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Posts Tagged ‘Global Capital’

Marx predicted globalisation of world capital over a century and a half ago. He pointed out that capital had an inherent tendency to expand, to seek areas of higher profit. Once it exhausts opportunities in one particular ‘market,’ it moves on to encompass other markets. Today the dominant view holds that globalisation, or spread of global capital and capitalism to far corners of the world, is inevitable. The process tends to link up the nation-states’ economies into an integrated world economy. But it is a multidimensional phenomenon. It impinges not only on the world economy but also on the environment, public health and culture, indeed almost every facet of life.

However, the economic integration of the world is not accompanied by matching political integration. The process of creation of supranational bodies able to enforce agreed system of rules and laws on all states is, in comparison, slow. The international system remains an anarchic one, composed of nominally sovereign states. The leading advanced capitalist countries seek free movement of capital and goods. The movement of labour continues to be hampered by a plethora of rules, regulations and laws.

The form of capitalism that the advanced, capitalist world, led by its corporate sector, is trying to impose on the rest of the world—in essence, the neoliberal mantra of liberalisation, deregulation and privatisation—is not conducive to the economic development of developing countries such as Pakistan, which are yet to establish a sound infrastructure and industrial base. Besides, it is certain to lead to tensions and conflict in inter-state relations and/or periodic global economic crises. A financial crisis hit the advanced capitalist world in 2008, sooner than expected.

The global crisis notwithstanding, Pakistan’s economic problems are worsening by the day, due to reliance on the neoliberal paradigm, further confounded by its ruling elite’s aimless policies, corruption, lavish lifestyle, resistance to positive change, and lopsided priorities.

Capitalism’s survival and growth depends, in any case, on the patronage and protection of governments. Judicious regulation of the activities of big market players by governments is essential for the system to work, as is clear from the failure of the ‘deregulation’ experiment of the past few decades. Unbridled ‘deregulation’ in accordance with neoliberal thinking, particularly in banking and finance, were bound to lead to problems. That moment arrived in a big way in 2008 when financial systems in the advanced capitalist world faced a meltdown. Capitalism is in its worst crisis since the Great Depression of 1929. The economies of the advanced capitalist world are in particular distress! Economies of those developing countries dependent on exports to those countries are also affected badly. The IMF forecast contraction of the developed world’s economies, and a reduction in the growth rate elsewhere.[1] The creed of market economy, which metamorphosed into greed economy, has received a big jolt. The huge inter-state and intra-state inequality that it promoted is pushing an increasing number of people across the globe below the poverty line. However, an organised effort is being made by governments in the advanced capitalist world to save capitalism. Nevertheless, a contradiction exists in the claims of the proponents of the market, who decry government intervention whilst the going is good, but call upon the government to save the market when things go awry, as they are bound to, from time to time.

Apart from this, the neoliberal paradigm has made the whole edifice topsy-turvy. It emphasises trade and finance, rather than production and manufacturing industry. This amounts to putting the cart before the horse. Trade follows production of goods, and finance has an important role in industry, but auxiliary, not primary. The rigmarole of financial instruments, hedging and risk management devices, not to speak of speculation and non-productive re-shuffling of financial investments that has taken centre-stage during the last few decades of the ascendancy of neoliberalism, has done more harm than good.

Besides, the developing states’ economies have been severely harmed by premature liberalisation and deregulation, mindless privatisation of state entities and strategic assets. The ‘integration’ of their economies with the world economy has been a mixed blessing, good for some countries, devastating for others. The industry of many developing countries—Pakistan, for example—has got stunted as a result of unthinking patronisation of neoliberal policies. Many economists in the developing countries have merely been parroting the neoliberal mantra, and the presumed blessings of ‘globalisation’ under the neoliberal paradigm—without understanding, and in some cases denying outright, its highly detrimental effects. Many of them have allowed their economies to become suppliers of raw materials, low value-added manufactures and low-skill jobs or merely markets for more developed countries. What they really need is to upgrade the skills of their people, establish industry, initially to substitute imports and at a later stage to export higher value-added products. Foreign Direct Investment is a good thing if it serves the needs of their economies, and worse than useless if it promotes the exploitation of their resources without adequate compensation or transfer of technology. What they need is to upgrade the knowledge and skill of their workforce, and open up avenues to utilise that knowledge and skill. The knowledge and skill gap with the developed world must be bridged in the quickest possible time. In this lies their only chance of meaningful survival, which means survival with dignity. Instead, most of them are turning their economies, partly under pressure, partly on the urging of the IFIs and the developed world, into consumption-oriented economies, markets for the industrialised world’s surplus production.

Many things that otherwise would have been perceived merely as claims, have been upheld by events around the world. Here is a crisis of global proportions, in essence a systemic crisis of world capitalism, hastened and aggravated by the misdeeds of greedy ‘investors,’ speculators and middlemen of the financial system, especially in the industrialised world, where the financial systems are the least regulated. In the US, the Congress passed a 0 bailout plan in late 2008 to save the system from collapse.

After the disintegration of the Soviet Union, and especially since the terrorist attacks in America in September 2001, the sole superpower has tried to sustain its hegemony through military adventurism. It launched an open-ended ‘war on terror’ and invaded Afghanistan and Iraq. Hundreds of thousands of people have fallen victim to this gigantic folly, to which there is no end in sight. Finally it has contributed to the financial meltdown that we witness today. While the Western governments and media focus on ‘extremists’ and ‘terrorists,’ they do not tell their people that they were promoted by western governments and their surrogates in the Islamic world, during the jihad against the former Soviet Union in Afghanistan. After 9/11, a wrong strategy has only served to keep them in business longer than might otherwise have been the case. They are now fighting against their own creators rather than doing there bidding!

Unfortunately, Pakistani leaders, past and present, cannot escape the blame for helping unbottle the genii—an action that led to the current unenviable situation for Pakistan. Since 1979, almost all Pakistani regimes have gone along with Washington’s strategic aims in the region, with the consequences that we witness today. The ‘war on terror’ has had highly detrimental consequences for its people! It has become an albatross hung around the nation’s neck. The financial costs of this war in FY 2008-2009 were Rs. 678 billion, up from 484 billion the previous year! The much-touted ‘financial assistance’ received from Washington and its allies is not even a fraction of the financial costs of this war. The political and human costs are in addition.

To return to our main subject, the world system theories give a good insight into understanding the contemporary world. Immanuel Wallerstein’s world systems theory analyses the world holistically. It considers ‘historical ‘systems’ in place of what is called ‘society’ in traditional social science. Systems are classified on the basis of economic production relations. Today’s system is the capitalist world economy, in which capitalist production relations prevail. In the past there have been other systems, which he names localised ‘mini systems’ of pre-agricultural period and later ‘world empires’ based on the ‘redistributive tributary’ mode of production. In today’s ‘world economy’ both state and non-state actors have a role in determining the course of events. The proper field of discourse that considers all these issues is political economy.

Some political economists divide the approaches to the study of international political economy into three different categories: Realist, Liberal and Marxist. According to Frieden and Lake, these three approaches differ in that they regard, respectively, nation-states, the individual, and classes (in society), as the units of analysis. The proponents of the liberal approach claim that economic relations, both at the international and domestic levels, are essentially harmonious, while the Marxist and the Realist approaches consider them to be conflictual. In the Marxist view, based on dialectic materialism, economics determines politics. Economics divorced from politics has no meaning. In the realist view, politics and power relations determine economics. The liberals regard