illegal rate increases were levied, the quality of services worsened, and employee rosters were cut, resulting in a “transfer of resources, first, from wage-earning and low-income sectors to business sectors, and, second, within businesses, from small and medium enterprises to large ones.”14 Though the Argentine and Peruvian cases are among the most extreme, they illustrate how privatization has contributed to the concentration of wealth, eroding economic security for most people, polarizing countries, and undermining social harmony.
Resistance: From Opposition to Insurrection
In the final decades of the past century, broad popular struggles in Latin America took aim at fiscal adjustment policies (the “Caracazo” in 1989) or at the corruption endemic to neoliberal governments (the “impeachment” of Brazilian President Fernando Collor de Melo in 1992) or at neoliberal policies generally, in nearly every country. This resistance intensified beginning in about 2000.
A series of struggles against privatizations succeeded in imposing bottom-up changes in neoliberal policies vis-à-vis state-owned enterprises. Most notable are the early-2000 uprising in Cochabamba over control of aquifer resources, the broad-based struggles in Peru and Paraguay in 2002, and the 2003 referendum in Uruguay on the privatization of the state oil company.
As the failure of privatization became evident, opposition grew more radical. Protests and referendums gave way to direct action in a process that accelerated toward the end of the 1990s from the revolts in Arequipa, Cochabamba, and Paraguay to the events of December 19 and 20, 2001, in Argentina and the gas war in Bolivia in September and October 2003. Neoliberal policies--especially privatizations--catalyzed opposition forces, uniting diverse social sectors including workers, the unemployed, and the middle class and triggering unprecedented crises.
Several examples illustrate this radicalizing transition.
In Uruguay the grassroots movement has often used legal mechanisms to repeal laws. By submitting the signatures of 25% of registered voters, activists can force the executive branch to call a referendum. In December 1992, during the term of Luís Alberto Lacalle, a broad social, trade-union, and political movement succeeded in blocking the State Companies Law (which called for several privatizations), when 72% of the votes cast in a referendum favored repeal. In 2002, the union of the state-owned oil company, ANCAP, the trade-union movement, and the political left obtained enough signatures to force another referendum. An overwhelming 62% of the voters favored repeal, while 35% voted in favor of leaving it on the books.
In countries without legal safeguards to prevent privatization, people have resorted to direct action. In Peru, on the day the government announced privatization of the power companies (July 14, 2002), Arequipa residents took to the streets, erected barricades, and openly defied the police. “¡Arequipa revolución!”--the mythic rallying cry used decades before in this city with an unruly tradition--was taken up once again.
Hundreds of protestors seized the airport, forcing flights to be rescheduled. Although the government sent in police and military reinforcements, the populace continued to rally. Not even a curfew and the imposition of military control convinced people to retreat. As the days went by, the protest contingent grew, spreading throughout the entire southern portion of the country and taking on insurrectional overtones. Cuzco, Tacna, Moquegua, and Puno demonstrated their solidarity with Arequipa , which by then had become the epicenter of an uprising that threatened to engulf the entire south.
On July 18, four days into the uprising--which had already killed one person, injured 100, and caused extensive damages--President Toledo backed down, apologized to Arequipa residents, and began negotiations with local mayors and the Frente Amplio Cívico de Arequipa (FACA). The talks resulted in the signing of the Arequipa Declaration, in which the government renounced its privatization project and promised to leave the entire issue in the hands of the judicial branch. Celebrations erupted, as the rebellion spurred the erosion of Toledo’s government.
An entire book could be written about Bolivia ’s “water war” in the city of Cochabamba . This was the first victorious large-scale street battle with specific objectives in many years and succeeded in coalescing very diverse social actors: workers, peasants, Indians, housewives, professionals, and young people. In early 2000, the Coordinadora por el Agua y por la Vida (Coordinating Group for Water and Life) was created as an umbrella group comprising a Water Defense Committee; Irrigators Federations; unions of factory workers, teachers, merchants, and peasants; and associations of professionals, including engineers, lawyers, and economists. The Coordinadora convened a popular consultation for Sunday, March 26, after marches, town meetings, and mobilizations were severely repressed by military deployments in the city. Fifty thousand persons expressed their opinion at more than 140 polling stations in every neighborhood in the city.
Based on the outcome of the consultation, starting April 4, calls were made for a general shutdown of the city and key roads. Appeals were issued for the government to find a definitive solution to the water problem, amid warnings that the “final battle” was beginning. Demands were made for the privatizing company, Aguas del Tunari, to leave the region, for water rates to be frozen, and for water privatization to be repealed. Starting April 4, the Coordinadora began its strike by closing local roads. It was joined by the Campesino Federation (CSUTCB), which blocked roads throughout the country. Workers of one airline (LAB) even delayed flights in support of the struggle in Cochabamba. Four days into the general strike, military and police forces seized Cochabamba ’s main plaza, which was packed with protestors, arrested the Coordinadora leaders, and declared a state of siege.
In the rural areas of the department of La Paz , three town meetings were held (the most important, in Achacachi near Lake Titicaca , was attended by 15,000 Indians) ratifying proposals to continue with the highway blockages. On April 7, Cochabamba was once again taken over by thousands of protestors, who regained the plaza and faced down the forces of repression. The mayor announced that Aguas del Tunari would leave, and a grassroots celebration broke out. Members of the military and police were cowed into returning to their barracks by the massive presence of the street protestors. In this climate, on April 10, the government acquiesced, signed an agreement with peasant groups, and confirmed that Aguas del Tunari would depart.
The Cochabamba insurrection witnessed “unprecedented forms of organization, capable of harboring a modern, hybrid proletarization of the urban population and the expansion of discursive constructs firmly anchored in a self-recognition of want, suffering, and laboriousness.” Marches and strikes--usually deemed appropriate for moments of upsurge--were eschewed as the main form of struggle in favor of the occupation of spaces. Grassroots opinion was polled through town meetings, and traditional representation gave way to self-representation. Such representation, exemplified by the multitudes in the street, was “an all-out expression of local self-organization,” a powerful network of power, mobilization, and territorial and regional self-control.15
An analysis of how opposition to privatization moved from disarray to militancy potency reveals its intense mobilization and the changes away from the centrality of the worker as the main social actor. “Each neighborhood, each water committee, began to arrive at the plaza with its leaders and banners at the fore of compact formations of young people, of men and women brandishing sticks, bottles, Molotov cocktails, rocks, and knives. Each neighborhood, agrarian union, and water committee had decided to wage war and was willing to do so.... The militarization of local structures of mobilization later led to the emergence of water warriors who entrenched themselves in Plaza 14 de Septiembre for the three following days.”16
In Paraguay, the leading protagonists of the struggle against privatization were the peasants, who in just four years succeeded in unifying the entire grassroots movement into the Democratic People’s Congress (CDP). The congress, an umbrella group of more than 60 peasant, trade union, grassroots, and political organizations, was constructed from the bottom up after peasant unity was fractured in 1998. In addition, activists wove broad alliances that coalesced in the formation of the Front for the Defense of Social Assets and National Wealth and the People’s Plenary Against State Terrorism.
Anticipating the imminent privatization of state-run enterprises and increased repression, including the introduction in the Paraguayan Congress of an antiterrorist law openly promoted by the U.S. Embassy, the CDP was created on May 15, 2002. In its first session, attended by more than 1,000 delegates, the CDP resolved to launch a broad-based national mobilization for the rejection of the Privatizations Law, the public banking system reform law, the antiterrorist law, a law privatizing national roads, and a law establishing an agricultural tax. The delegates also chose to target rampant corruption and impunity in the country.
On May 21, the first of a series of mobilizations began, with intermittent road closings at 18 points in 12 of Paraguay’s departments. In this highly polarized climate, peasants collided with the forces of repression, and more than 100 protestors and several social leaders were arrested. In the city of Coronel Oviedo, 130 kilometers from Asunción along the country’s main highway, solid walls of police and military prevented some 5,000 peasants from continuing their march to the capital, where one of their number had died. But in the coming days the campesinos broke through the cordons of repression and neared Asunción, while the wave of protests spread throughout the country. On June 3, peasants began streaming into Asunción, where they camped in the plazas across the street from the Paraguayan Congress, while in the other main cities protests raged and the highways remained closed. The next day, thousands of campesinos from the North broke through police cordons to converge on the capital with other columns that were approaching from the east and the south, while 1,500 protestors seized the commissariat of San Estanislao. Meanwhile, students closed highways, and classes were suspended throughout the country. In that climate, the Senate indefinitely suspended the Privatizations Law. This important victory came after 16 days of intense mobilization.
Tentative Balance: Social and Political Crisis
Seen through the prism of grassroots struggle, the victorious campaigns against privatizations in Peru, Paraguay, Uruguay, and Bolivia reveal how new social actors have evolved in the wake of changes promoted through two decades of neoliberalism. These conflicts also reveal the fragility of nation-states, the emergence of new forms of struggle, and the maturing of relations between social and political stakeholders.
Since 2000 the social sector has regrouped--as manifested in the struggles against privatizations--following setbacks in the 1980s and 1990s. However, this offensive occurred within a social landscape modified by the neoliberal model. The most obvious tactical adaptations embraced by grassroots activists are related to the nonexistence of a central stakeholder comparable to workers in the previous period. In their stead a diverse ensemble of protagonists (from informally employed and unemployed laborers to technicians and professionals) has emerged, establishing de facto alliances responding to concrete situations. In all cases, there has been a tendency for distinct relations to be established between social forces and political ones. The vitality of the mobilizations has been provided by the former, while the latter seek to reshape old structures on the left (as in the Bolivian case) or are excluded offstage (as in Peru).
The South American struggles against privatization also reveal the increasing weakness of nation-states. Except in Uruguay, where the state has maintained discipline over civil society, governments have exhibited a striking inability to resolve social conflict without resorting to repression. This undermining of social contracts is directly related to neoliberal policies and to the further weakening of the traditional left throughout most of the continent.
Sociocultural changes are reflected in changing forms of struggle, closely linked to the crisis of representation experienced in most Latin American countries. Road closings and insurrectional mobilizations have nudged into the political space once occupied by the labor movement’s strikes and work stoppages. These innovative forms of struggle have two noteworthy characteristics: they represent the emergence of geographically delimited stakeholders with a new configuration and spatial relationship in which shantytown dwellers, peasants, the unemployed, women, and young people all play a significant role. Grassroots movements seize public spaces, because they reject representation. By organizing independently, they give life to a new grassroots force that has characterized the most important civic battles in recent years in Latin America.
Same Old Problems, New Questions
Lastly, a new debate is taking shape that is intimately related both to the failure of privatizations and to the success of struggles against neoliberalism: What is to be done with the privatized companies? How are they to be recovered? And, above all, how are they to be managed, and who is to manage them?
The recent referendum in Bolivia may provide some insights. First, the social movement, which appeared very united in its opposition to privatization, fragmented when solutions were sought. The Bolivian people’s solidarity in defending the gas nationalization with their lives evaporated when Carlos Mesa’s government called for the July 18 consultation.
The problem, in the end, is the state. An increasing number of social sectors are suspicious of governments’ capacity to properly manage national resources. The memory of corruption in the managing of companies that were later privatized undermines the option of state ownership. Nevertheless, the debate is still alive. In Bolivia, since both the water war in Cochabamba and the October 2003 uprising over the gas issue, as well as in Argentina and in many other countries, these issues are being hotly debated.
The choice is no longer reduced to public vs. private ownership. The Argentine economist Julio Gambina, echoing the sentiment of popular assemblies and piquetero (unemployed) groups, recognizes that the outright nationalization of the privatized companies is not the answer, “because [nationalized companies] end up being bureaucratic and subjugated to the political group that happens to run the state at a given moment.”17 No one has ready-made alternatives, but the ongoing debates reveal possibilities for state-run or, at least, mixed management: cooperative companies run by users by users, with the possible participation of the state, and for creating a flexible social space capable of accommodating non-state-run companies, mutuals, cooperatives, and community organizations.
All of these options can be open to joint management by consumers, workers, and perhaps the state. This still-inchoate debate has an enormous virtue: it channels the concerns of common people in a new direction--toward resolving how to achieve empowerment vis-à-vis public assets without blindly handing over their management to some outside expert. If this direction is strengthened and clarified, the terrible history of privatizations might yet have a happy ending.
Endnotes
Julio Gambina, “Cómo recuperar las empresas privatizadas,” at www.lavaca.org.
Harry Targ, Department of Political Science, Purdue University
David Cormier, Institute of Labor Research, University of West Virginia
Introduction
Political commentators, journalists, and economists have been talking about globalization since the collapse of the Socialist Bloc. Some are excited about it; others are terrified. Some activists from the political left and right mobilize against it, yet others, both left and right of center celebrate its promise.
This chapter walks the reader through a discussion of globalization and the neo-liberal policies that made the phenomenon a reality. It relates global processes and policies to capitalism today. It then surveys how globalization has affected workers. The central theme of this chapter is that the pursuit of profit and capital accumulation, the driving forces of capitalism, shape the contemporary global political economy; that even though the elements of the era of globalization, and late capitalism, are unique to the 21st century, the basic character of the global capitalist system, which emerged in the fifteenth century, remains the same. Effective resistance strategies require an understanding of the basic elements of capitalism as a system and what is new about capitalism today.
Globalization: A Definition and Some Questions
Whether writers embrace it, denounce it, believe it is something new or not, they all see it as involving a qualitative increase in the number and size of interactions across national, sovereign, borders. The common assumption is that trade, investment, financial speculation, or the spread of images of Michael Jordan or Bono or the growing presence of McDonalds or
Kentucky Fried Chicken, or Levi Strauss, and probably all of the above constitute a new global reality. The movement of money and jobs and idolization of sports and music icons is creating a world that knows fewer and fewer territorial divisions. A world organized around more or less secure nation-states for hundreds of years has been replaced by a new global system. In addition, the bounded nation-states promoted the economic interests of their own ruling classes and corporate and investment houses to the exclusion of those in other countries. Some theorists argue that today the political and economic boundaries of nation-states have been significantly reduced. Metaphorically, the military fortress has been replaced by the internet.
Much of the discussion of globalization has involved elaborating on a variety of questions. Are there important agents stimulating these interactions? Why do these agents act the way they do in the world? Have there been particular public policies that have encouraged the increased frequency of interactions? Further, have there been significant historical events or conditions that have increased the likelihood of globalization to have occurred; such as the collapse of the Soviet Union in 1991. What are the roots causes of globalization: new technology, the internet, or the continual and advanced drive for profit in a world largely free of impediments?
Agents of Globalization
While debates about their role, positive or negative, still go on, multinational corporations (MNCs or what are often called transnational corporations or TNCs) clearly are agents of globalization by virtue of their size, the scope of their activities, and their presence in production, distribution, and consumption in just about every country in the world. As was discussed in the last chapter, these corporations have become more concentrated (that is a small number of them control a greater share of global economic activity than before). Data indicated that half of the world’s biggest economic agents are multinational corporations (the other half being nation-states). And about 250 such corporations control about a quarter to a third of all that is produced on the face of the globe.
International banks and investment houses have dramatically increased in size, global presence, and power in recent times. Lenin pointed out in his famous essay, Imperialism: the Highest Stage of Capitalism, that banks, which in the 19th century had served as accountants for manufacturing capital, had become independent and powerful economic actors in the large capitalist countries. Banking capital, he said, had become integrated with industrial capital, thus creating a new version of capitalism, finance capital.
Lenin could not have foreseen the magnitude of the role of finance capital, which is a critical feature of the era of globalization. Banks and investment houses oversee the transfer of trillions of dollars of investment across the globe and fund the huge debt incurred by poor countries over the last thirty years. They manage the global speculation of capital that has become a staple of the current era, buying and selling currencies, stocks and bonds, properties, and in general paper with value. The radical shift in the magnitude of economic exchanges from those relating to trade in commodities to trade in paper is managed by these institutions.
Alexander (1999) pointed out that the global capital market volume increased from $1.5 trillion a day in 1990 to about $4 trillion in 1998. Further, at the time of her writing, she estimated that the top twenty investment bankers in the world controlled 97 percent of the capital market business.
International organizations (IOs) increasingly have become the target of debate and popular mobilizations by those most critical of globalization. The Bretton Woods institutions-the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development, or World Bank-were established at the end of World War II to manage international financial exchanges and to provide short and longer term assistance to war-devastated nations for economic reconstruction. A few years later, the General Agreements on Trade and Tariffs (GATT) was established as an organization of nations interested in trade liberalization. In 1995, the GATT system was transformed into the World Trade Organization (WTO) with over 130 nations as members. These three organizations were less than fully visible before the 1980s but had become the agents promoting a set of market-based economic policies, often referred to as “neo-liberal,” that led to the transformation of the economies of virtually every country in the world. By managing the dramatic increase of indebtedness since the 1970s the IMF, the World Bank, and trade agreements (GATT, then WTO) increased the opportunity for international capitalist penetration of poor countries. With the collapse of socialism, the possibilities increased enormously. As the IMF/World Bank/GATT-WTO institutions increased in influence over the global economy, the role of the United Nations, which gave voice to poor nations through the General Assembly, declined.
While most would agree that MNCs, international financial institutions, and the IMF, World Bank, WTO triad are central actors in the globalization drama, disagreements abound concerning the role of nation-states in this transforming global process. Despite disagreements, it seems clear that some states provide the levers of power, military as well as economic, for the promotion of globalization, and other states, by virtue of their weakness, can serve only as enforcers of big state economic policies on the poor and oppressed.
The big state coalition most relevant to globalization is that of the so-called G7 countries. Even within that coalition of large capitalist countries the United States has asserted its role as global leader. This does not deny the significance of threats to that leadership from an integrating European system, for example, or an Asia dominated by Japan, or China (not a G7 member). One cannot separate the influence of global corporations and banks from the military power of the United States which in recent years has made war on Afghanistan and Iraq, has over 700 military bases in over 60 countries and has an FBI, CIA public and covert presence in many of those countries.
Globalization:
Trade, Production, Investment, Speculation, and Debt
The trading of commodities produced by one group of people to another is central to the construction of all civilizations. “Comparative advantage” was based on differential skills, resources, climates and the ability to produce some things better than others. Out of the growing specialization of society, trade became a staple of human interaction. In the capitalist era, commodities produced ever more efficiently required consumers in other communities or nations. If production was for profit, finding consumers was central to realizing that profit.
And so production of goods and, later, services became central to societies with growing populations and growing needs. A hallmark of capitalism was the bringing together of “free” labor to produce more and more products more efficiently. Since the dawn of capitalism, productive processes have repeatedly been revolutionized in terms of use of technology, organization of work processes, distribution of units of production around the world, and mechanisms of worker control.
To promote production (usually at the lowest rates of workers’ pay), increase access to markets, and stifle growing worker resistance, patterns of investment shifted significantly in the twentieth century. For example, during the formative years of the Cold War (1945 to the 1970s) investment increased more than trade. The largest global corporations began to produce larger shares of their products outside their country of origin. In the U.S. case, production of electronics, textiles, shoes, and other basic goods were shifted to low wage countries. Direct foreign investment became a primary source of capital accumulation and profit during the last half of the twentieth century.
The demise of the regulation of currency rates under the Bretton Woods system in the 1970s and the radical deregulation of economies in the 1980s stimulated an enormous increase in investment in intangible commodities: stocks, bonds, currencies, and various other forms of paper. These financial commodities exist mainly as zeroes and ones in computers and can be transferred anywhere in the world with the click of a computer mouse. Thus, there emerged a “virtual economy,” of instantaneous global transactions that began to dwarf the trade in goods and services. National boundaries were traversed in surprising new ways. Paradoxically, foreign investments in goods, services, and paper in the United States began to exceed U.S. investment overseas. A new global finance capital arose that dwarfed the finance capital that Lenin wrote about just 80 years ago.
Finally, finance capital, and globalization in general, was facilitated by the growth of a system of international indebtedness that assumed enormous proportions in the 1970s. Oil- poor countries committed to industrial development had to borrow ever larger amounts to buy the oil which had dramatically increased in cost, due to the oil crisis and instability in the Middle East. The end result was burgeoning debt that by 2000 exceeded $4 trillion. Most countries fell into what Cheryl Payer called in the 1970s “the debt trap.” Countries could never even pay back the interest on the debt they owed so they had to “reschedule” their debt, that is borrow some more. The IMF and private bankers would approve new loans if debtor nations changed their economic policies. They were forced to reduce tariffs, cut government spending, and generally make their economies attractive to foreign investors. These policies were part of the now familiar program of policies called “neo-liberal.”
Neo-liberal Economic Policies and Globalization
With the collapse of Socialism, what is called neo-liberal globalization has expanded dramatically. “Neo-liberal” refers to a set of economic policies that are derived from the vision of Adam Smith and David Ricardo. These policies include limiting state involvement in economic life; promoting “markets;” reducing impediments to the global penetration of each and every country by capitalism (particularly in production, investment, trade, and finance); and finally privatizing the provision of all goods and services needed to maintain human existence. Emphasis is placed on reducing public services to citizens, such as access to cheap transportation, food subsidies, sanitation, and cheap water; privatizing public institutions, such as selling publicly owned businesses to private investors; and promoting exports of cheaply produced goods to wealthy countries, including shifting agricultural production from goods produced for local markets to crops for foreign consumers. Since globalization refers to a process of dramatically increasing cross-national interactions, particularly in trade, production, cultural exchange, and communication, the neo-liberal policies and the interactions are closely related.
Neo-liberalism as an ideology influences public policy today in nearly every state, whether industrial-capitalist, post-Socialist, or post-colonial. Every powerful global institution--the World Bank, the International Monetary Fund, the World Trade Organization, and the association of rich states known as the G7 countries--promotes neo-liberal policies. The most powerful instrument that global institutions have used over the years to induce countries to embrace the neo-liberal policy agenda has been the debt system. As suggested earlier, countries began borrowing billions of dollars in the 1970s due to dramatic increases in the price of oil. Now the world’s nations owe banks trillions of dollars. Each loan or each decision to reschedule a debt comes with demands for economic “reform.” In other words, banks, multinational corporations, and wealthy capitalist states force governments and people to accept the neo-liberal medicine.
Advocates of neo-liberalism claim that the policies they recommend will, in the long run, entice foreign investors which will stimulate economic development, rising living standards, and political democratization. For neo-liberals, the expansion of capitalist penetration helps needy countries grow. To the extent that globalization increases interactions of all kinds across sovereign borders, economic development will occur. “Global celebrants” believe that neo-liberal globalization will bring humanity to a new level of social and economic well- being. Data presented above and referred to below indicate that this claim has not been realized. In fact, many of the material conditions of peoples’ lives over the last thirty years have gotten worse, not improved.
Neo-Liberal Globalization and the United States Drive for Hegemony
The United States at the end of World War II was the hegemonic power; that is it had the capacity to dominate international affairs economically, militarily, and politically. It was estimated that the United States held three-fourths of the world’s invested capital and two-thirds of its industrial capacity in 1945. It had a monopoly on atomic power and then, later, maintained atomic, nuclear, and air superiority over its adversary, the Soviet Union. It was able to dictate the establishment of a variety of international economic and political institutions that served U.S. interests including the IMF, the World Bank, and the GATT trading system. As the Socialist Bloc and radical nationalist regimes emerged, the U.S. constructed an alliance system, the North Atlantic Treaty Organization (NATO) to defend “the free world” from Communism.
This context provided the opportunity for the U.S. to plant the seeds of a system of global trade, investment, production, and financial speculation that flowered and grew through the years. From the days of the Marshall Plan program, transferring $14 billion in “aid” to war torn Europe-providing the recipients used the dollars to purchase goods from the U.S., to the trade pacts of the 1990s, to the Central American Free Trade Agreement (CAFTA) in 2005, United States foreign policy has been shaped by the vision of a neo-liberal world order. Its achievement was only constrained by social movements throughout the world with alternative perspectives on economic policy and competing power blocs.
During the “Golden Age” of U.S. hegemony (1945 to 1968), the United States produced goods at home and shipped them to other nations. This included massive amounts of military equipment sent to selected allied countries. Because of the large foreign assistance programs for Europe and Japan after World War II, these countries accumulated the dollars to buy U.S. goods. Growing U.S. foreign investment occurred in agriculture and extractive industries such as oil, copper, rubber, and bauxite, all materials vital to industrial development and military production. U.S. foreign policy pursued the “Open Door,” working toward the elimination of barriers to economic penetration. Even with U.S. power, resistance to U.S. penetration grew among Socialist, nationalist, and newly independent post-colonial regimes. The Cold War was a byproduct of the contradictions between these competing economic visions.
As worldwide resistance to the global agenda grew, the United States developed an interventionist and military response to it (as well as government opposition to labor militancy at home). Domestically, anti-Communism was elevated to a national crusade, consumerism was promoted, and an accord between conservative sectors of organized labor and management was fashioned.
During this so-called Golden Age, corporate profits grew substantially, real wages rose, social and economic benefits to some workers grew, while women and minorities remained left out. In short, the United States constructed a post-war global order to achieve the neo-liberal vision. Its full realization was blocked by international and domestic forces but U.S. economic and military power grew despite resistance to it.
By the late 1960s, however, global conditions had changed. European and Japanese products began to compete with U.S. made commodities. Political opposition to established power spread at home and abroad. The debacle of U.S. foreign policy in Vietnam substantially weakened American prestige and power. The U.S., still an economic and military giant, was no longer the hegemonic actor in the world. Its position was challenged militarily, politically, and economically, by the Socialist Bloc, by revolutionary regimes, movements around the periphery of the capitalist world, and by capitalist friends of the United States who had now become major competitors.
The Bretton Woods system, the system of established exchange rates to regularize trade, collapsed in 1971. Faced with growing inflation and the weakening dollar, and, as a result, increased foreign demand for gold in exchange for the dollars Europeans and others were holding, President Nixon announced that the U.S. would no longer exchange foreign held dollars for gold and deflated the once unshakable dollar.
In the aftermath of these decisions, exchange rates were allowed to “float,” i.e. the price of any country’s currency would be determined by “market forces.” Exchange rates would then change precipitously, with the currencies of weaker economies made more vulnerable to dramatic fluctuations. As data reviewed earlier suggests, financial speculation rose. Massive fortunes were made in the virtual economy. Floating exchange rates coupled with liberalized investment rules set the stage for financial crises such as the Mexican peso crisis of 1994 and the Asian financial crisis of 1997.
Meanwhile, European and Asian goods began to compare favorably with U.S. goods in style, quality, and price. In 1973, an Organization of Petroleum Exporting Countries (OPEC) oil embargo during the war between Israel, Egypt, and Syria drove up energy prices, making operating U.S. cars more costly. Increasingly foreign exports appeared in U.S. markets. Significant among these were Japanese autos, German machine tools, and clothing and electronics from Asia.
U.S. foreign investment increased, including the opening of production facilities such as auto plants, steel mills, and clothing factories in countries where desired markets were located and/or where labor was cheaper than in the U.S. Spurred by dramatic tax cuts for the rich in President Reagan’s first term, significant investments shifted from manufacturing and service to financial speculation.
As a result, de-industrialization escalated at home. American corporate investors bought or built production facilities or contracted for assembly operations with foreign capitalists; in short, a substantial increase in the export of U.S. capital and ultimately the export of millions of high-wage manufacturing jobs occurred. Paradoxically, foreign manufacturing transplants began to open in the United States in selected industries, such as auto and computers.
Real wages for the average U.S. worker peaked in 1973. Subsequently, wages and incomes declined because of declining rates of profit, increased competition from imported goods, the growing mobility of capital worldwide, the loss of higher paying manufacturing jobs, and the rise of lower wage service jobs. Real wages did increase during the last three years of the Clinton administration but increases were reversed in the new century.
In addition to the attack on good-paying manufacturing jobs, the Reagan administration began a systematic assault on government programs that had their roots in the New Deal, the Fair Deal, and the Great Society. In sum, neoconservatives launched a campaign to reverse 40 years of government programs that were designed to guarantee worker rights and provide health care, housing, transportation, education and retirement security. As government was cut back, except for military spending, economic elites successfully pressured each administration from 1980 on to cut taxes for the rich while reducing social programs. De-industrialization wiped out more unionized jobs, union density declined, and bargaining power of labor weakened. The power of the working class had been significantly weakened by the 21st century, perhaps to a degree not seen since the dawn of the 20th century.
At the same time in the Global South many countries were forced to borrow more money from international banks to pay for the rising cost of oil. Banks holding profits from oil revenues readily lent money to these countries. As suggested earlier, a debt spiral was launched in which many countries became entrapped, borrowing billions of dollars with limited means for ever repaying their debt. The pattern of incurring balance of payments deficits (importing more than exporting), being unable to repay the interest on old debt, and incurring more debt in order to stabilize their economies became a regular feature of the international financial landscape. Poor countries victimized by the “debt trap” became prime targets for neo-liberal economic reforms enforced by the financial community. Therefore, debt became the lever by which the global political economy influenced the destiny of most nations, and the majority of humankind.
The era of neo-liberal globalization was initiated in the Carter administration and fully flowered during the reign of Reagan and his successors. Faced with declining rates of profit, growing economic competition from allies, revolutionary ferment around the Global South, and continued but weakening resistance to penetration from the Socialist Bloc, Reagan initiated a campaign to reestablish U.S. global hegemony to reverse the declining profit rates. Embracing policies very different from the pump-priming via social programs of the 1940s and 1950s the policies of the 1980s radically increased the national debt through massive tax cuts and the largest peace time escalation of the arms race in U.S. history. Huge infusions of money from the tax cuts were channeled into financial speculation instead of U.S. manufacturing.
The tax cuts and the arms build up, created a qualitatively increased national debt. It required the U.S. to borrow hundreds of billions of dollars from foreign investors during the 1980s. Foreign investment in the U.S. soared. With de-industrialization the U.S. economy shifted from producing goods to providing services while huge quantities of goods produced overseas were imported. Negative trade balances which began in the 1970s continued to grow. By the mid-1990s, the U.S., in Greider’s terms (1997), had become the trader of last resort. Despite the enormous annual trade deficits the global economy relied ultimately on the U.S. ability to import the increased goods produced in poor countries.
Foreign policy was intimately connected to international economy. Reagan embarked on a global military program to undermine and overthrow regimes that did not support marketization. “Low intensity” wars, that is wars fought with US weapons and training but not its own troops, were fought in Nicaragua, Angola, Ethiopia, Cambodia, and Afghanistan. The Reagan Doctrine called for the rollback of international communism, including any regime that had relations with the Soviet Union. U.S. massive military spending, perhaps purposefully, drove the Soviet Union to compete which ultimately bankrupted their regime.
In the 1990s, the neo-liberal agenda was encouraged by the United States in the Western Hemisphere with NAFTA, in Asia with the Asian-Pacific Economic Cooperation network, and in the former Socialist states via intense financial support for pro-capitalist leaders such as Boris Yeltsin, President of Russia. President Clinton declared that his foreign policy priority was creating “market democracies.” To that end he engaged in diplomacy and war in the former Yugoslavia, maintained a regular bombing campaign over Iraq, and sought to control Latin American countries through his “war on drugs” in Colombia, managing economic change in Bolivia, military training throughout the continent, and promotion of a hemisphere-wide free trade agreement.
The collapse of the Cold War international system meant the end of resistance to neo-liberal globalization. Even the former Socialist states would be penetrated by global capital. The process of globalization, begun at the dawn of capitalism, had finally reached world-wide dimensions. Economic consolidation and military power had conjoined in a new world order in which opposition from nation-states had almost completely collapsed.
Capitalism by any kind of measure has become more concentrated than ever before in world history (as suggested in Chapter 2). Literally a few hundred corporations dominate manufacturing, retail commerce, and finance. With the growing concentration of capital, the flight of investments from domestic to cheap labor venues overseas, the rise of financial speculation, the rise of Post-Fordism, the shift from government transfers to survival in the informal sector, inequalities in income and wealth expanded within countries and between them.
Reviewing data from Chapter 2, in the United States, wealth and income inequalities had been growing since the 1970s.Rates of poverty have either stayed constant or worsened over the last thirty years as well. In total, a longitudinal examination of wealth, income, and real wages, suggests that the U.S. economy became increasingly unequal and during the period of neo-liberal globalization (from the late 1970s to today), the condition of the vast majority of Americans has either stayed the same or worsened. Neo-liberal globalization may not have been the root cause of the worsening conditions of working people but it surely has not helped them either.
Unfortunately, global data demonstrates a parallel and growing gap between rich and poor everywhere. As reported earlier, nearly half the people on the globe live on $2 a day, and about 1.7 billion people live on $1 a day. The UNDP reported that at the dawn of the new century of the 4.6 billion people living in developing countries, more than 850 million are illiterate, a billion lack access to water, and 2.4 billion lack access to basic sanitation. Nearly 325 million children are out of school and 11 million under age five die each year from preventable diseases.
In 1980, according to a 2001 report by Weller, Scott, and Hersh, median income in the richest countries (top 10 percent) was 77 times greater than the median income in the poorest (bottom 10 percent). By 1999 the gap had grown to 122 times. The numbers of poor had grown from 1987 to 1998. The world’s poorest people lived on 72 cents a day in 1980 and 78 cents in 1999. They concluded that “…the empirical evidence suggest that reductions in poverty and income inequality remain elusive in most parts of the world, and, moreover, that greater integration of deregulated trade and capital flows over the last two decades has likely undermined efforts to raise living standards for the world’s poor” (Weller, Scott, and Hersch, 1).
The International Labor Organization (1999) presented data on stagnation and regression of working class life in Latin America. Virtually no employment growth in the higher wage manufacturing sector occurred between 1990 and 1998 while 85 percent of the new jobs were in the informal sector (informal sector jobs were estimated to constitute 59 percent of non-farm jobs), involving tiny businesses, personal services, and illegal activities. Work in the informal sector was low paid, had no labor protections or benefits. Of course, informal sector workers had no option of joining a labor union.
Meanwhile unemployment rates in the formal sector in Latin America grew in the decade from about 6 percent in 1990 to 8 percent in 1998. Youth and women unemployment in most countries was double or triple the official unemployment rates. Economic desperation existed in the countryside as well as the cities. Massive rural to urban migration continued. In 1980, 66 percent of the labor force lived in cities and by 1998 the total reached 76 percent.
In addition, the ILO reported that workers’ buying power in Latin America dropped. A 1980 minimum wage salary could purchase 27 percent more than a 1998 minimum wage salary. The average income of informal sector workers declined by one percent in the 1990s. In a press release, the ILO indicated that “…while overall poverty levels remained constant or decreased in most countries due to lower inflation and higher output growth, impoverished families continue to suffer disproportionately from the paucity of income opportunities and growing deterioration in the quality of employment (ILO Press Releases, 823/99,2).
In a New York Times article about conditions in Latin America, Larry Rohter wrote: “Almost without exception, economic growth in the region has either slowed or stalled altogether. Unemployment, crime and social violence are growing, as is popular frustration with a nominally democratic political system that has left many of the 350 million people in South America feeling that they are trapped in an endless cycle of stagnation, corruption, and incompetent rule” (April 13, 2002,1).
Finally, trade, one measure of globalization and the spread of the neo-liberal policy agenda, is celebrated by supporters of “free trade” as a vehicle to overcome income and wealth inequality and the lifting of workers from poverty and misery. In a series of impact assessments prepared by Economic Policy Institute researchers, EPI concludes that NAFTA has been a failure. Between 1994 and 2000, 766,000 U.S. jobs were lost due to NAFTA (Scott, 2001). The consequences of such a quantity of jobs lost to lower wage Mexico have included a continuing shift from higher wage manufacturing jobs to low wage service jobs, declining real wages in the mid-1990s and since the beginning of the 21st century, and declining union effectiveness due to reduced membership and continuous threats to move production and service to Mexico.
Paradoxically, the researchers found that Mexico, now exporting more products to the U.S., has not benefited from the capital flight and increased trade. Declining U.S. production jobs meant growth in Mexican employment, primarily in deregulated areas such as the maquiladora zone along the U.S./Mexican border. These low wage jobs by U.S. and Canadian standards were not sufficiently robust to lift workers out of the category of the working poor. Further, with the concentration of new manufacturing in geographically isolated areas, the earnings of workers did not significantly infuse the national economy. Finally, the 80 percent of the working age population of Mexico did not benefit from the new jobs, experiencing stagnating or declining wages.
The EPI reported that while Canada had experienced increased investment and trade since NAFTA, per capita income there had declined and income inequality had risen. Full time employment had declined over the seven years and the basic social safety nets, including national health care, had deteriorated.
EPI concluded that the modest economic recovery experienced in the U.S. and the region in the late 1990s (and since reversed) was not fueled by the predicted increases in trade, job creation, and investment. Rather, they claimed, economic growth was stimulated by expanded domestic consumer credit, brisk buying by U.S. consumers, and financial speculation and growth in the stock market. EPI warned that the Canadian, Mexican and U.S economies depended on U.S. consumers spending more than they earned. “As the air seeps out of that bubble, the cost of those nations’ reliance on the U.S. consumer market is becoming apparent.” The economies of the NAFTA countries in the new century confirmed the EPI projection.
Reviewing the theory and practice of neo-liberal globalization leads to several conclusions. First, globalization has not brought the happy dawn of a new era of bliss to humankind. Any clear-headed assessment of the evidence indicates that in many ways the vast majority of people are leading lives of desperation. Indeed, advances in science, technology, and in public policy have impacted positively on health, education, communication, and transportation. However, at the same time, for the vast majority of the globe income, wealth, and political inequality have grown and the absolute numbers of people living in poverty have stayed the same or worsened.
Second, there is a connection between the downhill slide of humankind in economic, political, cultural and social terms and global public policies. Not only has the neo-liberal policy agenda not worked, but it has exacerbated human misery.
Third, globalization and its impacts are inextricably bound to the historic drive for profit, the very life-blood of the capitalist mode of production. Capitalism is a system that requires growth to survive-investments, production, trade, consumption, and new investments.
Fourth, the full flowering of the process of globalization and its policy agenda, neo-liberalism, was directly related to the collapse of the Cold War international system. The demise of a bloc of states animated by a different vision of economic and social organization, the Socialist Bloc, meant the end to organized resistance to global capitalist penetration.
Fifth, this system of globalization and neo-liberalism, the latest phase of capitalism, has had negative consequences for workers in the capitalist core, in the United States for one, and in the periphery, in Mexico, for example.
Sixth, the process of accumulation spearheaded by the drive for profits encounters a fundamental contradiction. The capitalist system is built on the purchasing of labor power for a wage that does not, indeed cannot given the pressure for profits, equal the value of products produced. Therefore, overproduction and under-consumption are recurring features of the system. Under the conditions of overproduction and under-consumption, rates of profit are subject to decline. With the pressures of competition, declining rates of profit force employers to cut wages or to move production to countries where labor costs are much reduced. Thus the process of globalization inevitably reduces the well-being of workers.
Seventh, economic crisis becomes political crisis when workers and their allies rise up in opposition to their circumstances. Progressive forces are, on the one hand, in disarray and, on the other hand, constructing new global movements against neo-liberal globalization, environmental devastation, war, and worker and other human rights.
Points of contestation include struggles against the imposition of neo-liberalism by states (national campaigns) and global institutions (anti-globalization campaigns). There is no question that both states and transnational institutions are “enforcers” of the new economic policies, whether they use economic or military means. Local living wage campaigns or global campaigns for debt cancellation should be seen as part of the same struggle to overturn the late capitalist order based and its international component, neo-liberal globalization.
Bibliography
Alexander, Nancy C. Financial Times, March 1, 1999.
Greider, William. One World Ready or Not, Simon and Schuster, 1997.
International Labor Organization. ILO Press Release, 1999, 823, 1999.
Payer, Cheryl. The Debt Trap, Monthly Review, 1975.
Rohter, Larry. “A Vicious Cycle: Failures and Instability,” New York Times, April 13, 2002.
Scott, Robert E. “NAFTA’s Hidden Costs,” Briefing Paper, Economic Policy Institute, April, 2001, epinet.org.
Weller, Christian E., Robert E. Scott, and Adam S. Hersh, “The Unreliable Record of Liberalized Trade,” Economic Policy Institute.
TOWARDS A GLOBAL RULING CLASS?:
GLOBALIZATION AND THE
TRANSNATIONAL CAPITALIST CLASS
BY: WILLIAM I. ROBINSON AND JERRY
HARRIS
NOTE: THIS ARTICLE APPEARED IN THE JOURNAL SCIENCE AND SOCIETY,
VOL. 64, NO. 1, SPRING 2000,
PP. 11-54
PLEASE CITE ACCORDINGLY
ABSTRACT: A transnational capitalist class (TCC) has emerged as that segment of the world bourgeoisie that represents transnational capital, the owners of the leading worldwide means of production as embodied in the transnational corporations and private financial institutions. The spread of TNCs, the sharp increase in foreign direct investment, the proliferation of mergers and acquisitions across national borders, the rise of a global financial system, and the increased interlocking of positions within the global corporate structure, are some empirical indicators of the transnational integration of capitalists. The TCC manages global rather than national circuits of accumulation. This gives it an objective class existence and identity spatially and politically in the global system above any local territories and polities. The TCC became politicized from the 1970s into the 1990s and has pursued a class project of capitalist globalization institutionalized in an emergent transnational state apparatus and in a "Third Way" political program. The emergent global capitalist historic bloc is divided over strategic issues of class rule and how to achieve regulatory order in the global economy. Contradictions within the ruling bloc open up new opportunities for emancipatory projects from global labor.
It is widely recognized that world capitalism has been undergoing a period of profound restructuring since the 1970s bound up with the world historic process that has come to be known as globalization (Burbach and Robinson, 1999). One process central to capitalist globalization is transnational class formation, which has proceeded in step with the internationalization of capital and the global integration of national productive structures. Given the transnational integration of national economies, the mobility of capital and the global fragmentation and decentralization of accumulation circuits, class formation is progressively less tied to territoriality. The traditional assumption by Marxists that the capitalist class is by theoretical fiat organized in nation-states and driven by the dynamics of national capitalist competition and state rivalries needs to be modified.
We argue in this essay that a transnational capitalist class (henceforth, TCC) has emerged, and that this TCC is a global ruling class. It is a ruling class because it controls the levers of an emergent transnational state apparatus and of global decision making. This TCC is in the process of constructing a new global capitalist historic bloc; a new hegemonic bloc consisting of various economic and political forces that have become the dominant sector of the ruling class throughout the world, among the developed countries of the North as well as the countries of the South. The politics and policies of this ruling bloc are conditioned by the new global structure of accumulation and production. This historic bloc is composed of the transnational corporations and financial institutions, the elite that manage the supranational economic planning agencies, major forces in the dominant political parties, media conglomerates, and technocratic elites and state managers in both North and South.
In what follows, we explore some of the theoretical, conceptual, and empirical issues at stake, although we state as caveat that space constraints preclude a full discussion of these issues. The propositions advanced here are intended to provoke discussion, and as a matter of course are tentative in nature, requiring further substantiation in ongoing research. In part I, we discuss the notion of transnational class formation, identify some of the key developments in the rise of a TCC as agency in the latter decades of the 20th century, and as part and parcel of the same historical process, the rise of a transnational state apparatus in this same period. In part II, we review some empirical data on globalization as indicators of transnational capitalist class formation. Finally, in part III, we discuss the political dynamics of the TCC, including strategic debates and emergent splits among transnational capitalists and their organic intellectuals.
Part I: Transnational Class Formation and the TCC:
Some Conceptual Issues
Since the 1960s a growing number of observers have discussed the rise of an "international capitalist class." In the early 1970s, Stephen Hymer noted that "an international capitalist class is emerging whose interests lie in the world economy as a whole and a system of international private property which allows free movement of capital between countries. ...there is a strong tendency for the most powerful segments of the capitalist class increasingly to see their future in the further growth of the world market rather than its curtailment" (Hymer, 1979:262). Dependency theorists posited the notion of an international bourgeoisie formed out of the alliance of national bourgeoisies bound by their mutual interest in defense of the world capitalist system. In their landmark 1974 study, Global Reach, Barnet and Mueller argued that the spread of multinational corporations had spawned a new international corporate elite. Summarizing much of this earlier work in the 1960s and 1970s, Goldfrank pointed in 1977 to "growing evidence that the owners and managers of multinational enterprises are coming to constitute themselves as a powerful social class" (35), and that "the study of class structure or stratification on a world level is in its infancy (32)."
Parallel to the burgeoning research on economic globalization, studies in more recent years have focused on the process of transnational class formation. Kees van der Pijl's excellent theoretical work on international class formation stands out here (1984; 1989; 1998). He has analyzed the fractionation of capital along functional lines in the post-WWII period in advanced capitalist countries, the internationalization of these fractions and their projects as a consequence of the transnational expansion of capital, and the consequent development of an internationally class consciousness bourgeoisie and of a "comprehensive concept of [bourgeoisie class] control" at the international level. For their part, David Becker and his colleagues, in their controversial thesis on "post-imperialism," observe that global corporations promote the integration of diverse national interests on a new transnational basis. A "corporate international wing" of the managerial bourgeoisie is the prime promoter of this process and the new ruling coalition is comprised of a national "managerial bourgeoisie" of private and public interests in the old Third World and a transnational "corporate bourgeoisie" tied to global corporations. Relatedly, the "Italian School" in international relations has attempted to theorize a global social formation that is increasingly outside the logic of the nation-state (see, esp. Cox, 1987; Gill, 1990). Robert Cox (1987, 271) discusses "an emergent global class structure," and Stephen Gill has identified a "developing transnational capitalist class fraction" (1990, 94). From an entirely different vein, Leslie Sklair's "theory of the global system" (1995) involves the idea of the transnational capitalist class that brings together the executives of transnational corporations, "globalizing bureaucrats, politicians, and professionals", and "consumerist elites" in the media and the commercial sector (1995; 1998). Although his analysis is muddled by a number of theoretical and conceptual confusions, including the conflation of class with strata, and his inability to address the issue of the state, Sklair's work goes the furthest in conceiving of the capitalist class as no longer tied to territoriality or driven by national competition.
What all these accounts share (with the exception of Sklair), is a nation-state centered concept of class. They postulate national bourgeoisies that converge externally with other national classes at the level of the international system through the internationalization of capital and concomitantly, of civil society. World ruling class formation is seen as the international collusion of these national bourgeoisies and their resultant international coalitions. The old view of internationalization as national blocs of capital in competition is merely modified to accommodate collusion in the new globalized age. In contrast, we submit that globalization is establishing the material conditions for the rise of a bourgeoisie whose coordinates are no longer national. In this process of transnational class formation dominant groups fuse into a class (or class fraction) within transnational space. The organic composition, objective position and subjective constitution of these groups are no longer tied to nation-states.
Globalization compels us in this way to modify some of the essential premises of class analysis. An understanding of the changes bound up with globalization requires that our methods and epistemological assumptions revert back to those of classical political economy, which set out to theorize a set of relationships that were not self-evident in contemporary practices in order to highlight both structures and historic movement latent in existing conditions. Marx's generic concept of political economy was general and not in its abstract form coincidental with the nation-state. But as history unfolded in its concrete form the dilemma of political economy became the need to explain the paradox between an economy that was clearly internationalized amidst a world political system that was compartmentalized into separate nation-states. The self-expansion of capital within the territorial boundedness of the nation-state and the international dynamics that resulted from the system of nation-states established the parameters of much social analysis. Those parameters are increasingly unable to capture phenomena bound up with globalization, such as the transnationalization of classes.
From an International to a Transnational Bourgeoisie
Marx and Engels spoke last century in the prescient passages of The Communist Manifesto of the essential global nature of the capitalist system and of the drive of the bourgeoisie to expand its transformative reach around the world. But for Marx, and for many Marxists after him, the bourgeoisie, while it is a global agent, is organically national in the sense that its development takes place within the bounds of specific nation-states and is by fiat a nation-state based class. Early 20th century theories of imperialism established the Marxist analytical framework of rival national capitals, a framework carried by subsequent political economists into the latter 20th century via theories of dependency and the world system, radical international relations theory, studies of U.S. intervention, and so on. Far from sequences of ideas, these theories were developed to explain actual world historic events, such as the two world wars, and to orient practice, such as national revolutions in the Third World seen as directed against particular imperialist countries. The problem was not that these theories stepped outside of history - to the contrary, they were theoretical abstractions from actual historical reality. Rather, they failed to acknowledge the historic specificity of the phenomena they addressed, tending to extrapolate a transhistoric conclusion regarding the dynamics of world class formation from a certain historic period in the development of capitalism.
As a result, in part, of this theoretical and political legacy, much recent research into globalization, by Marxists and non-Marxists alike, has analyzed the process of economic globalization from the political framework of the nation-state system and the agency therein of national classes and groups (for a critique of this "nation-state framework of analysis," see Robinson, 1998; 1999). The classical Marxist view that since capitalism is increasingly international the capitalist class is therefore also international in nature needs to be updated in light of globalization. Inherent in the notion of international is a system of nation-states that mediates relations between classes and groups, including the notion of national capitals and national bourgeoisies. Transnational denotes economic and related social, political, and cultural processes - including class formation - that supersede nation-states. The global economy is bringing shifts in the process of social production worldwide and therefore reorganizing world class structure.
A century ago the rise to economic dominance of the joint stock company and the national corporation had profound effects on the class structure. With the consolidation of national corporations and national markets local and regional capitalists crystallized into national capitalist classes. These became powerful ruling classes that restructured society and ushered in a new era of corporate capitalism. We are in the earlier stages of the same process now replicated at the global level. National capitals have increased fused into transnational capital. The rise of transnational capital out of former national capitals is having a similar transformative effect on what were national capitalist classes. These are drawn by globalization into transnational chains that reorient the determinants of class formation. The leading capitalist strata worldwide are crystallizing into a TCC.
Transnational class formation is therefore a key aspect of the globalization process. Moving one step back in the level of abstraction, globalization involves an "epochal shift" in the development of the world capitalist system (Burbach and Robinson, 1999). Specifically, it represents the transition from the nation-state phase to a new transnational phase of capitalism. In the nation-state phase, the world was linked together via commodity and financial flows in an integrated international market. In the new phase, the worldwide social linkage is an internal one springing from the globalization of the production process itself and the supranational integration of national productive structures, as dicussed below. Globalization therefore redefines the relation between production and territoriality, between nation-states, economic institutions and social structures. Organic class formation is no longer tied to territory and to the political jurisdiction of nation-states.
In the nation-state phase of capitalism, subordinate classes mediated their relation to capital through the nation-state. Capitalist classes developed within the protective cocoon of nation-states and developed interests in opposition to rival national capitals. These states expressed the coalitions of classes and groups that were incorporated into the historic blocs of nation-states. There was nothing transhistoric, or predetermined, about this process of class formation worldwide. It is now being superseded by globalization. The global decentralization and fragmentation of the production process redefines the accumulation of capital, and classes, in relation to the nation-state. What is occurring is a process of transnational class formation, in which the mediating element of national states has been modified. Social groups, both dominant and subordinate, have been globalizing through the structures, institutions, and phenomenology of a nation-state world, the atavistic historical infrastructure upon which capitalism is building a new transnational institutionality.
The nation-state is no longer the organizing principle of capitalism and the institutional "container" of class development and social life. As national productive structures now become transnationally integrated, world classes whose organic development took place through the nation-state are experiencing supra-national integration with "national" classes of other countries. Global class formation has involved the accelerated division of the world into a global bourgeoisie and a global proletariat, and has brought changes in the relationship between dominant and subordinate classes, with consequent implications as well for world politics. The world politics of the TCC is not driven, as they were for national capitalist classes, by the flux of shifting rivalries and alliances played out through the interstate system, as we discuss later on.
The reality of capital as a totality of competing individual capitals and their concrete existence as a class relation within specific spatial confines determined geographically as nation-states worked against a trans-, or supranational, unifying trend in the development of world capitalism. The liberation of capital from such spatial barriers brought about by new technologies, the worldwide reorganization of production, and the lifting of nation-state constraints to the operation of the global market taking place under globalization imply that the locus of class and group relations in the current period is not the nation-state. Yet many Marxists and non-Marxists alike advance a peculiar dualist construct that posits separate logics for a globalizing economic and a nation-state based political system. The nation-state is seen in this dualist construct as immanent to capitalist development, and transnational class formation therefore cannot really be conceived beyond the class and collusion of "national" classes.
But such a dualist construct flies in the face of the fundamental tenets of historical materialism, if we are to maintain that material conditions, and in particular the process of production, are central to political development and that classes are grounded in real economic production relations. If we acknowledge that these production relations are globalizing then it is incumbent upon us to address the issue of transnational class formation. Let us therefore focus briefly on the matter of the globalization of production before returning to the TCC.
The Globalization of Production and the Circuit of Capital
Global capitalism is not the mere collection of "national economies," as the dominant conception would suggest (see, inter-alia, Wood, 1999). Many critics who argue that globalization is overstated, or even illusory (E.g., Wood, 1999; Gordon, 1988; Hirst and Thomas, 1996; Weiss, 1998; Glyn and Sutcliff, 1992), claim that the current period is merely a quantitative intensification of historical tendencies and not a qualitatively new epoch. But this argument does not distinguish between the extension of trade and financial flows across national borders, which in our conception represents internationalization, and the globalization of the production process itself, which represents transnationalization. These accounts point to the high degree of world trade integration in the period prior to World War I (indeed, the world economy was at that time at least as integrated economically as it is at the beginning of the 21st century). But they fail to note what is qualitatively new. The pre-1913 integration was through "arms-length" trade in goods and services between nationally-based production systems and through cross border financial flows in the form of portfolio capital. In this period national capitalist classes organized national production chains and produced commodities within their own borders (actually, labor produced those commodities) which they then traded for commodities produced in other countries. This is what Dicken calls "shallow integration" (1998:5). It is in contrast to "deep integration" taking place under globalization. This involves the transnationalization of the production of goods and services.
The globalization of production has entailed the fragmentation and decentralization of complex production chains and the worldwide dispersal and functional integration of the different segments in these chains. This globalization of production has been increasingly researched. What concerns us here is its social and political implications, in particular, as regards class formation. It is the globalization of production that provides the basis for the transnationalization of classes and the rise of a TCC. In his important works on the internationalization of capital, Christian Palloix has suggested a clear historic sequence: the circuit of commodity capital was the first to become internationalized in the form of world trade; the circuit of money capital was the second, in the form of the flow of portfolio investment capital into overseas ventures; the circuits of productive capital is the most recent, in the form of the massive growth of TNCs in the post-WWII period (Palloix, 1977a; 1977b).
This transnationalization of production has expanded dramatically since Palloix wrote in the late 1970s, involving not merely the spread of TNC activities, but the restructuring, fragmentation, and worldwide decentralization of the production process (see, inter-alia, Dicken, 1998; Howells and Wood, 1992; Burbach and Robinson, 1999; UNCTAD, various years). Let us recall the centrality of the circuit of capital to class analysis, and that this circuit is embedded in social, political, and cultural processes. It is around the circuit, particularly M-C-P-C'-M' (including, crucially, P, or production) that class formation takes place, classes struggle, political processes unfold, states attempt to create the general conditions for the circuit's reproduction, cultural processes spring forth, and so on. In the earlier period of "shallow integration," the first part of this circuit, M-C-P-C', took place in national economies. Commodities were sold on the international market, and profits returned home, where the cycle was repeated. Under globalization P is increasingly globally decentralized, and so too is the entire first part of the circuit, M-C-P. Globally produced goods and services are marketed worldwide. Profits are dispersed worldwide through the global financial system that has emerged since the 1980s and which is qualitatively different from the international financial flows of the earlier period. As the entire circuit becomes transnationalized, so too do classes, political processes, states, and cultural-ideological processes. What is of concern in the present essay is transnational class formation and the rise of a TCC. Transnationalization of the capital circuit implies as well the transnationalization of the agents of capital. As national circuits of capital become transnationally integrated, these new transnational circuits become the sites of class formation worldwide.
Those who argue that globalization is merely a quantitative deepening of the process of internationalization also point to the continued existence of nation-state phenomena, such as national variations and "distinctiveness," certain production processes which are clearly contained within the bounds of particular nation-states, national capitalist groupings and their political protagonism and even state practices in countries where these groups are able to influence those practices, continued inter-state rivalries, the lingering phenomenology of the nation-state, and so on (see, inter-alia, Wood, 1999). All of these phenomena are currently present, yet they by no means invalidate the analysis of globalization as a qualitatively new epoch in the development of world capitalism. There is absolutely nothing in the conception and the method of dialectical analysis and of historical materialism to suggest that contradictory phenomena cannot coexist, as we discuss below in the concrete case of national and transnational class fractions and the contradictions between them. Within the totality of historic structures there are numerous processes that are in contradiction with one another or moving in separate directions within a larger unity. Globalization is a process, not a state or a condition. It is a conception of historic structure in motion, and as such numerous forms may be involved in its dynamics, such as ascendant transnational and descendant nation-state forms of class, of productive structure, and so on. What is important for materialist analysis is to capture the direction of historic movement and the tendencies underway, even when such historic processes are open-ended, subject to being pushed in new and unforseen directions, and even to reversals.
The TCC as a Class-in-Itself and a Class-for-Itself
By class, we mean a group of people who share a common relationship to the process of social production and reproduction and which are constituted relationally on the basis of social power struggles. The concept can apply to antagonistic polar opposites, such as the bourgeoisie and the proletariat, and also to fractional interests within a single class (e.g., industrial and commercial capital). A dialectic analysis of transnational class formation must start with the primacy of social relations of production in the constitution of antagonistic classes, and with the derivation of specific classes or class fractions, such as a TCC, from class struggle grounded in these relations. Marx and Engels clearly identified class as a collective position vis-a-vis the means of production and the production process. But they also suggested that the existence of a class was conditional upon its capacity to forge a collective political and/or cultural protagonism, that is, a self-representation, and that class formation involves the mutual constitution of antagonistic classes. This dialectic conception is best captured in Marx's notion of a class-in-itself and a class-for-itself, and epitomized in the modern literature on class perhaps above all in the works of E.P. Thompson.
The study of class formation therefore involves structural and agency levels of analysis. The first is concerned with the material bases and the production relations which give rise to and define classes; the second, with intentionality and with the forms of consciousness involved in intervention that shape social processes and as well the direction of development in material relations. At the level of structure, the global economy, specifically the transnationalization of capital, provides the material basis for a TCC. The TCC can be located in the global class structure by its ownership and/or control of transnational capital. Transnational capital constitutes the "commanding heights" of the global economy, that fraction of capital that imposes the general direction and character on production worldwide and conditions the social, political, and cultural character of capitalist society worldwide. The members of the TCC are the owners of the major productive resources of the world, or, as Marx expressed it, "the owners of the system of production."
We argue thus that the TCC is that segment of the world bourgeoisie that represents transnational capital. The old international alliance of national bourgeoisies has mutated into a transnational bourgeoisie in the new epoch, and this transnational bourgeoisie has become the hegemonic class fraction globally. Here fraction denotes segments within classes determined by their relation to social production and the class as a whole. This TCC is comprised of the owners of transnational capital, that is, the group that owns the leading worldwide means of production as embodied principally in the transnational corporations and private financial institutions. What distinguishes the TCC from national or local capitalists is that it is involved in globalized production and manages globalized circuits of accumulation that give it an objective class existence and identity spatially and politically in the global system above any local territories and polities.
At the level of agency, the TCC is class conscious, has become conscious of its transnationality, and has been pursuing a class project of capitalist globalization, as reflected in its global decision-making and the rise of a transnational state apparatus under the auspices of this fraction. The proletariat worldwide is as well in the process of transnational class formation. A transnational working class is increasingly a reality, a class-in-itself. But it is not yet for-itself for reasons bound up with the continued existence of the nation-state and uneven development that we cannot explore here. The TCC, however, is increasingly a class-in-itself and for-itself. Capitalist globalization has, in the momentary historical juncture of the late 20th and early 21st century, increased the relative power of global capital over global labor by acting as a centripetal force for the capitalist class and as a centrifugal force for the working class.
Globalization, Transnational Class Fractionation, and the TCC
Class fractionation is occurring along a new national/transnational axis. In recent years, in every country of the world, transnationalized fractions, or nuclei, of local dominant groups have emerged. Here contradictory logics of national and global accumulation are at work. The interests of one group lies in national accumulation, including the whole set of traditional national regulatory and protectionist mechanisms, and the other in an expanding global economy based on worldwide market liberalization. The struggle between descendant national fractions of dominant groups and ascendant transnational fractions has often been the backdrop to surface political dynamics and ideological processes in the late 20th century.
These two fractions have been vying for control of local state apparatuses since the 1970s. Transnational fractions of local elites swept to power in countries around the world in the 1980s and 1990s. They have captured the "commanding heights" of state policymaking - key ministries and bureaucracies in the policymaking apparatus, especially, Central Banks, finance and foreign ministries, as key government branches which link countries to the global economy. They have utilized national state apparatuses to advance globalization and to pursue sweeping economic restructuring, the dismantling of the old nation-state based Keynesian welfare and developmentalist projects. They have sought world-wide market liberalization (including the neo-liberal model), projects of economic integration such as the North American Free Trade Agreement (NAFTA), the Asia Pacific Economic Cooperation (APEC) forum, and the European Union; and they promoted a supra-national infrastructure of the global economy, such as the World Trade Organization, as we discuss below.
One key question with regard to national/transnational fractionation is the relationship between globalization and the traditional fractionation of capital into industrial, commercial, and financial groups. The national/transnational axis is a second dividing line, superimposed on traditional capital fractionation. Finance capital has certainly become hegemonic. It is the most mobile and the most deterritorialized. Some $25 trillion in currency is moved daily in global financial markets, and the daily turnover at the largest stock markets has surpassed $1 trillion (Harris, 1998/99:23), compared to a daily world trade of only about $10 billion (so that real trade is only 1 percent of fictitious trade). In the 1970s and 1980s finance capital came to determine circuits of global accumulation, that is, money capital becomes the regulator of the international circuit of production rather than investment capital. Transnational banks and investment firms, as well as Central Banks, hold vast foreign currencies and utilizes diverse currencies for their worldwide transactions. Under such circumstances it would be difficult to argue that world political dynamics are shaped by struggles for dollar, yen, or some other currency's hegemony, as they were in for instance the pre-1913 period, or in earlier moments in the post-WWII period. The TCC and different national states have a vested interest in a stable global monetary system.
What accounts for these dramatic developments in the world financial system, and the apparent decoupling of financial from productive capital, phenomena without precedent, has been hotly debated. Clearly it is linked to technological change and the possibilities opened up by informatics. It is probably also linked to cycles in world capitalism, in particular the Kondratieff cycles, in that the end of long swings (e.g., of the post-WWII boom) is characterized by an abundance of capital savings and accumulated surplus value expressed in the hegemony of money capital and financial speculation (Arrighi, 1994). But for the purposes of analysis of the TCC what is important is that the globalization process affects productive and commercial capital, and therefore it cannot be argued that class fractionation in the age of globalization is between mobile money capital on the one hand, and "fixed" productive capital on the other (with commercial capital somewhere in between).
In fact, the national/transnational axis cuts across money, commercial, and productive capital, such that all three are split internally along the axis (see, e.g., van der Pijl, 53). Also relevant, but not possible to take up here, is Hilferding's notion of finance capital as the socialization of money, commercial, and industrial capital into an interdependent complex. To what extent has transnational capital organically fractionalized? Or in fact does it constitute transnational finance capital in Hilferding's sense? We would speculate, given the interlocking structures of transnational corporations and banks (see, e.g., Fennema, 1982; van der Pijl, 1998, esp. chapter 2) that the latter is the case and that differences among transnational capitals are therefore strategic and between conglomerates. Finally, it is worth noting that most transnational units of production are simultaneously involved directly or indirectly in financial, productive, and commercial capital operations and investment.
The rise of a TCC therefore involves more integrated global capitals and we best examine the phenomenon of global class formation from angles other than traditional class analysis of fractions, such as from that of local versus global accumulation circuits and from national or territorial-bound versus transnational or deterritorialized class interests. Van der Pijl has argued that money interests have tended to manifest themselves in liberalism and cosmopolitanism, whereas productive capital has manifested itself historically in planning locally and nationally, and hence transnationalization has been led by money capital (1984; 1989). This might have been so in earlier epochs of capitalism but clearly central to globalization has been the fragmentation and global decentralization and dispersal of production, made possible in part by a new generation of science and technology and entailing the tendency towards the dissolution of "fixity" in productive capital. As has been amply documented, many previously nationally-based industries, such as autos, electronics, textiles, and computers, and even, in fact, services, are now thoroughly transnationalized (see, e.g., Dicken, 1998; Howells and Wood, 1992; UNCTAD, various years). Moreover, money capital must "land" in production, which under globalization is increasingly impermanent and dispersed in mobile worldwide production sites exhibiting accelerated turnover (and hence decreased fixity) time.
The Formation of a Transnational State Apparatus
The TCC is dominant economically, but is it also dominant politically and culturally? In what sense and in what degree can the TCC be shown to be a global ruling class? Does the TCC act collectively as a class in the exercise of political power? The economically dominant class is not necessarily the ruling class; that it is (or is not) is something that must be demonstrated. Here we proceed in order of determination from economic dominance to political rule. We draw out our earlier proposition that a transnational capitalist class as a class fraction of the world bourgeoisie has emerged, and that this TCC is in the process of achieving its rule or becoming a global ruling class. The TCC has articulated economic interests with political aims in pursuing the globalist project of an integrated global economy and society, what elsewhere Robinson has referred to as the "transnational elite agenda" aimed at creating the conditions most propitious to the unfettered functioning of global capitalism (Robinson, 1996a; 1996b; 1997; 1998/99; 1999).
It is not possible, therefore, to provide a comprehensive picture of the TCC without reference to its objective determinants in the productive structure - and here the transnationalization of the production process is key - and also with reference to its subjective determination - and here the rise of a transnational state (TNS) apparatus as a crucial political and institutional expression of the TCC is important. In other words, analysis of the power of the capitalist ruling class cannot be separated from the issue of the state and the political process. But we can proceed in order of determination to analyze, first, the economic-material determination of the TCC as embodied in transnational capital, and second, the exercise of its class power as expressed in TNS apparatuses. In other words, social power as domination is embodied in wealth (the means of production and the social product) and exercised through institutions (especially the state).
The dialectic of structure and agency has driven the process of globalization. Globalization is an objective process insofar as it is a consequence, not a cause, of the dynamics of capitalist development and a stage in the centuries-long expansion of world capitalism. And it is a subjective process insofar as it is unfolding as the result of agency. Dominant groups and especially the TCC, have sought transnationalization as a means of resolving problems of accumulation. And the political protagonism and class struggle of subordinate classes at the level of the national state and the constraints it placed on capital at that level is what first drove capital to transnationalize. We should recall that a dominant class exercises its rule through political institutions whose higher personnel must represent the class, unifying so far as possible its actions and reinforcing its control over the process of social reproduction, which in this case means ensuring the reproduction of global capitalist relations of production and at the same time the reproduction (or transformation) of political and cultural institutions favorable to its rule.
The leading strata among the emergent TCC became politicized from the 1970s into the 1990s. The notion of a managerial elite at the apex of the global ruling class which controls the levers of global policymaking captures the idea of a politically active wing of the global ruling class. As part of its political protagonism, this wing set about to create and/or transform a set of emerging transnational institutions. These institutions constitute an incipient TNS apparatus in formation. This TNS apparatus is an emerging network that comprises transformed and externally-integrated national states, together with the supranational economic and political forums and that has not yet acquired any centralized institutional form. The economic forums include the International Monetary Fund (IMF), the World Bank, the World Trade Organization (WTO), the regional banks, and so on. The political forums include the Group of 7 and the recently formed Group of 22, among others, as well as the United Nations system, the Organization of Economic Cooperation and Development (OECD), the European Union, the Conference on Security and Cooperation in Europe (CSCE), and so on. The TCC has directly instrumentalized this TNS apparatus, exercising a form of transnational state power through the multilayered configuration of the TNS. It is through these global institutions that the TCC has been attempting to forge a new global capitalist hegemonic bloc.
As transnational corporate and political elites emerged on the world scene in the 1980s they made explicit claims to building and managing a global economy through restructured multilateral and national institutions. The political organization of the TCC included the formation in the mid-1970s of the Trilateral Commission, which brought together transnationalized fractions of the business, political, and intellectual elite in North America, Europe, and Japan (Gill, 1990). Others markers in its politicization were: the creation of the Group of 7 forum at the governmental level, which began institutionalizing collective management of the global economy by corporate and political elites from core nation-states; the expansion of the activities of the OECD, formed as a supranational institution by the 24 largest industrialized countries to observe and coordinate their national economies; and the creation of the World Economic Forum (WEF), which brought together the top representatives of transnational corporations and global political elites (see below). Studies on building a global economy and transnational management structures flowed out of think tanks, university centers, and policy planning institutes in core countries.
This increasingly organized global elite articulated a coherent program of global economic and political restructuring centered around market liberalization - the so-called "Washington consensus" (Williamson, 1993), or the neo-liberal project (see below) - and set out to convert the world into a single unified field for global capitalism. It pushed for greater uniformity and standardization in the codes and rules of the global market - a process similar to the construction of national markets in the 19th century but now replicated in the new global space. The G-7 in 1982 designated the IMF and the World Bank as the central authorities for exercising the collective power of the capitalist national states over international financial negotiations (Harvey, 1990, 170). At the Cancun Summit in Mexico in 1982, the core capitalist states, led by the United States, launched the era of global neo-liberalism as part of this process and began imposing structural adjustment programs on the Third World and the then-Second World. Transnational elites promoted international economic integration processes, created new sets of institutions and forums, such as the WTO, the Multilateral Agreement on Investment (MAI), and so on. The institutions of this TNS such as the IMF, the World Bank, and WTO are not merely instruments of a world bourgeoisie against world labor; they are also instruments of some fractions of capital against others. They are not neutral vis-a-vis the different capitalist fractions. They suppress national fractions, opposing solutions (e.g., protectionism, fixed exchange rates, etc.) that would bolster national capitals and promote the interests of transnational fractions.
The TNS has been one important forum of transnational class socialization, as have world class universities, transnationally-oriented think tanks, the leading bourgeois foundations, such as Harvard's School of International Business, the Ford and the Carnegie Foundations, policy planning groups such as the Council on Foreign Relations, and so on. Elite planning groups are important forums for integrating class groups, developing new initiatives, collective strategies, policies and projects of class rule, and forging consensus and a political culture around these projects. Since at least late last century the corporate elite has operated through political organizations. These peak business associations function as bodies that connect capital with other spheres (governments, organs of civil society, cultural forums, etc.) at numerous levels. These have included in the United States, for instance, the Business Roundtable, the Chamber of Commerce, and the National Association of Manufacturers, among others. In recent years, there has been a veritable proliferation of transnationally-oriented capitalist organizations and planning groups beyond such better known ones as the Trilateral Commission. For instance, the Institute of International Finance (IIF) was created in 1983 by representatives from transnational banks and investment firms and has 300 members in 56 countries around the world. The IIF acts as a policy center, lobbyist, researcher and consultant for its membership, a virtual political center for transnational finance.
But it is the World Economic Forum (WEF) that stands out as the most comprehensive transnational planning body of the TCC and the quintessential example of a truly global network binding together the TCC in a transnational civil society. As van der Pijl notes, the WEF's component bodies are all acknowledged class organizations, in the sense of being subject to "strict conditions of admission in order to preserve their peer character" (1998:133). These different component bodies include: the CEO's of the top 1,000 TNCs (this component body is known as "Foundation Members" and is the core of the WEF); representatives from 100 of the most influential media groups worldwide ("World Media Leaders"); key policymakers from national governments around the world and from international organizations ("World Economic Leaders"); select academics and experts from political, economic, scientific, social and technological fields ("Forum Fellows"); and so on. "A body of this scope clearly has not existed every before," observers van der Pijl. "It is a true International of capital" (1998:133).
Global media has also been a crucial medium in the socialization of the TCC and in the development of its hegemonic project. The ownership and merger of media worldwide is a major area of transnationalization. Beyond the economic implications of the transnational corporate media and its tight control over the worldwide flow of information and of images are issues of cultural domination. The global corporate media plays an essential role in producing the ideological and cultural bases for a hegemonic bloc that brings together the TCC with other classes, groups, and strata. This transnational socialization of the TCC is crucial to the extent that class formation is as much a subjective as an objective process, and is complemented by the creation of transnational "epistemic communities" of organic intellectuals. Social scientists have long noted the role of cultural, educational and other mechanisms that generate the cohesion necessary for a class to bind together and to reproduce itself (e.g, the works of Domhoff, Useem, Dye, and Mills). The process of transnational socialization, including and emergent TNS as an organic representation of the TCC, transnational capitalist forums, the role of the media, and so on, needs to be studied further.
Despite its organization and coherence, the transnational bourgeoisie is not a unified group. "The same conditions, the same contradiction, the same interests necessarily called forth on the whole similar customs everywhere," noted Marx and Engels in discussing the formation of new class groups. "But separate individuals form a class only insofar as they have to carry on a common battle against another class; otherwise they are on hostile terms with each other as competitors" (Marx and Engels, 1970:82). Fierce competition among oligopolist clusters, conflicting pressures, and differences over the tactics and strategy of maintaining class domination and addressing the crises and contradictions of global capitalism make any real internal unity in the global ruling class impossible. We retake this issue below.
Part II: Some Empirical Indicators
of
Transnational Capitalist Class
Formation
Are capitalists transnational only in the sense that they span the globe with their economic power, or are they transnational in the sense that they are beginning to merge as a global bourgeoisie through corporate mergers, banking interests, and so on? We suggest that the former situation is an indicator of an international bourgeoisie while the latter are indicators of a transnational bourgeoisie. Internationalization occurs when national capitals expand their reach beyond their own national borders. Transnationalization is when national capitals fuse with other internationalizing national capitals in a process that disembedds them from their nations and locates them in new supranational space opening up under the global economy.
The boundaries of the TCC are indeterminate. At what point national classes become transformed into transnational classes is open to debate - despite the fact that we can conceptually distinguish such a class - and depends upon the devices we construct to define the material bases of transnational classes. Empirical evidence on the rise of the TCC includes the spread of transnational corporations (TNCs), the expansion of direct foreign investment, cross-national mergers, strategic alliances, the interpenetration of capital, and interlocking directorates that are transnational. As well are the phenomena of worldwide subcontracting and outsourcing, the extension of free enterprise zones, and a number of other new economic forms associated with the global economy. Such new forms of organizing globalized production are important because they contribute to the development of worldwide networks that link local capitalists to one another, generate an identity of objective interests and of subjective outlook among these capitalists around a process of global (as opposed to local) accumulation. They therefore function as integrative mechanisms in the formation of the TCC and act to shift the locus of class formation from national to emergent transnational space. Here we provide a cursory glance at some of these indicators. The objective is to provide some empirical references points for our theoretical exposition, in conjunction with the conjunctural analysis in the next section, and to the point the way for future research on the TCC, which requires a systematic study of such data not possible here.
A key indicator of the rise of the TCC and its agents is the spread of TNCs. TNCs embody the transnationalized circuits of capital and organize those circuits. In 1995, according to the UNCTAD (1996:3), there were some 40,000 companies with headquarters in more than three countries and some two-thirds of world trade was carried out by TNCs. Similarly, the share of world GDP controlled by TNCs grew from 17 percent in the mid-1960s to 24 percent in 1984 and almost 33 percent in 1995 (ibid.). Perhaps the single most comprehensive indicator of TNC activity and the growth of transnational production is the global stock of foreign direct investment (FDI, see Table 1), which was valued at over $4 trillion, with its rate of growth over the previous decade more than double that of gross fixed capital formation throughout the world. In 1994 it is estimated that the worldwide assets of corporate foreign affiliates was $8.4 trillion. Local firms become incorporated into the transnational corporate structure through an array of mechanisms involved in FDI and TNC activity, ranging from mergers, contracting and outsourcing arrangements, local marketing deals, take-overs, and so on. And as of 1995, some 280,000 affiliates of transnational corporations produced goods and services estimated at $7 trillion (UNCTAD, 1996:xv-xvi).
Until the 1980s, most merger and acquisition activity occurred within national boundaries, but within the last two decades cross-border acquisitions and mergers have become one of the most important ways for firms to expand their activities transnationally (Dicken, 1998:222) and are an essential mechanism in the transnationalization process. The concentration of capital is not new. It is part of the very process of capitalist development and was an integral aspect in an earlier period of national class formation and the rise of national bourgeosies. The transnational concentration of capital through global mergers and acquisitions has a similar importance for transnational class formation and the rise of a transnational bourgeoisie. Some of cross-border acquisitions involves the merger of TNCs, but much of it entails the acquisition of national companies by TNCs, which draws local social forces into the transnationalization process.
Of the $589 billion in total global FDI outflows in 1997, $342 billion, or 58 percent of the total, went into mergers and acquisitions. This means that just about two-fifths of FDI was in new or start up investments: the remainder was used to buy up other companies across national borders. In the case of mergers, it meant the integration of capitals from at least two distinct countries. If an acquisition, it meant that a given firm incorporated a foreign company with its employees, managers, and "national" interests. Summarizing the current "merger mania," Business Week noted: "In industries ranging from autos to telecoms, analysts predict the merger craze will continue" (1998b:53). Cross-border mergers and acquisitions have involved not just the most globalized sectors of the world economy, such as telecommunications, finances, and autos, but also mega-retailers, companies trading in primary commodities, chemicals, and numerous services, from legal firms to insurance and management. Some of the largest cross-national mergers and acquisition in recent years have been: the record-breaking merger of British Telecom and MCI (telecommunications); Daimler Benz and Crystler (autos); Dupont and Herberts (chemicals and paints); Alcatel and Motorola (phone and telecommunications equipment), and Alcatel's subsequent acquisition of DSC Communications; the acquisition of MCA by Seagram (entertainment); and the purchase of Marion Merrel Dow by Hoeschst (phareceuticals) [UNCTAD, 1996:12]. In the first nine months of 1998, such transnational merger and acquisition deals across the world totalled $383 billion, more than the total for 1997. As this process deepens transnational capital gains increasing control over every sector of the global economy and transnational class formation accelerates. Commenting on the wave of global mergers during an interview in which he announced the takeover of Random House by Berttelsman, Thomas Middelhoff, Berttelsman's Chair,noted: "There are no German and American companies. There are only successful and unsuccessful companies" (White, 1998:1).
TABLE 1: GLOBAL FDI OUTFLOWS, 1983-1997
In Billions of Dollars and Percentage Growth Rate
(Average Annual Amount and Growth Rates for Batch Years 1983-1987 and 1988-1992)
------------------------------------------------
Year Amount % Growth
1983-1987 76.8 35
1988-1992 208. 5 4
1993 225.5 11
1994 230.0 2
1995 317.8 38
1996 347 9
1997 589 41
1998 644 39
-------------------------------------------------
SOURCE: As reported by: UNCTAD World Investment Reports, 1996, pp. 4; UNCTAD, 1997, pp. 4. 1997 figure from UNCTAD 1998 report, pp. 19. 1998 figures from UNCTAD 1998 report, as reported The Economist, June 26, 1999:7.
Importantly, there has been a high degree of cross-investment between the major capitalist countries (Dicken, 1998:45-46), which indicates a high degree of interpenetration of "national" capitals in the process of FDI expansion. The developing world absorbed four-fifths of pre-WWII FDI through the old colonial "spheres of influence" structure of world order. But most FDI flows from the 1960s into the 1980s took place between core regions. This is important because the first pattern of FDI reflects a situation in which core national bourgeoisies were in rivalry, whereas the latter indicates a key mechanism in the transnationalization of these of these "national" bourgeoisies. It is in the Third World where transnational class formation is weakest and where "national" bourgeosies may still control states and organize influential political projects. However, even here transnational class formation is well underway. In a recent report, the ILO noted that FDI has "increased sharply, especially to developing countries. The average annual flows have increased more than three-fold since the early 1980s for the world as a whole, while for developing countries it had increased fivefold by 1993" (ILO, 1996-97:2). National capitals in the South have themselves increasingly transnationalized by their own FDI and by integrating into global circuits of accumulation. In 1960, only one percent of FDI came from developing countries. By 1985, this figure had increased to around 3 percent, and by 1995 it stood at about 8 percent (Dicken, 1998:44). Southern-based TNCs have invested $51 billion abroad, while developing countries have absorbed an increasingly proportion of FDI in the 1990s (Burbach and Robinson, 1999). The Third World bourgeoisie of countries such as Singapore, South Korea, Taiwan, Brazil, Chile, and Mexico are becoming important "national" contingents of the TCC (see Ibid.) In 1996 for the first time two third world companies, Daewoo Corporation of South Korea and Petroleos de Venezuela joined the ranks of the top 100 transnational corporations. The top 50 TNCs of the Third World augmented their foreign assets by 280 percent between 1993 and 1995, while those of the top 100 corporations based in the core countries increased by only 30% (ILO, 1996:xvii).
Another important aspect of the transnationalization of Third World economies is the growing importance of foreign portfolio equity investments (FPEI), which are not counted as FDI flows. These are international investments mainly by stock brokerage firms and mutual funds in foreign stock markets managing the capital of investors generally interested only in securing an ample return on their investments and exercise virtually no direct role in the company in which they invest. FPEI flows therefore represent a pronounced transnationalization of capital in that they are carried out by an array of investors with origins in a large number of countries. Many Third World countries in the 1990s as part of the drive to implement neo-liberal, free market policies have facilitated FPEI inflows by establishing or liberalizing their stock market exchanges. Referred to as "emerging markets," these represent a dramatic transnationalization of national firms and assets that accelerates the formation of the TCC.
The growth of direct and equity investment flows are part of the dramatic and growing integration of world capital markets through the commodification of financial instruments. One study found that the total market value of securities traded in world capital markets tripled between 1980 and 1992 (Akdogan, 1995:9). The same study revealed that international gross equity flows doubled between 1986 and 1989, and that in 1991 they were equal to more than one quarter of the capital in the world capital markets. Aside from equity investments, other components of world capital markets are bond and debt financing as well as derivatives, stock options, warrants and convertibles. The rise of a new globally-integrated financial system since the 1980s has been truly phenomenal. National stock markets have all but disappeared. Between 1980 and 1990 the volume of cross-border transactions in equities alone grew at a compound rate of 28 percent per year, from $120 billion to $1.4 trillion. The stock of cross-border bank lending rose from $324 billion to $7.5 trillion over the same period, and offshore bond markets (where companies issue "I owe yous" offshore), increased by 537 percent, from $259 billion to $1.6 trillion. As Hoogvelt notes, if we add up all these categories of world financial integration plus the stock of principal derivatives and FDI, "the total exceeds the total of the combined FDI of the OECD economies" (Hoogvelt, 1997:78-80).
Transnationalization is reflected as well in ever-greater trade integration. World trade has grown much faster than output, and this growth, after slowing briefly in the early 1990s, a consequence of the worldwide downturn, picked up again in mid-decade, as the following table indicates:
TABLE 2: GROWTH OF WORLD TRADE (GOODS AND SERVICES) AND GROWTH OF REAL
GDP, 1974-1995
----------------------------------------------------------------
World Trade World GDP
(Growth in Volume) (Percentage, Annual Average)
1974-83: 3.1 1974-80: 3.4
1984-89: 6.4 1981-90: 3.2
1990-93: 4.6 1991-93: 1.2
1994: 8.7 1994: 2.9
1995: 7.9 1995: 2.8
----------------------------------------------------------------
SOURCE: ILO (1997:3)
World trade can indicate internationalization and not transnationalization. But once we note that between one-third and two-thirds of this world trade is conducted as intra-firm trade (World Bank, 1992, 22) it becomes clear that data on the growth of world trade is itself a commercial expression of globalized production. The ILO report emphasizes: "These increased flows of direct investment have been accompanied by the growth of globally-integrated production systems characterized by the rapid expansion of intra-firm trade in intermediate products and of subcontracting, licensing and franchising arrangements, including new forms of outsourcing of work across national frontiers" (ILO, 1996-97:2).
This phenomenal spread since the late 1970s of diverse new economic arrangements, such as outsourcing, subcontracting, transnational intercorporate alliances, licensing agreements, local representation, and so on, parallels the proliferation of FDI, mergers and acquisitions, and underscores another major aspect of the transnational linkage of capitals. These arrangements result in vast transnational production chains and complex webs of vertical and horizontal integration across the globe. According to Dicken:
TNCs are also locked into external networks of relationships with a myriad of other firms: transnational and domestic, large and small, public and private. It is through such interconnections, for example, that a very small firm in one country may be directly linked into a global production network, whereas most small firms serve only a very restricted geographic area. Such inter-relationships between firms of different sizes and types increasingly span national boundaries to create a set of geographically nested relationships from local to global scales....There is, in fact, a bewildering variety of interorganizational collaborative relationships. These are frequently multilateral rather than bilateral, polygamous rather than monogamous (Dicken, 1998:223)
What Dicken's authoritive study underscores is the increasing interpenetration on multiple levels of capitals in all parts of the world, organized around transnational capital and the giant TNCs. It is increasingly difficult to separate local circuits of production and distribution from the globalized circuits that dictate the terms and patterns of accumulation worldwide, even when surface appearance gives the (misleading) impression that local capitals retain their autonomy. There are of course still local and national capitals, and there will be for a long time to come. But they must "de-localize" and link to hegemonic transnational capital if they are to survive. Territorially restricted capital cannot compete with its transnationally-mobile counterpart. As the global circuit of capital subsumes through numerous mechanisms and arrangements these local circuits, local capitalists who manage these circuits become swept up into the process of transnational class formation.
The diverse new economic arrangements in the global economy have been associated with the transition from the Fordist regime of accumulation to new post-Fordist flexible regimes (see, inter-alia, Harvey, 1990; Amin, 1994; Hoogvelt, 1997; Dicken, 1998). As many have noted, the structural properties of the emerging flexible regime are global in character, in that accumulation is embedded in global markets, involves global enterprise organization and sets of global capital-labor relations (especially deregulated and casualized labor pools worldwide) [see, inter-alia, Hoogvelt, 1997:109-113]. Competition dictates that firms must establish global as opposed to national or regional markets. As Hoogvelt shows, competition in the global economy increasingly compels them to operate full production systems in all three regions of the global triad (North America, Europe, and East Asia). The leading TNCs are becoming "multi-regional" companies, operating multiple and integrated production as well as financial and commercial operations throughout the triad (ibid). These multi-regional companies are emerging through the strategy of alliances, mergers, and other forms of integrative coordination among TNCs, as a general transitionary form in the process of the transnational integration of capital.
Meanwhile, each shock in the unfolding world economic crisis, from Mexico to Asia, from Russia to Brazil, has tended to result in an accelerated transnational integration of affected countries of local capitalists into the ranks of the TCC. These crises clearly bring into sharper relief the process of fractionation among local elites. For instance, the Asian crisis is leading to a restructuring of many of the region's major corporations and economies that facilitates and advances the consolidation of transnational capital. The "chaebol," the powerful financial-industrial groups of South Korea, for instance, have been compelled to sell off national assets to TNCs and at the same time they have forged partnerships with corporations from other areas of the world (Business Week, 1998a). As Lawrence Summers stated in 1998 when he was undersecretary of the U.S. Treasury Department, "In some ways the IMF has done more in these past months to liberalize these [Asian] economies and open up their markets to U.S. goods and services than has been achieved in rounds of negotiations in the region" (cited in Bello, 1998/99:138).
Increasingly, the leading strata among the TCC has come to occupy a variety of interlocking positions within the global corporate structure. Fennema, for instance, identified for the early 1980s an international network of interlocking directorates among the leading transnational banking and industrial firms (1982). This process parallels a similar one in an earlier period, when the rise of national bourgeoisies involved national-level interlocking directorates that congealed the objective links and the subjective identity of national bourgeoisies, as documented in a wealth of literature, Marxist and non-Marxist, from political sociology on the subject of national "power elites", and ruling blocs, the "inner circle", and so on (see, inter alia, Domhoff, 1967; Useem, 1984; Dye, 1986; Mills, 1959). The evolving composition of the directorates of the leading TNCs is an area ripe for research.
Part III: Hegemony and the
Global Politics "From
Above" of the TCC
The new global ruling bloc consists of various economic and political forces led by the TCC whose politics and policies are conditioned by the new global structure of accumulation and production. It is the logic of global accumulation, rather than national accumulation, that guides the political and economic behavior of this ruling bloc, henceforth referred to as the "globalist" bloc. At the center of the globalist bloc is the TCC, comprised of the owners and managers of the transnational corporations and other capitalists around the world who manage transnational capital. The bloc also includes the cadre, bureaucratic managers and technicians who administer the agencies of the TNS, such as the IMF, the World Bank, and the WTO, the states of the North and the South, and other transnational forums. And membership in the hegemonic bloc also includes the politicians and charismatic figures, along with select organic intellectuals, who provide ideological legitimacy and technical solutions. Below this transnational elite are a small and shrinking layer of middle classes who exercise very little real power but who - pacified with mass consumption - form a fragile buffer between the transnational elite and the world's poor majority. It is in this way that we can speak of a historic bloc in the Gramscian sense as a ruling coalition and a social base in which one group exercises leadership (the TCC) and imposes its project through the consent of those drawn into the bloc. Those from this poor majority who are not drawn into the hegemonic project either through material mechanisms or ideologically are contained or repressed.
The globalist bloc is loosely constituted and the TCC has had difficulty securing its leadership and reproducing hegemony. A necessary condition for the attainment of hegemony by a class or class fraction is the supersession of narrow economic interests by a more universal social vision or ideology, and the concrete coordination of the interests of other groups with those of the leading class or fraction in the process of securing their participation in this social vision. Here, the narrow interests of transnational finance capital (currency speculators, bankers, portfolio investors, etc.) seems to hold out the prospects of frustrating a hegemonic project. As well, a unified social vision has been difficult to secure because distinct sectors of the TCC have often sought different and even conflicting solutions to the problems of global capitalism based in the historic experiences of their regional systems. In this section we shift the narrative from conceptual and theoretical issues to political and conjunctural analysis of the TCC, including strategic debate and tactical differences within its ranks, and in particular, rising splits and factional disputes.
The globalists consolidated ideologically in the early 1980s under the program of the "Washington Consensus" (Williamson, 1993), or global neo-liberalism, first launched by the Reagan and Thatcher regimes. Neo-liberalism as a model for economic restructuring seeks to achieve the conditions in each country and region of the world for the mobility and free operation of capital. The program seeks to harmonize a wide range of fiscal, monetary, industrial, and commercial policies among multiple nations, as a requirement for fully mobile transnational capital to function simultaneously, and often instantaneously, among numerous national borders. In addition to fiscal, monetary, exchange and related measures intended to achieve macroeconomic stability, restructuring includes: liberalization of trade and finances, which opens the economy to the world market; deregulation, which removes the state from economic decision making (but not from activities that service capital); and privatization of formerly public spheres that could hamper capital accumulation if criteria of public interest over private profit is left operative. Neo-liberalism model thus generates the overall conditions for the profitable ("efficient") renewal of capital accumulation through new globalized circuits, and facilitates the subordination and integration of each national economy into the global economy. Neo-liberalism finds its legitimation in neo-classical economics, and in the globalist rhetoric of free trade, growth, efficiency, and prosperity. Global neo-liberalism also entails building a new legal and economic superstructure for the global economy. This process parallels the nation building stage of early capitalism that constructed an integrated national market with common laws, taxes, currency, and political consolidation around a common state. Globalization is repeating this process, but on a world scale.
By the earlier 1990s, the globalists had achieved what appeared as a veritable Gramscian consensus around the neo-liberal project. It was indeed a consensus in that: it represented a congruence of interests among the dominant groups in the global system; these interests were being advanced through institutions that command power (the world's states and the TNS apparatus); and this consensus had achieved ideological hegemony by setting the parameters for, and the limits to, debate among subordinate groups around the world on options and alternative projects. In this sense, the "Washington consensus" reflected the emergence of a new global capitalist hegemonic bloc under the leadership of the TCC. However, cracks in the consensus had become apparent by the close of the decade.
Splits in the Globalist Bloc
The world recession of the 1990s and the sequence of crises, from Mexico in 1995, to Asia in 1997, followed by Russia and Brazil in 1998, exposed the fragility of the world monetary system and caused rising alarm and exposed important contradictions and growing splits in the globalist bloc. The more deeply rooted and complex global capitalism becomes the more each shock to the system generates tensions within the ranks of the TCC. The TCC has become increasingly fragmented in its globalist discourse, in its political vision, and in its ideological coherence. The globalist ruling bloc has three main groups or factions: the free-market conservatives, the neo-liberal structuralists, and the neo-liberal regulationists. The debates that dominate the summits of power in global society do not correspond to the familiar political categories of the pre-globalization era. The distinct position of these factions have less to do with narrow economic-corporate interests than with strategic political issues of class rule. Foremost is the question of how best to structure the new global economy, achieve world order, and assure the long-term stability and reproduction of the system.
All three factions are "globalists" in that their projects are to construct global capitalism and they all speak for the TCC rather than for national capitals. Moreover, all three are neo-liberal in that none question the essential premises of world market liberalization and the freedom of transnational capital. In a nutshell, the free-market conservatives call for a complete global laissez-faire based on an undiluted version of the Washington consensus. The neo-liberal structuralists want a global superstructure that could provide a modicum of stability to the volatile world financial system, adjusting the Washington consensus without interfering with the global economy. And the neo-liberal regulationists call for a broader global regulatory apparatus that could stabilize the financial system as well as attenuate some of the sharpest social contradictions of global capitalism in the interests of securing the political stability of the system. They envision creating a post-Washington globalist consensus. However, even the regulationists do not propose any sort of a global Keynesianism that might involve redistribution or state controls on the prerogatives of transnational capital.
The leading globalist faction are the structuralists, which includes figures such as President Bill Clinton, George Bush (Junior and Senior), Newt Gingrich, World Bank President James Wolfensohn, IMF Managing Director Michel Camdessus, currency speculator George Soros, many Trilateralists and executives of TNCs and major financial institutions. They have had important success in rapidly developing an incipient infrastructure for the global economy, such as the NAFTA and the GATT, establishing the WTO, and expanding the power of the IMF and World Bank. What distinguishes this faction is its adherence to neo-liberal political and economic policies, their concern to build a stable and regulated environment for global accumulation, and their effort to protect world financial institutions from ruin and failure. Of the $1.3 trillion invested daily in currency markets, some two-thirds are held for seven days or less. Only one percent of all speculative transactions stay put for a year or longer. Huge profits are made possible because this instability and quick movement of money results in rapid fluctuations of currency values. It is the prospects of extreme market instability generated by this frenzied global financial activity that the structuralists find so unsettling. "Markets can move like a wrecking ball, knocking over one economy after another," George Soros has warned. "The swings cannot be avoided altogether, but they need to be brought under control" (as cited in Harris, 1999:4).
This fear was brought home by the Asian crash. Propelled by the overnight devaluation of Asian currency and the tidal wave of bankruptcies, the IMF stepped in to expand control over international monetary policies with a $120 billion bailout of Asia (followed by another $42 billion to Brazil). This bailout sparked a cascading debate among the globalists. Conservatives opposed such structural interference in the free market and regulationists raised the tone of their concern over neo-liberal social policies. Much of the discussion focused on stricter regulations of financial institutions, better market supervision of risk management practices, and how to respond to the social fallout resulting from IMF policies. The debate also revealed growing differences between the World Bank and IMF. In fact, the IMF has increasingly been at the center of the debate in the globalist camp. The Fund used the Asian crisis to place greater leverage on Third World countries to further open up to global corporations. In opposition to the IMF's apparent structuralist approach, the World Bank has advanced regulationist arguments. Its 1997 report, The State in a Changing World, questioned the promotion of the "minimalist state" and argued for a larger governmental role in protecting and correcting markets. The report sought to move "attention from the sterile debate of state and market to the more fundamental crisis of state effectiveness" (25). While the report stressed that free market policies should be maintained and in fact deepened, it emphasized that "liberalization is not the same as deregulation" and argued that the state's purpose is in "safeguarding the health of the financial system" (65). In a second report in November 1998 the Bank focused its criticism on particular features of IMF policies. Targeted were the IMF's rapid push for total financial liberalization, the need to control short-term investments, and greater aid for the poor.
The differences here are more of tactics than strategy. The debate is not over free trade, open markets, or long-term foreign investments. Rather it centers on how best to protect the global financial system. Camdessus believes that the current world crisis can be tamed by moderate policy adjustments regarding international regulation and oversight but that IMF policies are basically correct and already showing signs of success in Asian. This is the same approach taken by President Clinton's former Secretary of Treasury Robert Rubin, his replacement, Lawrence Summers, and Britain's Prime Minister Tony Blair. For structuralists grouped around the IMF the global crisis calls for greater centralization. Italian Treasury Minister Carlo Azeglio Ciampi called for the IMF's Interm Committee to become the "embryo" of an economic government for the world. The Interm Committee, which Ciampi chairs, seats finance ministers from 24 core countries. Ciampi argues that the Committee should "become the main channel of communication between the international financial community and national decision-makers" because the crisis makes it "necessary to reinforce the instruments for intervention by international financial institutions." (AFP, 1998). The IMF, in his view, should become this instrument, circumventing any national control over economic policy.
The conservatives are the most ideologically driven sector within the globalists. Representing this trend are former Secretary of State George Schultz, former Citibank CEO and speculator Walter Wriston, former Treasury Secretary and international speculator William Simon, Reagan era economists Lawrence Kudlow and Martin Feldstein, President of the Heritage Foundation Edwin Feulner, and Ian Vasquez of the Cato Institute. Deeply influenced by Milton Freedman, this sector sees any bureaucratic central planning as interference in the pure functioning of the market. As Kudlow has stated: "IMF statism is no better than Soviet statism" (Lerner News Hours). Conservatives argue that the market needs to carry its own risks, and firms must be allowed to fail without being saved by international agencies. It is within this process that a Schumpeterian "creative destruction" occurs. Money is freed from bad management and goes to those who know best how to invest. Bankruptcy, or the destructive side of capitalism, is necessary to free capital to be used to create new wealth. "Capitalism without bankruptcy is like Heaven without Hell," according to Kudlow (ibid). Schultz, Simon and others have actually called for the abolition of the IMF. As argued by Wriston, the power to change government policies is best left to international financiers, not bureaucratic agencies: "Money is asserting its control over government, disciplining irresponsible policies, and taking away free lunches everywhere. If your economic policies are lousy, the market will punish you instantly. I'm in favor of this kind of economic democracy" (1998:202-203).
A Post-Washington Consensus?
While the factional disputes between the structuralists and conservatives grows, since the Asian crash and Russian debacle the regulationists have been growing in importance. Regulationists support free markets, privatization, and the structures of global capitalism. But with expanding poverty they have come to question the complete deregulation of labor markets, cuts in social services, and government's abdication of a modicum of regulation. They want to use global political and regulatory structures to tame the most destructive features of the free market. They recognize the vast inequalities created by unregulated capitalism, and fear the political upheavals that may result.
As the crisis in Asia spread to Russia and Brazil some structuralists like Kissinger and Wolfensohn, along with Harvard economist and WEF administrator Jeffrey Sachs, began to share some of the concerns of the regulationists and debated how best to address the political and social fallout of the crisis. Wolfensohn, perhaps pushed by liberals such as Joseph Stiglitz inside the World Bank, has expressed concern for those thrown into poverty by IMF policies. Following the resignation of Indonesian President Suharto, Henry Kissinger joined the debate, expressing fear that "the indiscriminate globalism of the 1990s may generate a worldwide assault on the very concept of free financial markets" in the same manner that early capitalism "spawned Marxism" (1998). Upset over the political explosions then sweeping Indonesia, Kissinger complained that the "IMF has utterly failed to grasp the political impact of its actions" because of its "excessive emphasis on economics" (Ibid). Supporting Wolfenshohn's position, he argued that states should provide a "social safety net and curb market excesses by regulation" (Ibid).
Some regulationists have actually questioned important aspects of the Washington Consensus as the best way forward for constructing the global economy. This wing of globalists in the United States includes a significant faction of the Democratic Party with such spokespersons as Congressmen Dick Gephart and Dave Bonior, former Secretary of Labor Robert Reich, plus a growing number of influential economists and business figures. In Europe, Asia, and the Third World, it is represented by major labor and social democratic parties, such as Blair's "new" Labor, the social democrats in Germany and France, the ruling coalition in Brazil, and Japan's Vice finance minister Elsuhe "Mr. Yen" Sakakibara. Despite their nationalist and protectionist rhetoric (which is often their legitimizing discourse) these groups do not represent national fractions of capital but are committed to global capitalism. However, they have called for stronger labor standards and environmental protection in the growing number of international agreements, and some argue for a slowdown in capital mobility using different regulatory devices.
For his part, although he is a currency speculator, George Soros has stated that his fellow speculators threaten to destroy the very system that has created their wealth. In The Alchemy of Finance he claims: "Instability is cumulative, so that the eventual breakdown of freely floating exchange is ensured" (1994). As a result he argues the private sector is "ill-suited to allocate international credit" because its goals are to maximize profits and not maintain macro-economic stability. His solution is to create a new International Credit Insurance Corporation that would guarantee loans by setting a ceiling on the amounts insured. Speculative investments beyond insured amounts would be lost through failures, rather than save by IMF bail-outs. Soros understands that further regulation will "outrage the financial community," but in his view: "The main enemy of the open ["democratic"] society is no longer the communist but the capitalist threat" (as cited in Harris, 1999:4).
What these varied pronouncements point to is growing cracks in the Washington consensus, as perhaps best expressed by Joseph Stiglitz, Senior Vice President and chief economist of the World Bank, former Chair of the U.S. Council of Economic Advisors, and a key voice in the regulationist wing. In an April, 1998 speech delivered in Helsinki, Stiglitz launched a major criticism of the Washington Consensus, calling it "incomplete and misleading." Stiglitz, an important organic intellectual of the TCC, argued that "government has an important role in responding to market failures" and "in appropriate regulation, industrial policy, social protection and welfare." Stiglitz called for a post-Washington consensus that would expand the role of government to provide universal education, transfer technology to the public sphere, and enable increases in living standards, improved health, and a healthy environment.
Towards a New Political Configuration?
The "Third Way" and the Politics of Exclusion
Will a new political configuration emerge out of these splits and tendencies within the TCC? What would the politics of such a configuration look like? The rise of the regulationists and the increasing marginalization of the free market conservatives suggest that the first phase in the project of the globalist bloc may be coming to an end. The rise of a new order always involves a "revolutionary" phase that brings down the old one it is replacing, following by a more "moderating" phase in which the new order is stabilized and institutionalized. The revolutionary phase in the rise to hegemony of transnational capital and the TCC was launched by the Reagan and Thatcher regimes (Indeed, the Reagan administration was dominated by free market conservatives). The globalist project appeared in the 1980s in its more dogmatic and ideological form. The institutional structures of the old system were assaulted and brought down with their militancy and extreme form of neo-liberalism; the old system in the period preceding globalization were diverse Keynesian welfare and developmentalist regimes around the world. But by the late 1990s it appeared that the globalist project was moving into a moderating phase in which structuralists and regulationists were beginning to coalesce around a new political configuration.
This configuration is the so-called "Third Way," once again first promulgated in the United States and Great Britain, in the form of the Clinton and Blair regimes, as institutional stabilizers of the new order. By the late 1990s, with the rise of Chancellor Gerhard Schroder in Germany, the Third Way (also called the "New Middle") began to crystalize around this triad as an emergent political project of global capitalism, and to acquire adherents in numerous countries around the world, from Brazil and New Zealand to South Africa, from Spain and Taiwan to Argentina and Japan. Murphy (1999) reviews competing strategic approaches to world order among the global elite. He identifies five political positions: "neo-liberalism"; "Third Way liberalism"; a "softer Third Way liberalism"; a "global social democratic view"; and an "accountable humanitarian" view. He predicts the coming triumph of "Third Way liberalism" (or "soft neo-liberals"), which seems to be a hybrid of what we refer to here as neo-liberal structuralists and regulationists. A Third Way ideology, in his analysis, is likely to become hegemonic in the face of the intractable problems and the legitimacy crisis of neo-liberalism. The program, however, would not question the premises of an ever more open and integrated global economy.
If the globalist project finds its intellectual legitimation in neo-classical economics, the Third Way draws as well on the "new institutional economics" without actually questioning free market principles or challenging the prerogative of capital (it is no wonder that Joseph Stiglitz of the World Bank is also a leading economists from the new institutionalist school). The new institutional, or "post-Keynesian" economics, emphasizes the problems of economic coordination in the free market and their resolution through the management activities of "experts" in the state. Theoretically, this approach argues that the state, which has the authority to create money, influence interest rates, encourage technical development and research through educational and regional policy, and so on, can influence economic activity without interfering directly in the market by creating a more predictable economic environment (see, inter-alia, Cole, forthcoming). In the Third Way discourse, this is "an enabling rather than a bureaucratic government" (Democratic Leadership Council, 1999). Here we may note that the rise of an economic doctrine that emphasizes the coordination of individual producers and the provision of an optimal institutional and infrastructural environment for capital, without challenging the prerogatives of capital, closely mirrors the rise of post-Keynesian/Fordist "flexible" models of accumulation, or the so-called "New Economy." The doctrine emphasizes complex coordination among decentralized and vertically disintegrated production processes, as well as a new and more sophisticated infrastructural environment, such as communication grids and information highways - "goods" which the more "pure" neo-liberal laissez-faire state is ill-equipped to provide.
Third Way politicians have placed unemployment, poverty, and inequality, back on the economic policy agenda, although these are no longer to be tackled through state interventionist mechanisms. The program reaffirms the set of macroeconomic fiscal and monetary policies associated with neo-liberalism, the withdrawal of the state from "economic issues" (state regulation of capital) and the continued rollback of the welfare state. But these aspects are combined with a new emphasis on "social issues" and a quite liberal stance on these matters, emphasizing, in the best bourgeois tradition, equality of opportunity, a new political culture of "market individualism," and local political decentralization. Social programs such as education and health care that generate the "human capital" which high-tech information capitalism requires are given high profile, as is the creation of a "flexible labor market." If, in Frederick Jameson's (1984) famous assessment, post-modernism is the "cultural logic" of late capitalism, the Third Way may turn out to be the emerging "political logic" of global capitalism, with its attendant forms of flexible accumulation.
But can a "Third Way" political configuration stabilize the rule of the TCC? No emergent ruling class can stabilize a new order without developing diverse mechanisms of legitimation and securing a social base - the construction of what Antonio Gramsci called an historic bloc. Such a bloc involves a combination of the consensual integration through material reward for some, and the coercive exclusion of others that the system is unwilling or unable to coopt.
Global society is increasing characterized by a three-tiered social structure. The first tier is made up of some 30-40 percent of the population in core countries and less in peripheral countries, those who hold "tenured" employment in the global economy and are able to maintain, and even expand, their consumption. The second tier, some 30 percent in the core and 20-30 percent in the periphery, form a growing army of "casualized" workers who face chronic insecurity in the conditions of their employment and the absence of any collective insurance against risk previously secured by the welfare state. The third tier, some 30 percent of the population in the core capitalist countries, and some 50 percent or more in peripheral countries, represents those structurally excluded from productive activity and completely unprotected with the dismantling of welfare and developmentalist states, the "superfluous" population of global capitalism (see, inter-alia, Hutton, 1995; Hoogvelt, 1997).
Within this polarized social structure, the Third Way is seeking to secure a firm social base in the first tier, to draw in the second tier, and to contain the third tier. In this "politics of exclusion" the problem of social control becomes paramount. There is a shift from the social welfare state to the social control (police) state, replete with the dramatic expansion of public and private security forces, the mass incarceration of the excluded population (disproportionately minorities), new forms of social apartheid maintained through complex social control technologies, repressive anti-immigration legislation, and so on. It has also entailed, under the Third Way's deceptive discourse of "local politics" and "community empowerment," a shift in the responsibility for social reproduction from the state and society as a whole to the most marginalized communities themselves. This is, as Hoogvelt notes, an attempt to "contain territorially and ideologically" excluded groups, to organize "the poor and the marginalized to care for and contain and control themselves" (1997:149).
In sum, it is not clear that the globalist bloc will consolidate its economic and political hegemony. The fragility of the world monetary system will be a source of growing tensions within the inner circles of the TCC as it searches for a formula that could achieve some regulatory order to the system. However, the principal source of tension will be over how to avert the threat from below. It is not clear in the new epoch how the contradictions of global capitalism will be played out, in particular, those of overaccumulation and worldwide social polarization. But these contradictions and the tensions they generate within the globalist bloc certainly open up new opportunities for emancipatory projects from global labor. An expanding transnational proletariate is the alter ego of the TCC. Struggle between the two will shape the further class development of the new global ruling class and the dynamics of emerging global society.
ACKNOWLEDGEMENTS: We would like to thank Gioconda Robinson and two anonymous reviewers for their comments on earlier drafts of this essay.
William I. Robinson
Department of Sociology and Anthropology
New Mexico State University
PO Box 30001, MSC 3BV
Las Cruces, NM 88003-8001
wirobins@nmsu.edu
Jerry Harris
DeVry Institute of Technology
3300 North Campbell Avenue
Chicago, IL 60618-5994
jerryharris@igc.org
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