The Crazy Logic of Capitalist Globalization

Author: (USA) William Greider, translated by Zhang Dinghuai et al.
Translators: Zhang Dinghuai, Zhou Xinqi, Xia Jiashi
Country of Origin:
Publisher:
Publishing Date: 2003-08-01
Features: Most people, especially those in industrialized countries with higher education, have forgotten that the political history filled with struggles is closely linked to the eventual widespread sharing of wealth. People view the free market, rather than political behavior, as the only reliable guarantee of wealth and social justice. This forgetfulness reminds us that the cruel lessons of history may repeat themselves. The greater challenge than accurately remembering the past is to view the future from its own perspective. Unless one believes in vulgar determinism, there is no need to assume that historical patterns will blindly repeat themselves. Human actors can determine different outcomes. History only repeats itself when people and society fail to clearly understand things and grasp their new meanings. Now, the world economy has a new fulcrum for balance, which is completely different from the direct struggle between labor and capital as described by Marx. This new fulcrum is the transfer of opportunities to create wealth and income from relatively older, wealthier societies to relatively poorer societies. Even with its ugly side of exploitation, the process of productive dispersion has the ability to produce dramatic separation from the past, opening up a gap for greater equality on a global scale. And it is this gap that will cause economic losses and exacerbate social tensions within the older, wealthier nations, where the growing inequality and the marginalized people are unable to control their own fate.
"Not only the United States, but the whole world, is experiencing tremendous improvements in living standards," said Albert Wojnilower, a retired chief economist at the Boston branch of a Wall Street brokerage firm. For example, due to the immense pressure from global wage equality, the average wage in the United States has been gradually declining over the past 20 years. In some other major countries, income decline has also begun to emerge. As this happens, even though the overall inequality between rich and poor countries is narrowing, inequality among citizens in developed countries is severely expanding. With the free operation of globalized business, observers like Albert Wojnilower believe that this form of coordination will persist for many years, possibly even decades. "I believe this trend cannot be stopped even by a benevolent God, perhaps even by aggressive Southeast Asia," Wojnilower quipped. The friction between these two realities constitutes a complex dilemma of convergence. This friction has sparked contradictory reactions in people, a theme of conflicting desires that recurs throughout the book. For organized labor, the famous old question—where do you stand?—between labor and capital has become exceptionally complex in the new environment. Overall, the new world has created contradictions among those who, at least in theory, belong to the same camp—workers against workers. The opposition between the older, wealthier workers and the newly employed poorer workers. Where do you stand? The history of industrial development has taught people around the world to view the economic order as a ladder. Some are at the top of the ladder, while others are striving to climb up. The new dynamics of globalization have created a different metaphor in people's minds—a seesaw—where some fall so that others can rise. Whether metaphorized as a ladder or a seesaw, neither is satisfactory, as both can breed resentment and hostility. Neither can lead to a prosperous, stable, and fair global system, as both inherently rely on exploiting the inequality between society and people. The political temptation to hinder globalization—by somewhat dismantling the system—will certainly grow stronger in developed countries, as losses are increasing. The Luddite remedy—a self-protective political upheaval that might, at least temporarily for some, reverse this trend—could also completely destroy the system for everyone else. The possibility of such political upheaval poses a huge threat to the smooth functioning of the revolution, potentially even halting it in certain aspects. If only some countries, as many are doing now, take self-protective measures against the market, the system can still be maintained. But if every country does so, business will plummet. In the past, when this happened, it led to widespread disaster and eventually triggered large-scale wars.
The American Automotive Manufacturers Association protested these rules and demanded that the U.S. government oppose them. However, in the face of the U.S. automotive company's enthusiastic efforts to enter the Chinese market, these protests seemed futile. Despite skepticism about China's industrial production capacity, no major car manufacturer in the world was willing to give up the opportunity to invest in China. General Motors and Toyota have established technology centers and dispatched engineers. Ford Motor Company is particularly focused on setting up factories to produce parts—including glass for taxis and trucks, rubber, instrument panels, heaters, and air conditioners. Although Chrysler produced Jeeps in Beijing for 10 years, it lost a $1 billion development project for new small trucks to Mercedes-Benz. Before gaining the right to manufacture cars, Nissan only produced major components: engines and transmissions. Volkswagen is striving to maintain its pioneering advantage and has loudly assured the Chinese that one day VW cars will be sold in the Japanese market. South Korea has a geographical advantage in car sales. Daewoo is pursuing the "People's Car" project, proposing to manufacture engines and transmissions in China and assemble low-cost cars in Korea. These cars will compete with Japanese cars in the Asian market. "China can use South Korea as a card to squeeze out Japanese and American car companies," a Japanese automotive industry executive predicted in Beijing. "No one can match China and South Korea's alliance in terms of cost." In the second half of 1995, General Motors and Mercedes-Benz won the race in the automotive industry. General Motors was authorized to collaborate with Shanghai Automotive Manufacturing Company on a $1 billion project for the development and production of family cars, where Volkswagen would continue to produce and implement its 10-year production plan. Mercedes-Benz will manufacture small trucks in southern China, while Ford Motor Company, Chrysler, and Toyota are undoubtedly the big losers at the moment.
If financial value truly is an estimate of future prices, despite the extensive technical analysis conducted by investors, stock traders, and economists, this price still cannot be entirely rational or scientific. In fact, the financial markets where such estimates are made resemble a beehive or a swarm of ants, sometimes even like a rabble, as the participants must constantly react to each other's behavior and the state of the economy. These investors manipulate price changes, even though some astute traders sometimes know that their behavior is wrong, but they respect it because their actions also change the estimated value of assets. Investors are emotional rather than scientists. This ancient truth about financial markets has long been recorded by economic historians in the annals of economic manias and crashes, and savvy market players have long understood this truth. However, strangely enough, the economic dogma of the free market has overlooked this truth. Economists who praise the financial markets as an idealized place are easily blinded by the complex and alluring figures in financial flows and the theoretical perfection they see in the market (perhaps because these functions match geometric research methods). Meanwhile, the financial markets remain a swarm of ants, still making judgments about the future. When investors are misled by mania, these errors can be catastrophic. The harsh reality is that this swarm-like force is growing increasingly powerful in economic life. In the previous generation, as governments of major global countries lifted controls on financial capital, the aggregating power of global financial markets surged. However, the aggregation of financial power has a more fundamental reason: the growth of financial asset values far outpaces any other form of growth, almost like an explosion in an instant. According to McKinsey, a consulting firm that serves global multinational banks and industrial enterprises, the total stock of financial assets in developed countries grew at an annual rate of 60% between 1980 and 1992, twice the rate of basic economic growth. Financial has become so easily the pillar of the global economy because its growth scale is larger relative to other industries. By 1992, the total financial assets of developed countries in the OECD stood at $3.5 trillion, twice their economic output. McKinsey boldly predicts that by 2000, the total will reach $5.3 trillion, three times their economic output. According to the consulting firm's estimates, these countries' financial assets are currently 1.3 times their exports and will soon reach 19 times. These statistics show that the global economic system is diverging. Whether one believes financial prices to be reliable or not, their rise is indeed far faster than common economic activity; and their rise may be based on these common activities. In other words, from the perspective of their price curves, the prospects for finance seem extremely promising. At least, the hope of investment can be realized.
The rise in prices can only partially explain the rapid growth of assets. The entire history of capitalism also follows a basic physical law. The longer the expansion period free from catastrophic disruptions like wars and recessions, the greater the accumulation of productive reserves. In other words, long-term peace and prosperity inevitably breed imbalances, and these imbalances come from the "accumulation of labor." This should be a reason for joy rather than sorrow. This vicious cycle will not improve with balanced budgets. Indeed, the achievements of fiscal order can only make things worse. Imagine if the Republican conservatives promised that the United States would take the lead in restoring budget balance before other countries. It is widely believed that this would give the United States an advantage over other economic rivals, who would rely on unreliable promises of lower interest rates. However, the global reality imposes higher interest rates on every country, regardless of its fiscal condition. The G7 report noted that fiscal deficits are a common problem: "The impact of real interest rate changes on fiscal deficits now affects all countries entering the global financial system," the report said. "This means there is a common interest in the rationality of fiscal policy." So, suppose all developed countries take steps to correct fiscal chaos to some extent immediately. The economic consequences would be dramatic and, more disappointingly, demand would shrink as governments reduce revenue, cut public spending, and stop new borrowing. For example, fiscal order would require the United States to reduce domestic demand by 2%, Germany by 2.5%, Japan by 3.7%, France by 5.2%, Italy by 7%, the United Kingdom by 4.9%, and so on. If this happens, it will pose an interesting challenge to the world: what will replace the lost demand—income, sales, or profits? Global capital demand will certainly decrease, but personal savings will not increase either, as there is no miracle of savings accumulation during economic stagnation. The result will be widespread cutbacks in spending, statistical financial balance based on overall unemployment and economic resources, and, more importantly, expanded social suffering. The real cause of this chaos in the financial issue of debt growth and rising interest rates is the "globalization" of the new economy. The globalization of industrial production has pushed important emerging producing countries onto the rise while shaking the foundation of general prosperity in traditional economic regions. The old political order has endlessly talked about these changes but has never grasped the essence. In Europe and America, the general political debate around the government has been obstructed by rentiers: when an elected government is incompetent, its actions cannot change economic outcomes. However, the focus of U.S. politics remains somewhat on rapid economic growth, while Europe still protects its social welfare system. It can be imagined that future politics will redefine economic growth with different values for public welfare. Currently, politicians do not campaign on promises to slow economic growth. Even the U.S. conservatives suggest reducing federal government spending, balancing the budget, and cutting taxes for capital owners. But their views are based on the same premise: these measures are ways to stimulate rapid economic growth—more factories and more jobs. But if central banks and bond markets prevent rapid economic growth, and if rentiers view a healthy economy as a threat, what will they do? Traditional politics is in a dangerous dead end—promising the unfulfillable, raising public trust without the courage to challenge the ruling dogma. If someone ignores the universal policy principles of the rentier regime and assumes it has a deeper historical purpose—to force people to accept the revolutionary transformation of capitalism—then this logic begins to reveal a greater significance. Just as the gold standard did a century ago, the strict control of the old economy's growth and employment forced people to accept the deep adjustments already underway—industrial restructuring, the adoption of globalized production platforms, a fundamental decline in living standards, and the transfer of wealth to Asia and other regions. Other competing social and economic interests are being fiercely attacked by instability and harsh conditions, forcing them to defensively crouch and lacking the courage to resist these fatal changes in their lives.
Of course, no one in the government expresses such a candid statement.
Translator's Preface
Part One: The Whole World
Chapter 1: The Storm Before the Calm
Chapter 2: The Clash of New and Old
Chapter 3: The Ghost of Marx
Part Two: Fighting for Survival
Chapter 4: Equal Wages
Chapter 5: "Vava Shan 2020"
Chapter 6: Automation
Chapter 7: "Scratching Their Own Itches"
Chapter 8: The Glory of Getting Rich
Chapter 9: Cooperative Capitalism
Chapter 10: The Buyers of Surplus Products
Part Three: The Fervent Capital
Chapter 11: The Alchemists
Chapter 12: The Chains of Debt
Chapter 13: The Rentier Regime
Chapter 14: Economic Issues
Part Four: Social Issues
Chapter 15: "These Devilish Dark Factories"
Chapter 16: The Spiral Descent
Chapter 17: The Prosperity of the Working Class
Chapter 18: The Working Class Takes the Helm
Chapter 19: Managing Natural Resources
Acknowledgments