Home > Uncategorized > Globalization, inequality, and imperialism

Globalization, inequality, and imperialism

from David Ruccio

We need to fundamentally reject our “free trade” policies and move to fair trade. Americans should not have to compete against workers in low-wage countries who earn pennies an hour. We must defeat the Trans-Pacific Partnership. We must help poor countries develop sustainable economic models.

Sanders’s critique is buttressed by the conclusion of the latest report from the Economic Policy Institute, that the gaps between the richest and poorest families have grown in every state in the country since the late 1970s, as well as Oxfam’s analysis of growing inequality across the globe, summarized in the fact that the richest 1 percent have now accumulated more wealth than the rest of the world put together.

The case against the unequalizing dynamic of capitalist globalization couldn’t be clearer.

Yet, many (Noah Smith is just the most recent example) have attempted to argue exactly the opposite: that globalization is a positive force based on the fact that the global distribution of income has in recent decades become more equal.

The argument in favor of globalization is based on data from Branko Milanovic, illustrated in the so-called “elephant graph” (on the right-hand side of the chart at the top of this post), according to which most of the world’s population (except the very poorest and the working-classes within rich countries) has been gaining.* 

Smith takes Milanovic’s findings to represent a fundamental challenge to “some of the bedrock ideas of both the left and the right.” And, as usual, he gets a little bit right and a lot wrong.

On one hand, the fact that, on a global scale, both the world’s poorest people and the working-classes within rich countries have experienced little if any increase in their real incomes represents a fundamental challenge to the views—of both mainstream economists and neoliberal economic and political elites—that capitalist globalization benefits everyone. It doesn’t, and never has.

But, on the other hand, Smith is simply wrong to claim that the elephant-like changes in the global distribution of income invalidate left-wing claims that the global capitalist game is rigged. It is, and always has been.

What commentators like Smith miss is that global capitalism has changed over its history. At one time (especially in the nineteenth century), it meant industrialization in the global north and deindustrialization in the mostly noncapitalist global south (which were, in turn, transformed into providers of raw materials, which became cheap commodity inputs into northern capitalist production). Later, especially after decolonization (following World War II), we saw the beginnings of capitalist development in the south (under the aegis of the state, with a set of policies we often refer to as import-substitution industrialization), which involved a reindustrialization of the south (producing consumer goods that were previously imported) and a change in the kinds of industry prevalent in the north (which both exported consumer goods to the rest of the world, which after the first Great Depression and world war were once again growing, and often provided inputs into the production of consumer goods elsewhere). Later (especially from the 1980s onward), with the accumulation of capital in India, China, Brazil, and elsewhere, noncapitalist economies were disrupted and millions of peasants and rural workers (and their children) were forced to have the freedom to sell their ability to work in urban factories and offices. As a result, their monetary incomes rose (which is not to say their conditions of life necessarily improved), which is reflected in the growing elephant-body of the global distribution of income.

Does that mean global capitalism is not rigged? Of course not. It continues, as before, to be rigged both within and across countries. The top 1 percent across the globe continues to find itself in the position of capturing the surplus created by the world’s workers, does as they did when capitalist globalization began (because, we often forget, capitalism has been global from the very beginning). The only changes that have taken place are (a) the number of workers who are involved in producing that surplus (which has dramatically increased, especially in the global south), (b) the geographical location of the members of the 1 percent (many more now in India, China, Brazil, and elsewhere), and (c) the way the surplus is captured (either directly, from the production of capitalist commodities within the north and south, or indirectly, especially in the north, through finance, insurance, and other services).

Which brings us, finally, to the issue of imperialism (which, contra Smith, was never just about rich countries gaining at the expense of poor ones). The argument I made back in 2000 is that, while “‘formal empires’ no longer (or, better, hardly) exist—precisely because the thinkers and movements of anti-imperialism and national liberation (from Mariátegui and Gandhi to Fanon and Che, from Peru and India to Cuba and Vietnam) were successful, because imperialism was opposed both by broad alliances of subaltern, colonized peoples and by equally broad alliances within the imperial nations themselves”—what we’ve seen in recent decades is a new kind of imperialism, an attempt not to take over individual nations but to transform the world as a whole, “a project to recolonize the entire world, to remake it, with the zeal of a humanizing mission precisely reminiscent of the ‘Civilization, Christianity, and Commerce’ that, according to the legendary David Livingstone, was the basis of the European colonization of Africa.”

This encourages me, at least, to borrow from Gilles Deleuze and Félix Guattari and to think of imperialism as a machine—as against either a particular stage of capitalism (Lenin’s preference) or merely a political option (the choice of Lenin’s nemesis, Kautsky). Precisely the choices that are repeated today. In contrast, the machinelike quality of imperialism gives a sense of the ways in which it has various parts that (often but not always) work together, a set of energies, available identities and categories, that propels individuals and groups, institutions and structures, to enact designs and to civilize those who attempt to resist its apparent lessons, to make them succumb to the naturalized logic. Not a stage of capitalism but rather a machine that energizes and is energized by capitalism at various points in its history. Not an option, a political choice available to ruling governments and regimes, although it does include various options: military bombardment or invasion, economic carrots and sticks, cultural hegemony and worldwide news reach. . .

. . .And the knowledges produced by economists, especially (but not only) in the United States.

Today, the effects of the complex and changing assemblage of the capitalism and imperialism machines (and the mainstream economic knowledges that have supported them) are being contested by the discontents of capitalist globalization, the growing numbers of citizens on both sides of the Atlantic who have been treated as so much detritus in the opening up of global markets for their corporate employers and financial oligarchs.

The results of this contestation are, of course, messy but the message is clear: we need to imagine and create a new kind of global economy, one that benefits the majority of people both within and across countries.

 

*There’s nothing inconsistent between the Oxfam and Milanovic results: Oxfam is focusing on the global distribution of wealth, while Milanovic reports on the global distribution of income. Both, however, tell us something important about contemporary trends in global inequality—that, at one and the same time, the world’s top 1 percent has increased its accumulation of wealth (such that it now owns more than everyone else combined, most of whom have very little wealth), precisely because of its own soaring incomes, even as the world’s “middle-class” has seen its real income rise in recent decades.

  1. graccibros
    July 4, 2016 at 3:44 pm

    Thanks for this David. A heavy duty topic for economists and people on the left, loaded with historical baggage if not “fraught” – that increasingly used word that signals contested intellectual and political terrain spilling over into the emotional realm.

    The main issue you write about here – that there have been material economic gains – China is the leading example – of millions of peasants lifted out of poverty – at the same time the working class in America has seen its living standards erode and political “standing” drop down a steady incline since at least the late 1970’s…under a globalization (or imperlialism regime) free trade policy…was written about by economist Ken Rogoff in 2015 saying in essence to Western left leaners, if not a broader audience: cheer up, you may be stagnating, workers, but you have helped lift those millions out of poverty.

    Rogoff’s article really rubbed me the wrong way, and I think he and the Democratic establishment have missed, or want to ignore the pain and anger that have been building – in the working class and a good part of the middle class that have been fueling the revolts in both parties. I had no luck in sparking a discussion of the remarkable rise of China, how the world’s leading economy paved the way, rolled out the red carpet (sorry) for the rise of its chief challenger. One member of a private Email circle of intellectuals was quite rude to me, in the typical K Street Wash DC way – clearly did not want the topic broached, despite the fact that the organizer of our list had written one of the best books warning about the path the US was heading with its China trade. Another leading public policy commentator in the state I live in actually earns his living as a self described international trade lawyer specializing in China – but despite growing intensity to have his readers save the US from a Trump branded domestic form of fascism by embracing Sec. Clinton – he’s never written a word about what he has seen or learned by his China Trade experiences. It’s easier for Trump to demagogue the issue than have the Democratic Party examine its own role, esp. Bill Clinton, in letting US multinationals lead this policy which has been so devastating to what was once its core constituency, organized labor. And it’s especially telling in the wake of the extensive hacking, alleged Chinese hacking, of many major US institutions, companies and public sector nodes of power. And the double talk from the US military and foreign policy elites, whose language at times warns of China’s growing power but doesn’t seem to want to speak directly to the public about…much less the how it happened: this embarrassing track record of how we helped it rise, and helped our multinationals detach themselves from the economic welfare of US citizens (with professional free trade economists providing the rationales for the policy).

    Two other points. I’ve recently read Alexandra Henry’s 2008 book, “The China Price: The True Cost of Chinese Competitive Advantage,” which could have served as a good resource and briefing for journalists formulating questions in the 2016 Presidential debates about the significance of the rise of China, but no luck. It documents rising friction from below from the Chinese workforce, but there is no emergence of an independent labor movement. She say’s given the sheer magnitude of China’s labor force and manufacturing dominance, China’s labor problems belong to the world, and she makes it very clear that so do it’s vast and increasing environmental problems, something that Rogoff didn’t mention if I recall correctly. Mere externalities I guess.

    Which leads me to point number two: there is no coherent, sustained international force on the left which can formulate new universals and also sink roots into individual countries in the way the rising socialist movement of the 19th century did – tempered by the knowledge that we know it faced its true test in August of 1914 and never recovered from that failure.

    Nothing yet, despite some hopeful signs in the US and elsewhere – DiEM25 in Europe of a resurgence driven by sheer necessity more than any powerful new intellectual synthesis. And despite rooting for the new forces, I do worry than Sanders himself, and most of his followers seem to lack the intellectual depth and international ties that once characterized the best of the left, like the late Michael Harrington (1928-1989), his book “Socialism” (1972) being a synthesis of left history, an attempted re-interpretation of Marx for his times, and perspectives equally attuned to the US, Western Europe and the Third World. The 1970’s themselves delivered an answer to Harrington’s hopes as the country moved Right with Reagan in 1980…forewarned by Thatcher’s rise in the UK. I can’t help but wonder what Michael might have made of Sanders and his movement. Perhaps David might have some thoughts on that.

    Well, I guess this is serving a Fourth of July post of sorts, from the left.

  2. graccibros
    July 4, 2016 at 5:04 pm

    I should add another point to my comments above (and note the author above is Alexandra Harney, not Henry, my apologies to her and reades): the China dynamics and the issues raised in the book the “China Price” blur many of the historical lines drawn in the historical discussions of “imperialism.” What do I mean? Here we have a major socialist state, ostensibly, with one party rule, so not a socialist democratic state, embarking upon a controlled experiment in a capitalism useful to itself, focused on manufacturing, inviting major western private powers in to invest some capital – the terms and bargains struck between the multi-nationals and the Chinese state – on terms favorable more to China that the companies, with always the lure of the future potential of the vast China MARKET in view – and with China seeking some input from left leaning Western economists, like James Galbraith…so this, in my view is far from the model of imperialist exploitation from the last great age of globalization, the one from the late 19th century up to the end of the Second World War. The ironies tossed out like many sparks from this dynamic apply to both the traditional democratic socialist left, what’s left of it, as well as the American Right…something to offend everyone in China’s path…and previous and standing ideological constructions. It is not surprising to me that a Right populist (in some respects, at least, not his overall economic policy proposals as critiqued this morning, July 4, in Paul Krugman’s column) has picked up the issue when the centrist Democrats won’t touch it.

    Harney’s books makes the point that there are many Chinese laws on the books that do a fair to good job of theoretically regulating wages and hours, but which have been widely evaded by firms facing intense competition from their many domestic competitors; from Chinese regional and local gov’t whose political leaders will be judged not on fairness to workers and socialist ideals but increases in economic growth, Herman Daly’s work be damned; and the real hot iron applied to these already “race to the bottom’ forces (for workers and working conditions, and the environment), the always lower prices sought by the western corporate drivers of the process – pushing, demanding that the “China Price” be ever lower…or else they’ll go somewhere else (Vietnam, India, Bangladesh…)

    Interestingly enough, when “progressive reforms” are broached, as in the spring of 2006, from the Chinese gov’t (central) releasing new labor reform proposals, the American Chamber of Commerce in Shanghai and the US-China Business Council objected they were too strong…one doesn’t hear much about this today in the election discussions.

    It’s hard to fit traditional imperialist exploitation neatly into this dynamic, although I guess one could say that that “tradition” has always had strong Western companies or individual businesspeople driving it, and almost always some form of aiding and abetting by the host country, even when it had a formal government.

    Ironically, for this year’s Presidential Primary dynamics, and the awful silence of the press on the issue (and Krugman is telling us much less than Harney’s book), she wrote that in 2005 there was a bi-partisan burst of criticism of US China trade dynamics, with echoes of William Greider’s “One World, Ready or Not” (the 1997 book Krugman slammed again and again as mere journalism lacking Krugman’s beloved “modelling”) as well as the warnings of the old Kevin Phillips who has now grown silent:

    Savor this excerpt from a Lindsay Graham (R,SC) and Charles Schumer (D,NY) Press release; it virtually writes questions to direct in 2016 to the candidates of both parties, ones never posed:

    “‘ China’s emergence as a manufacturing powerhouse at the expense of the United States raises significant economic security concerns and the question of whether a country that loses its ability to produce tangible products will long remain an economic power.'”

  3. July 5, 2016 at 5:19 am

    Capitalism began you might say with adventurism – or maybe better, ventureism. Groups like the British and Dutch East India companies imported to Europe from the around the world. Spices, furs, fabrics, etc. And they did it to “make a profit.” They got the money to fit their ships, pay their sailors, fight pirates, etc. mainly from three types of investors – rich English, Dutch, etc. merchants at home, rich royals (most worthless second sons) who wanted to make a quick profit and could offer besides money access to Royal support of the companies, and from foreign merchants who had been excluded from such companies at home. This last group also helped the rival companies with intelligence on the rivals. The risks were great. Sometimes as many as half the ships never made it back (and therein begins the rise of insurance). But the profits ran as high as 200%-300% for ships that made it home. These companies exploited much of Asia, the Americas, and Africa. And it wasn’t till 300 years later that the exploited began to find ways to exploit the exploiters. These companies cared little about the overall welfare of their home countries. They employed every trick in the book including monopolies, market manipulation, price fixing, bribing Royal officials, and just plain lying to keep profits up. And their brutal treatment of the countries with whom they “traded” has been documented many times over. These facts have not changed in the long history of capitalism. Companies want profit. What they will do to gain it is sometimes difficult to control, as are the methods companies use to protect that profit and themselves. And while there has been some variance over time the companies have a narrow and short-term vision of the world they face. The companies generally view this repertoire as necessary and as the things that make the company strong and high performing. But that’s not always true. The companies can actually be easily manipulated and undermined by allowing them to be tricky, short-term, and narrowly focused, while designing partnerships that show the companies what they want to see while taking the profits and market control away from the companies. China has mastered the art of appearing to approve and follow capitalist dogma while using the magician’s “sleight of hand” to do just the opposite. And the companies being tricked can’t see it, won’t see it as their adherence to capitalist dogma makes that impossible. Psychologists have a name for it. It’s called ‘situational blindness.”

    • graccibros
      July 11, 2016 at 10:13 pm

      Without any pretentions to being a China expert, and noting all the hedging and caveats from those who lean towards China “expertise,” or openly proclaim it, from the modest amount I’ve read, I think you are right, that China has the deeper and longer term view of the economic, political economy chessboard. And not just domestically, but how they go about their trading relationships and foreign ventures. Our expenditures in Afghanistan and their operations there are an instance that comes to mind.

      • July 12, 2016 at 7:20 am

        My company has worked with China (the “Reds”) for about 11 years. Mostly we work with Chinese government agencies concerning questions of public opinion, local feelings about national policies, and the impacts of poverty and substandard education on the quality of life in rural and near-rural areas of the country. Based on those years of work I’ve reached two conclusions about China (mostly the Chinese government, national and regional) and its relations with the US. First, the Chinese believe the US government and most US businesses are foolish and unable to deal with real problems. At the same time the Chinese did up to a few years ago admire US higher education and the US public school system and US civil service. Second, the Chinese become ever more certain each year that the US intends to begin a war with China and will use nuclear weapons. In this they often cite the statements of US members of Congress (mostly Republican) that they consider direct threats. Although President Obama’s name also comes up often. Also, in this they mention the treatment of China under western colonialism, which they definitely have not forgotten. Chinese society is an interesting combination of Confucianism and Communism. The first a strongly conservative way of life. The latter what might be termed flexible autocracy. I could spend days going through the interesting and creative ways these are combined. And I don’t believe there are more than a few thousand Americans who understand any of this.

  4. July 5, 2016 at 6:58 am

    The actual distribution is unacceptable? Do NOT seek economic advice!
    Comment on David Ruccio on ‘Globalization, inequality, and imperialism’

    Assume somebody argues as follows:

    (i) We have reliable numbers about income and wealth distribution in our country and worldwide. They show extreme inequality.
    (ii) I have come to the conclusion that this inequality is unacceptable for several reasons (economic, social, political, ethical, historical …)
    (iii) It turned out that there is a vast majority of fellow citizens who have come to the same conclusion.
    (iv) We have decided in a referendum to take political action X in the immediate future that will lead to a more equal distribution in our country. There will be some negative effects but we believe the positive effects will be far greater.
    (v) It is to be expected that other counties will act in like manner. So, we will have a more equal distribution worldwide soon.

    Nobody should have any qualms with this argument and action plan. My point is that it belongs ENTIRELY to the political sphere. It contains not much economics and needs not much economics.

    The qualms begin when economics comes in. Economists cannot explain how the monetary economy works, what profit is, how profit relates to exploitation, which built-in feedback loops stabilize and increase inequality, and how the distribution of income/wealth develops over time. What we know for sure is that the standard marginal productivity theory of distribution is false.

    Unfortunately, other distribution theories are also false. Marx was, like the classicals, a political economist and mainly concerned with society and the underlying laws/trends of societal evolution. As a matter of fact, he was rather good at descriptive sociology but failed as an economist. Like Smith, Ricardo and other classical economists he got profit theory wrong (2014). And this fate the Marxian school shares with the other schools until this very day: “A satisfactory theory of profits is still elusive.” (Desai, 2008, p. 10)

    So we have Walrasianism, Keynesianism, Marxianism, Austrianism and all got profit theory wrong. Economics has NOTHING to say about the ultimate driving forces that have produced the observed inequality. And economics has NOTHING to offer in the way of effective measures that equalize the distribution without much collateral damage. Economists can describe the phenomenon of increasing inequality and talk much about it but they do not understand it. The profit and distribution theories are PROVABLY false since Adam Smith (2014).

    When Keynesian economists come one day to understand the relationship between income, profit, distributed profit, investment, saving and deficit spending they will realize with horror that nothing has deteriorated the income distribution more than well-meant Keynesian deficit spending.* What economists lament today is an uninteded consequence of their own policy advice and ultimately due to theory failure.

    So, for a society that politically decides to change the income distribution it would be a waste of time to seek the expertise of economists. Neither those who support the decision nor those who oppose it have a scientifically valid theory of how the actual monetary economy works.

    Egmont Kakarot-Handtke

    References
    Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online, pages 1–11. Palgrave Macmillan, 2nd edition. URL http://www.dictionaryofeconomics.com/article?id=pde2008_P000213
    Kakarot-Handtke, E. (2014a). Profit for Marxists. SSRN Working Paper Series, 2414301: 1–25. URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2414301
    Kakarot-Handtke, E. (2014b). The Profit Theory is False Since Adam Smith. What About the True Distribution Theory? SSRN Working Paper Series, 2511741:
    1–23. URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2511741

    * See ‘Profit and the collective failure of economists’
    http://axecorg.blogspot.de/2015/11/profit-and-collective-failure-of.html
    and ‘Keynesianism as ultimate profit machine’
    http://axecorg.blogspot.de/2015/07/keynesianism-as-ultimate-profit-machine.
    html

    • July 12, 2016 at 4:18 am

      “So, for a society that politically decides to change the income distribution it would be a waste of time to seek the expertise of economists. Neither those who support the decision nor those who oppose it have a scientifically valid theory of how the actual monetary economy works.”

      But anthropologists, historians, and sociologists do have such theories. They’re all partial at this point but the empirical evidence shows they explain many elements of actual events and they can be used to work out possible solutions.

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