Capitalist Globalization shows that neoliberal policies have not succeeded in bringing prosperity to the world’s population, but rather have entrenched existing inequalities

The ideal for any individual capitalist is to pay their own workers the very least possible, usually, but not always, compatible with basic reproduction of life. This should happen at the same time as other capitalists’ workers are being paid enough to afford to buy the products of the first. Since each wants to be the one who pays his workers the least, this equation is one of the central contradictions that leads to periodic crises in capitalism. So long as this system exists there will be pressure to make the impossible conundrum work. Of course ways can be found to fix a particular crisis for a limited time, but sooner or later the process will create another crisis, for which another temporary solution must be found.

This is, in schematic form, what has been happening in the world economy during the era of ‘globalisation’, usually dated from the late 1970s to the present. Neoliberalism, the ideology accompanying the present wave of globalisation (there have been others in the past), presents the process in ideological terms as the unleashing of the power of the ‘market’ through the adoption of free trade agreements, labour market ‘liberalisation’, and other such mechanisms designed to strengthen the hand of capital against labour. Martin Hart-Landsberg gives us a very clear account of the realities of globalisation, as well as a withering critique of the neo-classical economics behind it, in accessible and succinct form. There is even some debunking of key elements of classical economics, such as Ricardo’s theory of comparative advantage. The latter is vital to the argument that, in a context of international free trade, national economies will specialise in certain products for their prosperity (pp.74-80). Like so many nostrums of bourgeois economics, the proof of this theory rests on a series of assumptions requiring an idealised state of affairs that never holds true in practice.

Hart-Landsberg draws a sharp distinction between free-market ideology and its practice; the actual content and impact of the economic policies and trade agreements justified by the ideology in the last forty years. Neoliberal ideology in its popular guise tends to present ‘free trade’ as the natural state of affairs, which, if only governments would release their economies from artificial statist fetters, would provide a bounty of prosperity and growth. Statisticians and insider-economists have provided the numbers that regularly purport to show each and every trade deal in prospect increasing GDP and the volume of trade by so many millions, and creating new jobs by however many further tens of thousands.

There are several fallacies in the neoliberal position. Firstly, there is no natural state of free trade any more than there was ever that time of individualistic natural liberty which classical economists always posited. All international trade structures are the active creations of governments, so the notion of ‘free trade’ is a total abstraction from the realities of history. Many of the discussions of recent international economic relations, particularly in South America, bear out this general argument very clearly (see chapter three in particular).

In any case, however, the promises made in advance of these trade deals have never been borne out in practice. It was claimed that a free trade agreement with South Korea, known as KORUS, would produce a $10-11 billion increase in trade and an extra 70,000 jobs in the US. The estimates and assumptions behind these figures turn out not to have been based on anything solid, and Hart-Landsberg easily pulls them apart. For example, the original figures took no account of US imports from South Korea, nor did they factor in the likely switch of the destination of US exports from other countries to Korea, and so forth (pp.101-2).

This case is instructive in itself, but it is part of a pattern in which free-trade agreements are sold to the public, whether in the US or here. A fairly recent exchange between George Monbiot and Tory ex-Chancellor, Ken Clarke in the Guardian, over the possible free trade deal between the US and the EU, holds parallels to the cases discussed in Capitalist Globalisation. A reader armed with Hart-Landsberg’s debunking of other cases will be more confidently sceptical of Ken Clarke’s very similar claims about rises in collective GDP, or a ‘7%’ rise ‘in the number of jobs in the UK car industry’. The basis of these claims is not objective science, but estimates and projections based on highly questionable assumptions.

Any triumphalist crowing, that capitalism in the age of neoliberalism has shown its superiority over any other conceivable system, has been brought into question by the recent financial crisis. Nevertheless, in any case, there is plenty of hard evidence that ‘free trade’ policies have not been working to the advantage of either workers in the United States, Hart-Landsberg’s main example of a developed country, or in economies of the Global South. One of the claims consistently made for globalisation is that it has opened up possibilities for advancement precisely in the developing world, but the promises have not been fulfilled. It is true that the latter’s share of world manufacturing exports ‘jumped from 4.4 percent in 1965 to 30.1 percent in 2003’ (p.84). Yet shares of foreign direct investment (FDI) and manufactures exports do not directly equate to development; these can hide dangerous and unhealthy imbalances and dependencies, not to mention inequalities, in a country’s economy. Hart-Landsberg notes that ‘the world economy has become increasingly dependent not just on US growth in general, but on U.S. household consumption’ (p.39).

Moreover many of the countries that show ‘successful’ rises in FDI have liberalised their economies to the ‘destruction of their domestic import-competing industries, causing unemployment, a rapid rise in imports, and industrial hollowing out (p.85). One study of seven of the most advanced developing countries, Hong Kong, Malaysia, Mexico, South Korea, Singapore, Taiwan and Turkey found that the gains from export activity were not being matched in ‘worker well-being or national development’. Despite a rise in the ratio of manufacturing exports to GDP, the ‘average ratio of manufacturing value added to GDP generally remained unchanged’; in other words, domestic industry was being sacrificed to export industry linked to multinational corporations. The consequence for Mexico is stark; showing a tenfold growth in manufacturing exports between 1980 and 1997, it lost one third of its share in world manufacturing value, and saw a 13% drop in its share in world income (pp.85-6).

Even in China it turns out that wages have fallen, as a share of GDP, from 53% in 1992 to below 40% in 2006, while in the same period private consumption fell from about 47% to 36% (p.50). Hart-Landsberg quotes The Economist itself noting how sharp a drop this represents. The Chinese ruling class are behaving in a way mirroring the western elite. While ‘real wages fell by almost 2 percent in 2011 [in the US], corporate profits hit a record high in the third quarter of the same year’ (p.64). In China, meanwhile, the richest seventy members of the legislature gained an extra $11.5 billion from 2010 to 2011 on top of their existing aggregate wealth of $89.8 billion.

Hart-Landsberg argues that a major problem in the debates about globalisation has been that they are conducted through ‘national’ frameworks rather than through a class-based analysis. It is rarely asked precisely who will benefit from ‘globalisation’, or what sectors will be advantaged. In this way the role and interests of the great corporations are kept hidden from view. In some passages here the US context of the book stands out for a UK-based reader, since debates about the European Union frame much discussion here, which makes for somewhat different ideological dynamics. Yet Hart-Landsberg’s discussion demonstrates how capitalist interests dominate the assumptions from which most public discussion flows, and this is no different on either side of the Atlantic. The analysis of the KORUS trade deal comes to a conclusion that echoes critiques of much policy and legislation arising from EU institutions; ‘the Government Procurement chapter goes along way to ensure that public authorities will be unable to use public money in ways that might interfere with corporate profit maximization’ (pp.108-9).

Neoliberal ideology contains both a carrot and a stick. The carrot lies in the false promises of growth and jobs that are supposed to follow from free-trade agreements. Having established these agreements, the ideological argument switches to the stick; now that we exist in a globalised world, we have no choice but to accept the labour conditions of the least well treated workers in the world. Thus George Osborne on a visit to China denigrated British economic efforts in a speech clearly aimed at stoking fears of competition with a labour force suffering much worse conditions and lower wages; we are pampered by our employers is the message. Yet the argument is purely ideological, rather than responding to necessary economic forces, for a start assuming that ‘globalisation’ represents a perfect market where every actor is equal. It glosses over entirely the fact that the global economy is structured around Western based multinational corporations, and that manufacturing growth in Asian economies in particular has occurred within this hierarchy.

Hart-Landsberg gives a very useful history of the origins of ‘globalisation’ in corporate outsourcing beginning in the late 1960s. It was US corporations with falling profit margins which began to send parts and components to be processed in ‘export platforms’ in countries of the Global South with low wages (p.15). A process of the ‘internationalization of production’ accelerated in the mid-1980s, when Japanese and German corporations in particular began to follow the lead of US corporations (p.16). The eventual result has certainly ‘increased the importance of the third world as a location for international production’ to put it mildly. Trans-national corporations (TNCs) retain their ‘dominance of cross-border production networks’ while relying ‘on independent “partner” manufacturers to procure required parts and components and oversee their assembly into final products’, while some of these ‘partner’ corporations themselves may have transnational production lines (p.18).

This is a complicated picture, giving not a global market place of equal players, but rather ‘a hierarchically structured, interlocking system of TNCs’ (p.20). One result of this is that the TNCs of ‘core countries’ are in a position to seize the ‘lion’s share of the profits’, as in the example of Apple, in a short case study of the electronics industry (p.22). Globalisation is not a simple matter of national competition, as neoliberal ideology presents it, but a class question:

‘In short, although national accounting implies that China is the big winner and the United States the big loser, in reality the profit generated by the production and sale of iPhones was largely captured by a select few transnational corporations, none of which are Chinese, with Apple, a U.S. company, the biggest winner (p.22).

Since multi-nationals can use their international position to withhold their profits from significant taxation, the ‘prosperity of companies’ does not lead to any rise in wages in core countries (p.23). The apparent inability (or reluctance) of national governments to bend the great corporations to the social interest has led to the situation where wages are too low to support capitalist growth, which is therefore dependent upon debt as a motor. In seeking to pay their own workers as least as possible, capitalists have found they have a problem selling their goods, in capitalism’s classic contradiction. This is why the current ‘recovery’ in the UK is highly unlikely to be long-lasting or stable, based as it is on a re-inflated debt bubble.

There are several discussions in this book which could be usefully taken further, and the analysis of the Chinese place in the world economy is one, alongside the observation noted above that the world is increasingly dependent upon US household consumption. These points intersect with another set of concerns. The US is seen to be in decline, in terms of both its political and economic power, and this is connected to the notion that the world is moving towards a military clash between a rising China and a declining US. Behind this scenario is an increasingly explicit parallel with World War I, when a British Empire in relative decline faced a rising economic power in the shape of Germany.

China is always cast as Germany in this parallel, but there is a crucial difference between the two powers in their historical context. Germany was a fully independent imperial power, yet hemmed in by British and French imperial interests, and therefore, inevitably, having to take up the more obviously aggressive stance in the existing international order. China, given its relationship with Western corporations and markets, in particular the American consumer market, is not at all in the same position as Germany was around 1900. Claims that Chinese aggression is the upcoming danger to the international order therefore look exaggerated and ideological in nature. China’s actions are most probably defensive in character, given that it needs to maintain access to US and Western markets, with the real aggression coming from the opposing side. Rising tensions are much more likely to be stemming from the unstable nature of US imperialism, with its paradoxical military strength, economic weakness and yet continuing centrality to the world economy.

So, this is not to argue that imperialist competition between the west and China will not be the cause of dangerous conflict; some thought before 1914 that Britain and Germany would never go to war because of the extensive trade links between them. The capitalist-utopian notion that trade brings peace has been disproven over and again, not least by the First World War itself. It is rather that any such conflict will not be a simple repetition of the imperialist dynamics of the twentieth century, and that China is surely quite unlikely to be the initiator of any real aggression, compared to the US and its allies. The United States in particular is the more likely to use its remaining power to attempt to maintain the existing hierarchy of production and profit distribution, favouring western-based TNCs.

The closing sections of Capitalist Globalisation move from the analysis of globalisation to the search for alternatives. One chapter was written soon after the 1999 WTO demonstration in Seattle, and focuses on campaigning to build movements within the US. The last two chapters look at regional alternatives to American-led international institutions in Latin America, the Bank of the South and ALBA (Alternativa Bolivariana para las Américas). Both explorations are useful and interesting, but have the weakness that neither approach fully challenges the structures that Hart-Landsberg has shown tend to protect TNCs from proper scrutiny. Workers’ resistance stays effectively within a national context, while international initiatives remain the preserve of established governments. The section on Latin America does showcase a real attempt to separate a group of countries from existing imperialist trade structures. Nonetheless, this effort remains within a capitalist context, and is directed by state actors rather than social movements.

Yet it would not be purely abstract to argue for the building of an international movement against the economics of ‘capitalist globalisation’. The last decade and a half has seen strong signs of the possibility of such a movement, from the Seattle demonstration of 1999, through the Social Forum movement to the strongly international reach of the anti-war movement ever since 2001. Movements against austerity and neoliberalism may need to organise in a national context, but can and must co-ordinate on regional and then international scales to construct a real power capable of challenging the miserable logic of capitalism.