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In 1995, the World
Trade Organization was born. The
offspring of eight years of negotiations, the World Trade Organization (WTO)
was hailed in the establishment press as the gem of global economic governance
in the era of globalization. The nearly
20 trade agreements that underpinned the WTO were presented as a set of
multilateral rules that would subject both the powerful and the weak to a
common set of rules backed by an effective enforcement apparatus In the WTO, it
was claimed, the powerful United States
and lowly Rwanda
had exactly the same number of votes: one.
The Crisis of the Globalist Project
Now the triumphalism
of those earlier years is gone. As the
fifth Ministerial of the WTO approaches, the organization is in gridlock. A new agreement on agriculture is nowhere in
sight as the United States
and the European Union stoutly defend their multibillion dollar subsidies. Brussels
is on the verge of imposing sanctions on Washington
for maintaining tax breaks for exporters who have been found to be in violation
of WTO rules. Meanwhile, Washington
has threatened to file a case with the WTO against the European Union’s (EU)
moratorium on genetically modified foods.
Developing countries, some once hopeful that the WTO would in fact bring
more equity to global trade, unanimously agree that most of what they have
reaped from WTO membership are costs, not benefits. Instead of heralding a new round of global
trade liberalization, the Cancun ministerial is likely
to announce a stalemate.
What happened? In
a word, Empire. It turns out that globalization and U.S.
unilteralism don’t mix. But first, some notes on globalization and the
globalist project.
Globalization is
the accelerated integration of capital, production, and markets globally, a
process driven by the logic of corporate profitability. It is defined by the ideological hegemony of
neoliberalism, which focuses on “liberating the market” through privatization,
deregulation, and trade liberalization.
There were, broadly, two versions of neoliberal ideology—a “hard”
Thatcher-Reagan version and a “soft” Blair-Soros version (globalization with
“safety nets”). But underlying both
approaches was the unleashing of market forces, and the removing or eroding of
constraints imposed upon transnational firms by labor, the state, and society.
Three Moments of the Crisis of Globalization
There have been three moments in
the deepening crisis of the globalist project.
The first was the
Asian financial crisis of 1997. This
event, which laid low the proud “tigers” of East Asia,
revealed that one of the key tenets of globalization—the liberalization of the
capital account to promote freer flows of capital, especially finance or
speculative capital, could be profoundly destabilizing. This was clearly shown
when, in just a few weeks’ time, one million people in Thailand
and 21 million in Indonesia
were pushed below the poverty line.[1]
The Asian
financial crisis was the “Stalingrad” of the
International Monetary Fund (IMF), the prime global agent of liberalized
capital flows. Its record in the
ambitious enterprise of subjecting some 100 developing economies to “structural
adjustment” was found sorely wanting. Structural adjustment programs were
designed to accelerate deregulation, trade liberalization and privatization.
Almost everywhere, however, they resulted in economic stagnation, and increased
poverty and inequality.
Shortly after the
Asian financial crisis, key intellectual defenders of the neoclassical free
market model began leaving the fold—among them Jeffrey Sachs, noted earlier for
his advocacy of “free market” shock
treatment in Eastern Europe in the early 1990’s; Joseph Stiglitz, former chief
economist of the World Bank; Columbia Professor Jagdish Bhagwati, who called
for global controls on capital flows; and financier George Soros, who condemned
the lack of controls in the global financial system that had enriched him.
The second moment
of the crisis of the globalist project was the collapse of the third ministerial
of the WTO in Seattle in December
1999. Seattle
was the fatal intersection of three streams of discontent and conflict that had
been building for sometime:
- Developing countries resented the inequities of the
Uruguay Round agreements that they felt compelled to sign in 1995.
- Massive popular opposition to the WTO emerged
globally from myriad sectors of global civil society, including farmers,
fisher folk, labor unionists, and environmentalists. By posing a threat to the well-being of
each sector in many of its agreements, the WTO managed to unite global
civil society against it.
- There were unresolved trade conflicts between the EU
and the United States,
especially in agriculture, which had been simply been papered over by the
Uruguay Round agreement.
These three
volatile elements combined to create the explosion in Seattle.
The developing countries rebelled against the Northern diktat at the Seattle
Convention Center; 50,000 people
massed militantly in the streets; and the differences prevented the EU and the United
States from acting in concert to salvage the
ministerial. In a moment of lucidity
right after the Seattle debacle,
British Secretary of State Stephen Byers captured the essence of the
crisis: “[T]he WTO will not be able to
continue in its present form. There has
to be fundamental and radical change in order for it to meet the needs and
aspirations of all 134 of its members.”[2]
The third moment of the crisis was the collapse of
the stock market and the end of the Clinton
boom. This was not just the bursting of
the bubble but a rude reassertion of the classical capitalist crisis of
overproduction, the main manifestation of which was massive overcapacity. Prior to the crash, corporate profits in the United
States had not grown since 1997. The crash
was related to overcapacity in the industrial sector, the most glaring example
being in the troubled telecommunications sector, where only 2.5 percent of
installed capacity globally was being utilized.
This stagnation of the real economy led to capital being shifted to the
financial sector, resulting in the dizzying rise in share values. But since profitability in the financial
sector cannot deviate too far from the profitability of the real economy, a collapse
of stock values was inevitable. This occurred in March 2001, leading to
prolonged stagnation and the onset of deflation.
The New Economics of George W. Bush
The crisis of globalization,
neoliberalism, and overproduction provides the context for understanding the
economic policies of the Bush administration, notably its unilateralist
thrust. The globalist corporate project
expressed the common interest of the global capitalist elites in expanding the
world economy and their fundamental dependence on one another. However, it did not eliminate competition
among the national elites. In fact, the
ruling elites of the United
States and Europe had
factions that were more nationalist in character as well as more tied for their
survival and prosperity to the state, such as the military-industrial complex
in the United States. Indeed, since the eighties, there has been a
sharp struggle between a section of the ruling elite stressing the common
interest of a global capitalist class, and the more nationalist faction that
wanted to ensure the supremacy of U.S.
corporate interests.
As Robert Brenner
has pointed out, the policies of Bill Clinton and his treasury secretary Robert
Rubin put prime emphasis on the expansion of the world economy as the basis of
the prosperity of the global capitalist class.
For instance, in the mid-1990’s, they pushed a strong dollar policy to
stimulate the recovery of the Japanese and German economies, so that they could
serve as markets for US goods and services.
The earlier, more nationalist Reagan administration, on the other hand,
had employed a weak dollar policy to regain competitiveness for the U.S.
economy at the expense of the Japanese and German economies.[3] With the George W. Bush administration, we
are back to the weak dollar and other economic policies that are meant to
revive the U.S.
economy at the expense of the other center economies. Several features of this
approach are worth stressing:
- Bush’s political economy is very wary of a process of
globalization that is not
managed by a U.S.
state, to ensure that the process does not diffuse the economic power of the United
States.
Allowing the market solely to drive globalization could result in key U.S.
corporations becoming the victims of globalization. Thus, despite the free
market rhetoric, we have a group that is very protectionist when it comes to
trade, investment, and the management of government contracts. It seems that the motto of the Bushites is
protectionism for the United States
and free trade for the rest.
- The Bush administration is wary of multilateralism as
a way of global
economic governance since while
multilateralism may promote the interests of the global capitalist class in
general, it may often contradict particular U.S.
corporate interests. The Bush coterie’s
growing ambivalence towards the WTO stems from the fact that the United
States has lost a number of rulings there,
rulings that may hurt U.S.
capital but serve the interests of global capitalism as a whole.
- For the Bush people, strategic power is the ultimate
modality of power.
Economic power is a means to
achieve strategic power. This is related
to the fact that under Bush, the dominant faction of the ruling elite is the
military-industrial establishment that won the Cold War. The conflict between globalists and
unilateralists (or nationalists) along this axis is shown in the approach
toward China. The globalist approach puts the emphasis on
engagement with China,
seeing its importance primarily as an investment area and market for U.S.
capital. The nationalists, on the other
hand, see China
mainly as a strategic enemy, and they would rather contain it rather than
assist its growth.
If these are seen
as the premises for action, then the following prominent elements of recent U.S.
economic policy make sense:
- Achieving
control over Middle East oil. While it
did not exhaust the war aims of the administration in invading Iraq,
it was certainly high on the list.
With competition with Europe becoming the
prime aspect of the trans-Atlantic relationship, this was clearly aimed
partly at Europe.
But perhaps the more strategic goal was to preempt the region’s
resources in order to control access to them by energy poor China,
which is seen as the United States’s strategic enemy.[4]
- Aggressive
protectionism in trade and investment matters. The US
has piled up one protectionist act after another. One of the most brazen
is its stymieing of WTO negotiations over vital matters of public
health. On behalf of the powerful
pharmaceutical lobby, it staunchly resists the loosening of patent rights
to drugs on all but three diseases.
While it seems perfectly willing to see the WTO negotiations
unravel, Washington has put
most of its efforts into signing up countries to bilateral or multilateral
trade deals such as the Free Trade Agreement of the Americas (FTAA) before
the EU gets them into similar deals.
Indeed the term “free trade agreements” is a misnomer since these
are actually preferential trade deals.
- Incorporating
strategic considerations into trade agreements. In a recent speech, U.S. Trade
Representative Robert Zoellick stated explicitly that “countries that seek
free trade agreements with the United
States must pass muster on more than
trade and economic criteria in order to be eligible. At a minimum, these
countries must cooperate with the United
States on its foreign policy and
national security goals, as part of 13 criteria that will guide the U.S.
selection of potential FTAA partners.”
New Zealand, perhaps one of the governments most committed to free
trade, has nevertheless not been offered a free trade deal because it has
a policy that prevents nuclear ship visits, which the U.S. government
feels is directed at the United States.[5]
- Manipulation
of the dollar’s value to force rival industrial economies to shoulder
costs, thereby regaining competitiveness for the US economy. While the Bush
administration has denied that this is a beggar-thy-neighbor policy, the U.S.
business press has seen it for what it is:
an effort to revive the U.S.
economy at the expense of the European Union and other center economies.
- Aggressive
manipulation of multilateral agencies to push the interests of U.S. capital. While this might not be too easy to
achieve in the WTO owing to the weight of the European Union, it can be
more readily done at the World Bank and the IMF, where U.S.
dominance is more effectively institutionalized. For instance, the IMF management
proposed a Sovereign Debt Restructuring Mechanism (SDRM) which would
enable developing countries to restructure their debt, while giving them some protection from
creditors. Already a very weak
mechanism, the SDRM was vetoed by the U.S. Treasury in the interest of U.S.
banks, though it had the support of many European governments.[6]
The Economics and Politics of Overextension
Any discussion of the likely
outcomes of the Bush administration’s economic policies must take into account
both the state of the U.S.
economy and the global economy, and the broader strategic picture. A key basis for successful imperial
management is an expanding national and global economy—something precluded by
the extended period of deflation and stagnation ahead, which is more likely to
spur inter-capitalist rivalries. For, without legitimacy, imperial management
is inherently unstable.
The Roman
Empire, for example, solved its problem of legitimacy through
political, not military, means. It extended Roman citizenship to ruling groups
and non-slave peoples throughout the empire. Political citizenship combined
with a vision of the empire providing peace and prosperity for all created that
intangible but essential moral element called legitimacy.
Needless to say,
extension of citizenship plays no role in the U.S.
imperial order. In fact, U.S.
citizenship is jealously reserved for a very tiny minority of the world's
population, entry into whose territory is tightly controlled. Subordinate populations are not to be
integrated but kept in check either by force or the threat of the use of force
or by a system of global or regional rules and institutions—the World Trade
Organization, the Bretton Woods system, NATO—that are increasingly blatantly
manipulated to serve the interests of the imperial center.
Though extension
of universal citizenship was never a tool in the American imperial arsenal,
during its struggle with communism in the post-World War II period Washington
did come up with a political formula to legitimize its global reach. The two
elements of this formula were multilateralism as a system of global governance
and liberal democracy.
As Frances
Fitzgerald observed in Fire in the Lake,
the promise of extending liberal democracy was a very powerful ideal that
accompanied American arms during the Cold War.[7] Today, however, Washington
or Westminster-type liberal democracy is in trouble throughout the developing
world, where it has been reduced to a façade for oligarchic rule, as in the Philippines,
pre-Musharraf Pakistan,
and throughout Latin America. In fact, liberal democracy
in America has
become both less democratic and less liberal.
Certainly, few in the developing world see a system fueled and corrupted
by corporate money as a model.
The
Bush people are not interested in creating a new Pax Romana. What they want is a Pax Americana where most
of the subordinate populations like the Arabs are kept in check by a healthy
respect for lethal American power, while the loyalty of other groups such as
the Philippine government is purchased with the promise of cash. With no moral
vision to bind the global majority to the imperial center, this mode of
imperial management can only inspire one thing: resistance.
The
great problem for unilateralism is overextension, or a mismatch between the
goals of the United States
and the resources needed to accomplish these goals. Overextension is relative, that is, it is to
a great degree a function of resistance.
An overextended power may, in fact, be in a worse condition even with a
significant increase in its military power if resistance to its power increases
by an even greater degree. Among the key
indicators of overextension are the following:
- the inflaming of Arab and Muslim sentiment in the
Middle East, South Asia, and Southeast Asia, resulting in massive
ideological gains for Islamic fundamentalists—which was what Osama bin
Laden had been hoping for in the first place;
- the collapse of the Cold War Atlantic Alliance and
the emergence of a new countervailing alliance, with Germany
and France
at the center of it;
- the forging of a powerful global civil society
movement against US
unilateralism, militarism, and economic hegemony, the most recent
significant expression is the global anti-war movement;
- the coming to power of anti-neoliberal, anti-US
movements in Washington’s own backyard—Brazil, Venezuela, and Ecuador—as
the Bush administration is preoccupied with the Middle East;
·
an increasingly negative impact of militarism on
the U.S. economy, as military spending becomes dependent on deficit spending,
and deficit spending become more and more dependent on financing from foreign
sources, creating more stresses and strains within an economy that is already
in the throes of stagnation.
In conclusion, the
globalist project is in crisis. Whether
it can make a comeback via a Democratic or Liberal Republican presidency should
not be ruled out, especially since there are influential globalist voices in
the U.S.
business community—among them George Soros—that are voicing opposition to the
unilateralist thrust of the Bush administration.[8] This, however, is unlikely, and unilateralism
will reign for some time to come.
We have, in short,
entered a historical maelstrom marked by prolonged economic crisis, the spread
of global resistance, the reappearance of the balance of power among center
states, and the reemergence of acute inter-imperialist contradictions. We must
have a healthy respect for U.S.
power, but neither must we overestimate it.
The signs are there that the U.S.
is seriously overextended and what appear to be manifestations of strength
might in fact signal weakness strategically.
[1]
Jacques-Chai Chomthongdi, "The IMF's Asian Legacy," in Prague 2000: Why We Need to Decommission the
IMF and the World Bank (Bangkok:
Focus on the Global South, 2000), pp.18, 22
[2] Quoted
in “Deadline Set for WTO Reforms,” Guardian
News Service, January 10, 2000.
[3] See
Robert Brenner, The Boom and the Bubble
(New York: Verso, 2002), pp.
128-133.
[4] David
Harvey, Speech at Conference on Trends in Globalization, University
of California at Santa
Barbara, May
1-4, 2003.
[5]
"Zoellick Says FTA Candidates Must Support US Foreign Policy," Inside US Trade, May 16, 2003.
This article summarizes a May 8 speech by Zoellick.
[6] For the
sharpening conflicts between the US Treasury Department and IMF officials, see
Nicola Bullard, "The Puppet Master Shows his Hand," Focus on Trade,
April 2002 (http://focusweb.org/popups/articleswindow.php?id=41)
[7] Frances
Fitzgerald, Fire in the Lake (New York: Random
House, 1973), p. 116. "The idea
that the mission of the United States
was to build democracy around the world had become a convention of American
politics in the 1950's. Among certain
circles it was more or less assumed that democracy, that is, electoral
democracy combined with private ownership and civil liberties, was what the United
States had to offer the Third
World. Democracy provided
not only the basis for American opposition to Communism but the practical
method to make sure that opposition worked."
[8] See
George Soros, "America's Role in
the World," Speech at the Paul H. Nitze School of Advanced International
Studies, Washington, DC, March 7, 2003.
Noting that he was for intervention in the Balkans, including a
"NATO intervention without UN authorization," Soros denounces the war
with Iraq on
the grounds that it stems from a fundamentalism that is unsound and wreaking
havoc with the US'
relations with the rest of the world.
The arguments he musters are those heard not only in liberal Democratic
Party circles in Washington but
also in "pragmatic" Republican Party circles and Wall Street.
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