On Economic Globalization, Neo-Liberalism and the Nature of the Period – Discussion Notes (Nigel Harris)

Nigel Harris wrote that the charge of “imperialism” has served the Left for a very long time as a supreme accusation against the political order of the world. The term implies not that strong States invariably try to bully weaker ones, nor that “imperialism” is just a fancy name for Washington, but that there is a world political order embodying systemic relations of domination. However, while once there might have been relatively robust theoretical underpinnings to this approach (in Lenin's popularization of the combination of Hobson and Hilferding¹), the thesis has long since been shown to be doubtful². On the other hand, imperialism's opposite, “national self-determination”, seems equally of doubtful validity in conditions of economic globalization. Indeed, these theoretical difficulties become even sharper when it is recognized that Washington, the supposed global hegemon, is itself trapped in an apparently insoluble crisis in the global economic order – the political agenda comes apart from the economic. What follows are some notes for discussion on an alternative approach to characterizing the world order.

1. Since about 1980, the world economy and its constituent national parts, has been dominated by the transition to a single global economy, “economic globalization”. This imposes on the world a changing pattern of territorial specialization and interdependence, organized by global markets, not – as hitherto rightly or wrongly believed – by national States. The economic integration of the separate political territories (former “national economies”) into a single economic system has been achieved by States (at different times and stages) relinquishing control of external trade, of capital movement and finally, albeit partially, of labour. Indeed, by now it is doubtful in the core of the system whether “national economies” - discrete territorial areas of autonomous economic activity, defined by political boundaries – any longer exist as objects of effective government policy. States here at best seek to manage global economic flows that begin and end beyond both their authority and even knowledge. The free flow of the global factors of production is creating a single integrated economy outside the control of any one national political authority³(as in the original creation of national economies free movement within carved out a national economic entity from what had been often a regional economy – witness, for example, the formation of Germany or the partition of India).The destruction of the old Soviet Union and the former Eastern Bloc, of apartheid in South Africa, as well as the coming transformations of others(North Korea, Myanmar, Cuba etc) can be seen as only the more extreme examples of this apparently inexorable process of economic globalization.

2. The first phase of the current transition has been characterized both by extraordinary levels of prosperity in the heartlands of the system (the Atlantic economy and Japan) and an unprecedented geographical spread of economic growth (to China, east and south-east Asia, eastern Europe to Latin America, and latterly to India). This in turn, may now draw in to the process sub-Saharan Africa. In the first phase, opinion rejoiced that apparently the world had mastered the secret of sustained and spreading economic growth; in the second, marred at the end by severe economic crisis in the heartlands, there were growing fears there that globalization had robbed the world of political governance, the State, and imposed a global territorial division of labour which made it impossible to employ the mass of the labour force, implying long-term mass unemployment. There seemed to be simultaneously an existential political crisis of the State and an economic crisis of material survival⁴.

3. Historically, the current transition is the second⁵ great surge towards economic globalization. The first, between – say – 1870 and 1914⁶ – ended with two world wars and the Great Slump in which States not only clawed back powers they had conceded to global markets, but immensely enhanced and centralized political control over their respective national economies to an unprecedented degree, epitomized in the extraordinary concentration of State power in Nazi Germany and Soviet Russia. More generally, the period established an uncritical faith in the potential of State planning and dominant public sectors, nowhere more so than in Nehru's India. Everywhere governments mimicked the imperatives of the war economy, even in peacetime. It took nearly another half century after the end of the second World War to resume the drive to economic globalizaton, now with much enhanced vigor and comprehensiveness, and encompassing the whole world, not just the Atlantic economy.

4. Indeed, never before in the history of capitalism, it seems, has the ethic of competitive markets, “neo-liberalism”, penetrated so deeply into the domestic operations of the State, into virtually every cell of the social order. Neo-liberalism has established an extraordinary intellectual hegemony, founded not upon an excess of greed (that was always there), nor an intellectual error among economists, but rather as the ideological expression of an order of global capital – the neoliberals are the product of the process, not its source. We are now within sight of the reversal of many of the major historical efforts to limit the power of markets – from the New Deal and Great Society legislation in the US (even including the right to collective bargaining) to the welfare state and social services in Europe. In the period from the 1950s to the present, there has been an almost complete reversal of the dominant statist narrative – then in the developing countries, accelerated economic growth was seen as exclusively attainable through economic isolation, closure to the world; now it is seen as exclusively attainable through “opening up”.

5. “Opening up” the national economy (and undertaking all the domestic reforms for this to work) involves allowing the integration of national and global economies, allowing domestic economic activity to be decided by global markets rather than by the State – or electoral – priorities. By implication, the State relinquishes any ambition to shape the domestic economy in any particular direction, restricting itself to managing efficiently and facilitating the accommodation of global forces.

6. However, the emergence of a national “global State” (that is, a State, the function of which is to manage the local economy and society in conformity with global, not local, imperatives) profoundly weakens the political position of the State, compared to the past. The State is obliged to relinquish much of what used to be a national political agenda which involves the management of external trade, capital movements and, in principle, labour flows. It relinquishes power to bribe the electorate and to secure its political perpetuation, to reward patrons etc.To put it, over simplistically, it faces contradictory options – to secure economic growth (through integration in the world economy) but with weakened State control over its political environment; or to enhance its political dominance at home with economic stagnation. Of course, depending on specific circumstances of a particular State (and the cumulative effect of past policies), opening up to the world may not lead to economic growth, in which case, the State has no recourse except to rule by violence. In an existential crisis (such as, for example, faces the Asad regime in Syria), the State will be obliged to sacrifice present and future economic growth – and indeed, the inhabitants – to keep hold on power.

7. The threat to State power is political in a different way – through undermining the domestic social solidarity that is supposedly a precondition for stable government. No population is likely to remain indefinitely loyal to a state seen as working exclusively for foreigners (the “world system”). Nowhere is this more apparent in developed countries than in the field of immigration. The mobility of labour internationally seems now to be a precondition for economic growth. No advanced economy is now self-sufficient in labour (including here the changing diversity of skills required to cope with changes in the economy. imposed by changing global demand). However, the solidarity underpinning the old State required levels of xenophobia, and sometimes racism which are incompatible with continued immigration, required to sustain the “churning” of the labour force to sustain economic growth (especially where there are high levels of native unemployment). Everywhere today, certainly in the heartlands, there are increasing restrictions on immigration and mobility, despite the damage this does to economic growth (not to speak of the welfare of an aging native born population). States are again caught in a contradiction – the conditions of growth undermine the elements of national closure (zero net migration) supposedly required to make State power secure (seen most vividly in North Korea and the old Stalinist States).

8. It is perhaps this contradictory position which today inhibits States from copying the reactions to the interwar Great Depression which ended the first surge of globalization – economic closure and domestic authoritarianism. The reaction now is fragmentary and contradictory – moves to authoritarianism⁷, along with continued neo-liberal reform, attempts to cut immigration, to demonize “illegal immigrants” (and Muslims) but without systematic protectionism. Of course, the longer the crisis persists, the more it may become an existential issue for the State, especially if marked by popular revolt against economic austerity, then the greater the danger States will seeks to recover their lost powers, and reverse economic globalization, sacrificing the welfare of their own – and the world inhabitants - to their own political survival. The issue of world slump was only settled last time round by resort to World War and a terrible orgy of self-destruction. At the moment, world war seems unlikely but one should not underestimate the potential for auto-destruct when one or other States existence appears threatened, producing the “common ruin of the contending nations/classes”.

9. These trends – if “trends” they are - go with attempts to disenfranchise the citizenry, to isolate government from “politics”, to protect the global system (and States) from popular demands and pressures, and install technical or expert administration (the World Bank and IMF play a key role here in training a global cadre of experts to direct the financial administration of States). Independent central banks - and independent national statistical agencies – are required to reassure “global investors” that mere governments – or “politics” - cannot be allowed to interfere either with monetary policy or basic data. In the special case of Europe, experts have been parachuted in to run Greece and Italy, and binding clauses inserted in respective constitutions to enshrine conditions of national management. Some of the language betrays the displacement of the sovereign people - “citizens” become “clients” or customers for State services, where the criterion of judgment becomes efficiency and cost of provision not the exercise of popular sovereignty. Undermining popular representation further erodes the legitimacy of the State.

10. In crisis, the limits imposed on national sovereignty by the new order are slowly becoming clearer . On the economic front, the global economic nexus, global markets, severely disciplines national policy, and those constraints are reinforced by the political order of States, the so-called “international community”. The State begins to behave as an agent for an economic and political world order, enforcing global imperatives on the domestic population, rather than representing it to the world at large (let alone defending it against external threats). If State sovereignty is no longer practicable, will the world's fascination with “national liberation” be undermined? Not while aspirant ruling classes are willing to fight for a place at top table and there are no alternative options for popular self-emancipation. Winning national independence and a new State allows privileged access to loot the new country – and then deposit the proceeds in Vermont or Kent or Provence(as with the Gaddafis or Bhuttos)
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11. The conjuncture exposes the separation of what we might call two ruling classes – a territorial national ruling class, whose very existence depends on holding a national territory (composed of the State administration, armed forces and security services, croney capital, owners of land and infrastructure etc), and a global ruling class which directs the companies and corporations which constitute the global economy, the mobile global rich, the staff of international agencies and NGOs etc – that is a global social stratum for whom nationality is a mere contingency, not a matter of defining identity and loyalty. In practice, the two classes are not at all clearly distinguishable, and members pass freely between the two. What is distinguishable is a political interest (for example, between neoliberalism and economic nationalism), and a role (national versus international)⁸.

12. Thus, we may be entering a period which combines both the extraordinary potential for an end of world poverty⁹, and an existential crisis of the fractured political order of the world. The danger is that the territorial ruling classes may use their overwhelming control of the powers of physical coercion to restore national dominance of the global economy, resulting in domestic authoritarianism with economic stagnation (with possible perpetual warfare on the borderlands to enforce social discipline, a combination so brilliantly imagined in George Orwell's 1984). In practice – and hopefully – global economic integration is by now so advanced, it cannot be comprehensively reversed, even if components can be qualified (for example, free movement of labour), and States will continue to try to cheat on the rules. States have an interest in the developed countries, in inflating the popular fear that the new international division of labour will render redundant larger sections of the labour force to support populist authoritarianism that could damage economic globalization – and hence global welfare. Elements of possible national capitalisms already might be seen to exist in the marriage between national militaries and crony capitalism in some important States (Russia, China, Pakistan, Iran etc.).

13. As we have noted, many States have already been making adjustments to the new circumstances. One of the more curious – if not risible - by-products of this has been the ubiquitous spread of debates on what it is to be a native, the “values” supposed to unite the natives, often under the pretext of the need to “integrate” non-natives (immigrants, refugees etc). The discussion is obscure since what united – say- the British – was never shared values but common subordination to the British State, but it is embarrassing to admit that there is nothing else in common. As so often, out of its peculiar circumstances (including immense cultural diversity), Israel appears as pioneer making these adjustments – combining militarized ethno-nationalism, religious orthodoxy and authoritarianism, employing the Arab Israelis and Palestinians as an anvil on which to forge unity out of immigrant diversity, with perpetual war in the Occupied Territories as a source of popular fear. However, the combination in the medium term could be suicidal for an economy as globalized as that of Israel.

14. Left to itself, the global system appears incapable of resisting self-destruction. Markets and the competitive drive to profit – seem incapable of establishing the self-discipline to escape crash. The global capitalist class shows little potential for political self-government. For that, they are dependent on the existing political order. Yet the fragmented political order appears incapable of overcoming its ferocious rivalries to achieve unified action. The core problem, in sum is an integrated world economy, driven by global markets, the outcome of which can neither be determined nor predicted, faces a fractured political order of competing States, each undermined by global capital. Capital for a very long period was able to hide behind one or other State but now – in the final phases of the completion of a global bourgeois revolution, it is obliged to step into the limelight, unprotected by political power. Meanwhile, the opposition to global capital – from the scattered occupations, the Arab spring, the trade union fight against austerity in Europe, to the hundreds of peasant agitations and strikes in China, remain trapped within each national context, each assuming a State which can change their environment for the better. The creativity of these1111 movements is not in doubt, yet we cannot even begin to visualise a realistic road map to one world, a world without war, with a unified drive to end world poverty, secure a livelihood for all with security, in a safe and sustainable environment. Revolutions in one country can no longer achieve “national liberation” (that requires breaking the global order), and though revolutions may spread (as we have seen in the Arab spring), the outcome only reiterates the same order of competing states, itself at the core of the underlying problem.

15. These notes began with an implied criticism of the Left insofar as it identified the contemporary world as “imperialist”. The charge put Washington at the centre of a world system of domination, implying that achieving self-determination by overthrowing Washington would achieve the liberation of the world. However, Washington itself is victim to a global capitalist order. Not only is it mired in an apparently insoluble economic crisis, it has lost its economy(and its capital, now global), now a junction in global flows. Its spectacular armaments in no way resolves the economic problem. Washington's extension into the world is not “imperialism” but an attempt to create a substitute for the missing world government, but not in the interests of the people of the world so much as the tiny minority that directs the US.

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¹ The literature is now so historic, it hardly seems worth enumerating but see:
* VI Lenin, Imperialism, the highest stage of capitalism 1916, republished Selected Works V, London 1936,p.53;
* John A Hobson, Imperialism: a Study, New York (Potts and Co.), 1902;
* Rudolf Hilferding, Finance Capital: a study of the latest phase of capitalist development, translated from the original German (1910 edition) by Morris Watnick and Sam Gordon, with an introduction by Tom Bottomore, London (Rouledge and Kegan Paul), 1981.

² The literature here is enormous, but by way of example, see Michael Kidron, Imperialism: highest stage of capitalism but one, International Socialism 9. Summer 1962, republished in his Capitalism and Theory, London (Pluto), 1974, pp.123-139, and Nigel Harris, Imperialism Today, in India-China:Underdevelopment and socialism, Delhi (Vikas), 1974, pp.155-205.

³ The topic is difficult to discuss, in part because the data and policy discussion are defined by the current distribution of political power. Statistics and concern are defined by national States and their interests. The subject of a global economy is thus mystified through the perspective of competing States. Indeed, some see the story of the world economy as little more than the competition for shares of output of different States, rather than States being, as it were, corks on the waves of global economic churning.

⁴ In an overheated political context, the fears were wildly exaggerated, muddling the relative position of one State with the condition of populations. The concentration of skilled labour, research facilities and infrastructure, not to mention the role of the heartlands in providing safe refuges for the global rich, should give the heartlands an indispensable global role far into the future, even if the relative pecking order of States changes.

⁵ A still earlier “surge” might be seen – following Kautsky - in the period of colonial empires. See also Tirthankar Roy, Empire, Law and Economic growth, EPW Feb 25th 2012,pp.98-105.

⁶ Summed up presciently (if prematurely) in 1914 by Leon Trotsky:
“The natural tendency of our economic system is to seek to break through the state boundaries. The whole globe, the land and the sea, the surface as well as the interior, has become one economic workshop, the different parts of which are inseparably connected with each other...The present War (World War I [NH]) is at bottom the revolt of the forces of production against the political form of nation and state..It means the political collapse of the national state as an independent economic unit.”. Preface, The War and the International, 1915 (NY transl.1918).

⁷ In the US, the moves to end habeas corpus, institutionalize State use of torture etc. are well known – and see the 2011 National Defense Authorisation Act to allow indefinite detention without charge or trial (in the UK there are comparable steps to allow indefinite detention without trial). Meanwhile, the US has one of the largest prison populations – over 7 million; China does not publish figures, but the number maybe larger.

⁸ It might be said that global ruling class cannot be said to exist as “a class for itself” without identifiable institutions of self-realization, of global governance. The issue is important but would carry this account far off course to pursue here.

⁹ The reduction in world poverty since 1980 – the period of economic globalization - is staggering, and seems to have persisted through the onset of world economic crisis; although subject to much dispute, partial World Bank summary estimates for 2010 suggest global poverty has been halved since 1990, a reduction replicated in all regions of the world – see A fall to cheer, The Economist, Mar. 3rd, 2012, p.75.

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